87968 Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Proposed Rules 

Testing for Class 1E Power, 

Instrumentation, and Control 

Equipment at Nuclear Facilities.’’ DG– 

1419 also removes all quality assurance 

(QA) requirements from RG 1.30 and 

addresses the requirements of a QA 

program for design and construction in 

RG 1.28, Revision 6, ‘‘Quality Assurance 

Program Criteria (Design and 

Construction),’’ (ADAMS Accession No. 

ML23177A002), and for operation in RG 

1.33, Revision 3, ‘‘Quality Assurance 

Program Requirements (Operation),’’ 

(ADAMS Accession No. ML13109A458). 

The staff is also issuing for public 

comment a draft regulatory analysis 

(ADAMS Accession No. ML23235A321). 

The staff developed a regulatory 

analysis to assess the value of issuing or 

revising a regulatory guide as well as 

alternative courses of action. 

As noted in the Federal Register on 

December 9, 2022 (87 FR 75671), this 

document is being published in the 

‘‘Proposed Rules’’ section of the Federal 

Register to comply with publication 

requirements under 1 CFR chapter I. 

III. Backfitting, Forward Fitting, and 

Issue Finality 

Issuance of DG–1419, if finalized, 

would not constitute backfitting as 

defined in section 50.109 of title 10 of 

the Code of Federal Regulations (10 

CFR), ‘‘Backfitting,’’ and as described in 

NRC Management Directive (MD) 8.4, 

‘‘Management of Backfitting, Forward 

Fitting, Issue Finality, and Information 

Requests’’; affect issue finality of any 

approval issued under 10 CFR part 52, 

‘‘Licenses, Certificates, and Approvals 

for Nuclear Power Plants’’; or constitute 

forward fitting as defined in MD 8.4, 

because, as explained in DG–1419, 

licensees would not be required to 

comply with the positions set forth in 

DG–1419. 

IV. Submitting Suggestions for 

Improvement of Regulatory Guides 

A member of the public may, at any 

time, submit suggestions to the NRC for 

improvement of existing RGs or for the 

development of new RGs. Suggestions 

can be submitted on the NRC’s public 

website at https://www.nrc.gov/readingrm/doc-collections/reg-guides/ 

contactus.html. Suggestions will be 

considered in future updates and 

enhancements to the ‘‘Regulatory 

Guide’’ series. 

Dated: December 14, 2023. 

For the Nuclear Regulatory Commission. 

Stephen M. Wyman, 

Acting Chief, Regulatory Guide and Programs 

Management Branch, Division of Engineering, 

Office of Nuclear Regulatory Research. 

[FR Doc. 2023–27961 Filed 12–19–23; 8:45 am] 

BILLING CODE 7590–01–P 

DEPARTMENT OF LABOR 

Employee Benefits Security 

Administration 

29 CFR Part 2510 

RIN 1210–AC16 

Definition of ‘‘Employer’’—Association 

Health Plans 

AGENCY: Employee Benefits Security 

Administration, Department of Labor. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: This document proposes to 

rescind the Department of Labor’s 

(Department or DOL) 2018 rule entitled 

‘‘Definition of Employer—Association 

Health Plans’’ (2018 AHP Rule). The 

2018 AHP Rule establishes an 

alternative set of criteria from those set 

forth in the Department’s pre-rule 

guidance for determining when a group 

or association of employers is acting 

‘‘indirectly in the interest of an 

employer’’ under section 3(5) of the 

Employee Retirement Income Security 

Act of 1974 (ERISA) for purposes of 

establishing an association health plan 

(AHP) as a multiple employer group 

health plan. The 2018 AHP Rule’s 

alternative criteria were set aside in 

large part by the U.S. District Court for 

the District of Columbia in New York v. 

United States Department of Labor. The 

district court found the bona fide 

association and working owner 

provisions in the rule to be an 

unreasonable interpretation of ERISA, 

inconsistent with congressional intent 

that ERISA applies to employee benefits 

arising out of employment relationships. 

