[Federal Register Volume 63, Number 72 (Wednesday, April 15, 1998)]
[Proposed Rules]
[Pages 18345-18349]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9952]


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DEPARTMENT OF LABOR

Pension and Welfare Benefits Administration

29 CFR Part 2510

RIN 1210-AA48


Plans Established or Maintained Pursuant to Collective Bargaining 
Agreements Under Section 3(40)(A)

AGENCY: Pension and Welfare Benefits Administration, Department of 
Labor.

ACTION: Notice of intent to form a negotiated rulemaking advisory 
committee.

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SUMMARY: The Department of Labor (Department) intends to form a 
Negotiated Rulemaking Advisory Committee (Committee) in accordance with 
the Negotiated Rulemaking Act of 1990 and the Federal Advisory 
Committee Act. The Committee will negotiate the development of a 
proposed rule implementing the Employee Retirement Income Security Act 
of 1974, as amended, 29 U.S.C. 1001-1461 (ERISA). The purpose of the 
proposed rule is to establish a process and criteria for a finding by 
the Secretary of Labor that an agreement is a collective bargaining 
agreement for purposes of section 3(40) of ERISA. The proposed rule 
will also provide guidance for determining when an employee benefit 
plan is established or maintained under or pursuant to such an 
agreement. Employee benefit plans that are established or maintained 
for the purpose of providing benefits to the employees of more than one 
employer

[[Page 18346]]

are ``multiple employer welfare arrangements'' under section 3(40) of 
ERISA, and therefore are subject to certain state regulations, unless 
they meet one of the exceptions set forth in section 3(40)(A). At issue 
in this regulation is the exception for plans or arrangements that are 
established or maintained under one or more agreements which the 
Secretary finds to be collective bargaining agreements. If adopted, the 
proposed rule would affect employee welfare benefit plans, their 
sponsors, participants and beneficiaries, as well as service providers 
to plans. It may also affect plan fiduciaries, unions, employer 
organizations, the insurance industry, and state insurance regulators.

DATES: Written comments, applications for membership and nominations 
for membership on the negotiated rulemaking committee must be received 
at the address provided below on or before May 15, 1998.
    The first meeting of the Committee will be held after the Committee 
has been established under the Federal Advisory Committee Act (FACA). 
The date, location and time for Committee meetings will be announced in 
advance in the Federal Register.

ADDRESSES: Comments, applications for membership and nominations for 
membership may be mailed to the following address: Office of the 
Solicitor, Plan Benefits Security Division, Room N-4611, U.S. 
Department of Labor, 200 Constitution Avenue, NW, Washington, DC 20210. 
Attention: Negotiated Rulemaking Advisory Committee for ERISA Section 
3(40). In the alternative, comments may be hand-delivered between the 
hours of 9 a.m. to 5 p.m. to the same address.
    All submissions will be open to public inspection and copying in 
the Public Documents Room, Pension and Welfare Benefits Administration, 
U.S. Department of Labor, Room N-5638, 200 Constitution Avenue, NW, 
Washington, DC from 8:30 a.m. to 5:30 p.m.
    The Committee meetings will be held at U.S. Department of Labor, 
200 Constitution Avenue, NW, Washington, DC 20210 at the convenience of 
the Committee. The date, location and time for Committee meetings will 
be announced in advance in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Patricia Arzuaga, Office of the 
Solicitor, Plan Benefits Security Division, U.S. Department of Labor, 
Room N-4611, 200 Constitution Avenue, NW, Washington, DC 20210 
(telephone (202) 219-4600). This is not a toll-free number.