The Department, after further review of 

the relevant statutory language, judicial 

decisions, and pre-rule guidance, and 

further consideration of ERISA’s 

statutory purposes and related policy 

goals, now proposes to rescind in full 

the 2018 AHP Rule in order to resolve 

and mitigate any uncertainty regarding 

the status of the standards that were set 

under the 2018 AHP Rule, allow for a 

reexamination of the criteria for a group 

or association of employers to be able to 

sponsor an AHP, and ensure that 

guidance being provided to the 

regulated community is in alignment 

with ERISA’s text, purposes, and 

policies. 

DATES: Comments are due on or before 

February 20, 2024. 

ADDRESSES: You may submit written 

comments, identified by RIN 1210– 

AC16, by one of the following methods: 

Federal eRulemaking Portal: https://

www.regulations.gov. Follow the 

instructions for submitting comments. 

To facilitate receipt and processing of 

comments, the Department encourages 

interested parties to submit their 

comments electronically. 

Mail: Office of Regulations and 

Interpretations, Employee Benefits 

Security Administration, Room N–5655, 

U.S. Department of Labor, 200 

Constitution Ave. NW, Washington, DC 

20210, Attention: Proposed Rescission 

of AHP Final Rule RIN 1210–AC16. 

Instructions: All submissions must 

include the agency name and Regulatory 

Identifier Number (RIN) for this 

rulemaking. Any comment that is 

submitted will be shared with the 

Internal Revenue Service (IRS). If you 

submit comments electronically, do not 

submit paper copies. Comments will be 

available to the public, without charge, 

online at https://www.regulations.gov 

and https://www.dol.gov/agencies/ebsa 

and at the Public Disclosure Room, 

Employee Benefits Security 

Administration, Suite N–1513, 200 

Constitution Ave. NW, Washington, DC 

20210. 

Warning: Do not include any 

personally identifiable or confidential 

business information that you do not 

want publicly disclosed. Comments are 

public records posted on the internet as 

received and can be retrieved by most 

internet search engines. 

Docket: Go to the Federal 

eRulemaking Portal at https://

www.regulations.gov for access to the 

rulemaking docket, including any 

background documents and the plainlanguage summary of the proposed rule 

of not more than 100 words in length 

required by the Providing 

Accountability Through Transparency 

Act of 2023. 

FOR FURTHER INFORMATION CONTACT: 

Suzanne Adelman, Office of Regulations 

and Interpretations, Employee Benefits 

Security Administration, U.S. 

Department of Labor, (202) 693–8500 

(this is not a toll-free number). 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Definition of Employer Under Section 

3(5) of ERISA 

ERISA regulates ‘‘employee benefit 

plans’’ (classified as ‘‘employee welfare 

benefit plans’’ and ‘‘employee pension 

benefit plans’’), and generally preempts 

State laws that relate to or have a 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Proposed Rules 87969 

1 83 FR 28912 (June 21, 2018). The 2018 AHP 

Rule included an amendment to the Department’s 

regulation at 29 CFR 2510.3–3, which excludes 

‘‘plans without employees’’ from the definition of 

employee benefit plans covered by Title I of ERISA, 

to expressly address participation of working 

owners without any common-law employees in 

AHPs under that provision by cross-referencing the 

regulation at 29 CFR 2510.3–5, under which a 

working owner was able to be treated as an 

employee and the working owner’s business as the 

individual’s employer for purposes of being an 

employer member of the bona fide group or 

association and an employee participant in the 

AHP. This proposal would also rescind that 

amendment to 29 CFR 2510.3–3. 

2 Gruber v. Hubbard Bert Karle Weber, Inc., 159 

F.3d 780, 786–87 (3d Cir. 1998) (endorsing the 

Department’s historical approach to determining 

whether an organization is acting in the interests of 

employer-members); MDPhysicians & Assocs., Inc. 

v. State Bd. of Ins., 957 F.2d 178, 185–86 (5th Cir. 