SUPPLEMENTARY INFORMATION:

I. Regulatory Negotiation

    The Department intends to use the negotiated rulemaking procedure 
in accordance with the Negotiated Rulemaking Act of 1990, P.L. 101-648 
(5 U.S.C. 561-569)(NRA). The Department will form an advisory committee 
consisting of representatives of the affected interests and the 
Department for the purpose of reaching consensus on the proposed rule. 
The NRA establishes a framework for the conduct of a negotiated 
rulemaking and encourages agencies to use negotiated rulemaking to 
enhance the informal rulemaking process. Under the NRA, the head of an 
agency must consider whether:
     There is a need for the rule;
     There are a limited number of identifiable interests that 
will be significantly affected by the rule;
     There is a reasonable likelihood that a Committee can be 
convened with a balanced representation of persons who (1) can 
adequately represent the interests identified; and (2) are willing to 
negotiate in good faith to reach a consensus on the rulemaking;
     There is a reasonable likelihood that a Committee will 
reach a consensus on the rulemaking within a fixed period of time;
     The negotiated rulemaking process will not unreasonably 
delay the development and issuance of a final rule;
     The agency has adequate resources and is willing to commit 
such resources, including technical assistance, to the Committee; and
     The agency, to the maximum extent possible consistent with 
its legal obligations, will use the consensus of the Committee with 
respect to developing the rule proposed by the agency for public notice 
and comment.
    Negotiations are conducted by a Committee chartered under the 
Federal Advisory Committee Act (FACA) (5 U.S.C. App. 2). The Committee 
includes a Department representative and is assisted by a neutral 
facilitator. The goal of the Committee is to reach consensus on the 
language or issues involved in the rule. If consensus is reached, the 
Department undertakes to use the consensus as the basis of the proposed 
rule, to the extent consistent with its legal obligations. The 
negotiated rulemaking process does not otherwise affect the 
Department's obligations under FACA, the Administrative Procedures Act 
and other statutes, including all economic, paperwork and other 
required regulatory analyses.
    The Department invites comments on the appropriateness of 
regulatory negotiation for this proposed rule.

II. Subject and Scope of the Rule

A. Need for the Rule

    The Department believes that regulatory guidance on the scope of 
the ERISA 3(40) exception for plans or other arrangements established 
or maintained pursuant to collective bargaining agreements is necessary 
to ensure that (1) the Department and state insurance regulators can 
identify and regulate MEWAs operating in their jurisdiction, and (2) 
sponsors of employee health benefit programs may determine whether 
their plans are established or maintained pursuant to collective 
bargaining agreements for purposes of section 3(40)(A).
    Section 3(40)(A) of ERISA defines the term multiple employer 
welfare arrangement (MEWA) in pertinent part as follows:

    The term ``multiple employer welfare arrangement'' means an 
employee welfare benefit plan, or any other arrangement (other than 
an employee welfare benefit plan), which is established or 
maintained for the purpose of offering or providing any benefit 
described in paragraph (1) [of section 3 of the Act] to the 
employees of two or more employers (including one or more self-
employed individuals), or to their beneficiaries, except that such 
term does not include any such plan or other arrangement which is 
established or maintained--

    (i) Under or pursuant to one or more agreements which the 
Secretary finds to be collective bargaining agreements * * *.

    This provision was added to ERISA by the Multiple Employer Welfare 
Arrangement Act of 1983, Sec. 302(b), Pub. L. 97-473, 96 Stat. 2611, 
2612 (29 U.S.C. 1002(40)), which also amended section 514(b) of ERISA. 
Section 514(a) of the Act provides that state laws which relate to 
employee benefit plans are generally preempted by ERISA. Section 514(b) 
sets forth exceptions to the general rule of section 514(a) and 
subjects employee benefit plans that are MEWAs to various levels of 
state regulation depending on whether or not the MEWA is fully insured. 
Sec. 302(b), Pub. L. 97-473, 96 Stat. 2611, 2613 (29 U.S.C. 
1144(b)(6)).1
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    \1\ The Multiple Employer Welfare Arrangement Act of 1983 added 
section 514(b)(6), which provides a limited exception to ERISA's 
preemption of state insurance laws. This exception allows states to 
exercise regulatory authority over employee welfare benefit plans 
that are MEWAs. Section 514(b) provides, in relevant part, that:
    (6)(A) Notwithstanding any other provision of this section--
    (i) in the case of an employee welfare benefit plan which is a 
multiple employer welfare arrangement and is fully insured (or which 
is a multiple employer welfare arrangement subject to an exemption 
under subparagraph (B)), any law of any State which regulates 
insurance may apply to such arrangement to the extent that such law 
provides--
    (I) standards, requiring the maintenance of specified levels of 
reserves and specified levels of contributions, which any such plan, 
or any trust established under such a plan, must meet in order to be 
considered under such law able to pay benefits in full when due, and
    (II) provisions to enforce such standards, and
    (ii) in the case of any other employee welfare benefit plan 
which is a multiple employer welfare arrangement, in addition to 
this title, any law of any State which regulates insurance may apply 
to the extent not inconsistent with the preceding sections of this 
title.
    Thus, an employee welfare benefit plan that is a MEWA remains 
subject to state regulation to the extent provided in section 
514(b)(6)(A). MEWAs which are not employee benefit plans are 
unconditionally subject to state law.

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[[Page 18347]]

    The Multiple Employer Welfare Arrangement Act was enacted to 
counter abuse by the operators of bogus ``insurance trusts.'' Congress 
was concerned that certain MEWA operators were successfully thwarting 
timely investigations and enforcement activities of state agencies by 
asserting that such entities were ERISA plans exempt from state 
regulation by the terms of section 514 of ERISA. The goal of the law 
was to remove legal obstacles which could hinder the ability of the 
States to regulate multiple employer welfare arrangements to assure the 
financial soundness and timely payment of benefits under these 
arrangements. 128 Cong. Rec. E2407 (1982)(Statement of Congressman 
Erlenborn).
    As a result of the addition of section 514(b)(6) to ERISA, certain 
state laws regulating insurance apply to employee benefit plans that 
are MEWAs. However, the definition of a MEWA in section 3(40) provides 
that an employee benefit plan is not a MEWA if it is established or 
maintained pursuant to an agreement which the Secretary of Labor finds 
to be a collective bargaining agreement. Such a plan is therefore not 
subject to regulation under state insurance law under section 
514(b)(6).
    While the Multiple Employer Welfare Arrangement Act of 1983 
significantly enhanced the states' ability to regulate MEWAs, problems 
in this area continue to exist as a result of the exception for 
collectively bargained plans contained in the 1983 amendments. This 
exception is now being exploited by some MEWA operators who, through 
the use of sham unions and collective bargaining agreements, market 
fraudulent insurance schemes under the guise of collectively bargained 
welfare plans exempt from state insurance regulation. Another issue in 
this area involves the use of collectively bargained arrangements as 
vehicles for marketing health care coverage nationwide to employees and 
employers with no relationship to the bargaining process or the 
underlying agreement. In addition, the Department has received requests 
to make individual determinations concerning the status of particular 
plans under section 3(40) of ERISA.
    The purpose of the negotiated rulemaking is to develop a proposed 
rule that would facilitate determinations by the Department, employee 
benefit plans and state insurance regulatory agencies as to whether a 
particular agreement is a collective bargaining agreement, and whether 
a particular plan is established or maintained under or pursuant to one 
or more collective bargaining agreements.
    Earlier Proposed Rule: In 1995, the Department published a Notice 
of Proposed Rulemaking on Plans Established or Maintained Pursuant to 
Collective Bargaining Agreements in the Federal Register. 60 FR 39209 
(August 1, 1995) (NPRM). The Department proposed criteria and a process 
for determining whether an employee benefit plan is established or 
maintained under or pursuant to one or more agreements that the 
Secretary finds to be collective bargaining agreements for purposes of 
section 3(40) of ERISA. The proposed approach would not have required 
individual findings by the Department. The Department received numerous 
comments on the NPRM. Commenters expressed concerns about their ability 
to comply with the standards set forth in the NPRM, or to obtain data 
necessary to establish compliance with the criteria proposed by the 
Department. Commenters also objected to having states determine whether 
a particular agreement was a collective bargaining agreement.