1992) (consistent with the Department’s pre-rule 

guidance, requiring that, to act in the interests of 

employer members, an organization must not be a 

commercial, ‘‘entrepreneurial venture’’ but must 

instead represent members with ‘‘a common 

economic or representation interest’’ unrelated to 

the provision of benefits and who established or 

maintained the plan); Wisconsin Educ. Ass’n Ins. 

Tr. v. Iowa State Bd. of Pub. Instruction, 804 F.2d 

1059, 1062–65 (8th Cir. 1986) (same); Int’l Ass’n of 

Entrepreneurs of Am. Ben. Tr. v. Foster, 883 F. 

Supp. 1050, 1056–62 (E.D. Va. 1995); Assoc. Indus. 

Mgmt. Servs. v. Moda Health Plan, Inc., No. 3:14– 

CV–01711–AA, 2015 WL 4426241, at *2–*5 (D. Or. 

July 16, 2015); Smith v. Prudential Health Care Plan 

Inc., No. CIV. A. 97–891, 1997 WL 297096, at *3– 

*4 (E.D. Pa. May 27, 1997). 

3See, e.g., Advisory Opinions Nos. 94–07A (Mar. 

14, 1994), 95–01A (Feb. 13, 1995), 96–25 (Oct. 31, 

1996), 2001–04A (Mar. 22, 2001), 2003–13A (Sept. 

30, 2003), 2003–17A (Dec. 12, 2003), 2007–06A 

(Aug. 16, 2007), 2012–04A (May 25, 2012), and 

2019–01A (July 8. 2019). See also Department of 

Labor Publication, ‘‘Multiple Employer Welfare 

Arrangements Under ERISA, A Guide to Federal 

and State Regulation,’’ at www.dol.gov/sites/dolgov/ 

files/ebsa/about-ebsa/our-activities/resource-center/ 

publications/mewa-under-erisa-a-guide-to-federaland-state-regulation.pdf. Judicial decisions tended 

to take approaches consistent with that followed by 

the Department. See also Wisconsin Educ. Assn. 

Ins. Trust v. Iowa State Bd. of Public Instruction, 

804 F.2d 1059, 1063–1064 (8th Cir. 1986); 

MDPhysicians & Associates, Inc. v. State Bd. of Ins., 

957 F.2d 178, 183–186 (5th Cir. 1992) [hereinafter 

MDPhysicians]; National Business Assn. Trust v. 

Morgan, 770 F. Supp. 1169 (W.D. Ky. 1991). 

connection with such plans, subject to 

certain exceptions. An ‘‘employee 

welfare benefit plan’’ is defined in 

section 3(1) of ERISA to include, among 

other arrangements, ‘‘any plan, fund, or 

program . . . established or maintained 

by an employer or by an employee 

organization, or by both, to the extent 

that such plan, fund or program was 

established or is maintained for the 

purpose of providing for its participants, 

or their beneficiaries, through the 

purchase of insurance or otherwise . . . 

medical, surgical, or hospital care or 

benefits, or benefits in the event of 

sickness, accident, disability, [or] 

death. . . .’’ Thus, to be an employee 

welfare benefit plan, the plan, fund, or 

program must, among other criteria, be 

established or maintained by an 

employer, an employee organization, or 

both an employer and an employee 

organization. 