B. Issues and Questions to be Resolved

    The major issues the Department intends to address in this proposed 
rule are the criteria and the process for determining whether an 
employee benefit plan is established or maintained under or pursuant to 
one or more agreements that the Secretary finds to be collective 
bargaining agreements for purposes of section 3(40)(A) of ERISA.
    A number of interests (including employers, service providers, and 
participants) are likely to be affected by the new rule on the 
definition of collective bargaining agreements under ERISA 3(40). The 
effect of the rule is likely to vary, depending primarily on the size 
of the multiemployer plans and the size and financial condition of the 
employers contributing to these plans, and the extent to which plan 
coverage encompasses non-bargaining unit employees.

III. Affected Interests and Potential Committee Membership

    The following organizations have expressed an interest in 
participating in this negotiated rulemaking. The Department believes 
that these organizations, directly or through joint representation with 
other organizations, reflect an appropriate mix of the interests 
significantly affected by the proposed rulemaking. Committee membership 
may change from the organizations listed below based on applications 
for membership or nominations for membership that may be received in 
response to this Notice.

Labor (employees covered by or seeking to be covered by CBAs)

AFL-CIO

Multiemployer Plans

National Coordinating Committee for Multiemployer Plans
Entertainment Industry Multiemployer Health Plans

States

National Association of Insurance Commissioners

Federal Government

Department of Labor:
    Pension Welfare Benefits Administration: Elizabeth Goodman, DOL 
Negotiator, Office of Regulations and Interpretations
    The Department nominates Peter Swanson of the Federal Mediation and 
Conciliation Service as facilitator. Mr. Swanson has extensive 
experience in facilitating negotiating rulemaking meetings and in 
mediating disputes.
    The intent in establishing the Committee is that all significantly 
affected interests are represented, not necessarily all parties. While 
the Department believes the above participants represent the principal 
interests associated with the rule to be negotiated, we invite comment 
on this list of negotiation participants.

IV. Formation of the Negotiating Committee

A. Procedure for Establishing an Advisory Committee

    As a general rule, an agency of the Federal Government is required 
to comply with the requirements of FACA when it establishes or uses a 
group that includes nonfederal members as a source of advice. Under 
FACA, an advisory committee is established once a charter has been 
approved by the

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Secretary of Labor. Negotiations will not begin until the charter has 
been approved.

B. Participants

    Under the NRA, the number of participants on the Committee should 
not exceed 25. A number larger than this could make it difficult to 
conduct effective negotiations. One purpose of this notice is to help 
determine whether the proposed rule would significantly affect 
interests not adequately represented by the proposed participants. The 
NRA does not require that each potentially affected organization or 
individual must necessarily have its own representative. However, each 
interest must be adequately represented. Moreover, the Department must 
be satisfied that the group as a whole reflects a proper balance and 
mix of interests.

C. Requests for Representation

    Persons who will be affected significantly by the planned proposed 
rule on the definition of a collective bargaining agreement and who 
believe that their interests will not be adequately represented by the 
persons identified above may apply, or nominate another person, for 
membership on the Committee to represent their interests. Each 
application or nomination must include: (1) The name of the applicant 
or nominee and a description of the interests the person will 
represent; (2) evidence that the applicant or nominee is authorized to 
represent parties related to the interests the person proposes to 
represent; (3) a written commitment that the applicant or nominee will 
actively participate in good faith in the development of the proposed 
rule; and (4) the reasons the persons identified above do not 
adequately represent the interests of the person submitting the 
application or nomination.
    The Department will decide whether the applicant or nominee should 
be permitted to represent an interest or member of the Committee. The 
decision is based on whether the individual or interest (1) would be 
significantly affected by the rule; and (2) is already adequately 
represented on the Committee.

D. Notice of Establishment of Committee

    After reviewing any comments on this Notice of Intent and any 
requests for representation, the Department will issue a notice 
announcing the establishment of a negotiated rulemaking advisory 
committee, unless the Department decides, based on comments and other 
relevant considerations, that establishment of the Committee is 
inappropriate. All meeting notices will be published in the Federal 
Register.

V. Negotiation Procedures

    When the Committee is formed, the following procedures and 
guidelines will apply, unless they are modified as a result of comments 
received on this notice or during the negotiation process--

A. Facilitator

    The Committee will use a neutral facilitator. The facilitator will 
not be involved with the substantive development of the regulation. The 
facilitator's role is to chair the negotiating sessions; help the 
negotiation process run smoothly; maintain the meeting minutes as 
required under FACA; and help the Committee define and reach consensus.

B. Good Faith Negotiations

    Participants must be willing to negotiate in good faith and be 
authorized to do so.

C. Committee Expenses and Administrative Support

    In most cases, Committee members are responsible for their own 
expenses of participation. The Department may pay for certain expenses, 
in accordance with Section 7(d) of the Federal Advisory Committee Act, 
if (1) a member certifies a lack of adequate financial resources to 
participate in the Committee; and (2) the Department determines that 
such member's participation in the Committee is necessary to assure 
adequate representation of the member's interest.
    The Department will provide logistical, administrative, and 
management support to the Committee. If deemed necessary, the 
Department will provide technical support to the Committee in gathering 
and analyzing data or information.

D. Schedule for Negotiation/Meetings

    The Department has set a deadline of approximately five to six 
months beginning with the date of the first meeting for the Committee 
to complete work on development of the proposed rule. We intend to 
terminate the activities of the Committee if it does not appear likely 
to reach consensus within this time period.
    Once the Committee has been established under the FACA, the 
Department will publish a notice of the first Committee meeting in the 
Federal Register. The purpose of the first meeting will be to discuss 
in detail how the negotiations will proceed and how the Committee will 
function. The Committee will:
     Agree to ground rules for Committee operation;
     Determine how best to address the principal issues; and
     If time permits, begin to address those issues.
    The date, location, time and agenda for all Committee meetings will 
be announced in advance in the Federal Register. These subsequent 
Committee meetings will be held approximately every three weeks. Unless 
announced otherwise, meetings are open to the public.

E. Committee Procedures

    Under the general guidelines and direction of the facilitator, and 
subject to any applicable legal requirements, members of the Committee 
will establish the detailed procedures for Committee meetings that they 
consider most appropriate.

F. Defining Consensus

    The goal of the negotiating process is consensus. Under the NRA, 
consensus means that each interest represented on the Committee concurs 
in the result, unless the Committee (1) agrees to define ``consensus'' 
to mean general but not unanimous concurrence, or (2) agrees upon 
another specified definition. The Department expects the Committee 
participants to fashion their working definition of this term.

G. Failure of the Advisory Committee to Reach Consensus

    If the Committee is unable to reach consensus, the Department will 
proceed independently to develop a proposed rule. Parties to the 
negotiation may withdraw at any time. If this occurs, the Department 
and the remaining participants on the Committee will evaluate whether 
the Committee should continue.

H. Record of Meetings

    In accordance with FACA's requirements, minutes of all Committee 
meetings will be kept. The minutes will be placed in the public 
rulemaking record.

I. Other Information

    In accordance with the provisions of Executive Order 12866, this 
notice was reviewed by the Office of Management and Budget.

VI. Authority

    This document was prepared under the direction of Olena Berg, 
Assistant Secretary of Labor for Pension and Welfare Benefits, U.S. 
Department of

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Labor, 200 Constitution Avenue, NW, Washington, DC 20210, pursuant to 
Section 3 of the Negotiated Rulemaking Act of 1990, 104 Stat. 4969, 
Title 5 U.S.C. 561 et seq.; and section 3(40) of ERISA (Pub. L. 97-473, 
96 Stat. 2611, 2612, 29 U.S.C. 1002(40)) and section 505 (Pub. L. 93-
406, 88 Stat. 892, 894, 29 U.S.C. 1135) of ERISA, and under Secretary 
of Labor's Order No. 1-87, 52 FR 13139, April 21, 1987.

    Signed at Washington, DC, this 9th day of April 1998.
Olena Berg,
Assistant Secretary, Pension and Welfare Benefits Administration.
[FR Doc. 98-9952 Filed 4-14-98; 8:45 am]
BILLING CODE 4510-29-P