Section 3(5) of ERISA generally 

defines the term ‘‘employer’’ as ‘‘any 

person acting directly as an employer, 

or indirectly in the interest of an 

employer, in relation to an employee 

benefit plan.’’ Thus, ERISA defines the 

term ‘‘employer’’ to include the ‘‘direct’’ 

(or common-law) employer of the 

covered employees or ‘‘any person 

acting . . . indirectly in the interest of’’ 

the common-law employer, in relation 

to an employee benefit plan. Section 

3(5) of ERISA also expressly identifies 

‘‘a group or association of employers 

acting for an employer in such capacity’’ 

as falling within the definition of 

‘‘employer.’’ A group or association may 

establish an employee welfare benefit 

plan only when it is acting as an 

‘‘employer’’ within the meaning of 

ERISA section 3(5). The Department of 

Labor’s (Department or DOL) regulation 

at 29 CFR 2510.3–5, published in its 

2018 rule entitled ‘‘Definition of 

Employer—Association Health Plans’’ 

(2018 AHP Rule),1 which is the subject 

of this proposal to rescind, sought to 

define circumstances under which a 

group or association of employers 

constitutes an ‘‘employer’’ within the 

meaning of ERISA section 3(5) with 

respect to sponsorship of a group health 

plan and the provision of health 

benefits. 

B. Historical Guidance Prior to the 2018 

AHP Rule—‘‘Bona Fide’’ Group or 

Association of Employers 

Based on definitions in title I of 

ERISA, and because title I’s overall 

structure contemplates employmentbased benefit arrangements, the 

Department has long recognized that, 

even absent the involvement of an 

employee organization, a group or 

association of employers may sponsor a 

single ‘‘multiple employer’’ plan if 

certain criteria are satisfied. If a group 

or association satisfies these criteria, the 

Department’s guidance that predates the 

2018 AHP Rule (hereinafter referred to 

as pre-rule guidance) generally refers to 

these entities as ‘‘bona fide’’ employer 

groups or associations. Under that prerule guidance, health coverage 

sponsored by a bona fide employer 

group or association can be structured 

as a single, multiple employer plan 

covered by ERISA. The criteria specified 

in the pre-rule guidance are intended to 

distinguish bona fide groups or 

associations of employers that provide 

coverage to their employees and the 

families of their employees from 

arrangements that more closely 

resemble State-regulated private health 

insurance coverage.The Department’s 

pre-rule guidance is consistent with the 

criteria articulated and applied by every 

appellate court, in addition to several 

federal district courts, that considered 

whether an organization was acting in 

the interests of employer-members.2

Moreover, to the Department’s 

knowledge, no court has found, or even 

suggested, that the pre-rule guidance 

criteria too narrowly construe the 

meaning of acting ‘‘indirectly in the 

interest of an employer’’ under section 

3(5) of ERISA. 

Historically, the Department has taken 

a facts-and-circumstances approach to 

determining whether a group or 

association of employers is a bona fide 

employer group or association that may 

sponsor an ERISA group health plan on 

behalf of its employer members. The 

Department’s pre-rule guidance, largely 

taking the form of a collection of 

advisory opinions issued over more 

than three decades, has expressed the 

Department’s view regarding whether, 

based on individual circumstances, a 

particular group or association was able 

to sponsor a multiple employer welfare 

plan.3 While the language in the 

Department’s pre-rule advisory opinions 

was tailored to the issues presented in 

the specific arrangements involved, the 

Department’s interpretive guidance has 

consistently focused on three criteria: 

(1) whether the group or association has 

business or organizational purposes and 

functions unrelated to the provision of 

benefits (the ‘‘business purpose’’ 

standard); (2) whether the employers 

share some commonality of interest and 

genuine organizational relationship 

unrelated to the provision of benefits 

(the ‘‘commonality’’ standard); and (3) 

whether the employers that participate 

in a benefit program, either directly or 

indirectly, exercise control over the 

program, both in form and substance 

(the ‘‘control’’ standard). 

A variety of factors were set forth in 

the Department’s pre-rule guidance as 

relevant when applying these three 

general criteria to a particular group or 

association. These factors include how 

members are solicited; who is entitled to 

participate and who actually 

participates in the group or association; 

the process by which the group or 

association was formed; the purposes 

for which it was formed; what, if any, 

were the preexisting relationships of its 

members; the powers, rights, and 

privileges of employer members that 

exist by reason of their status as 

employers; who actually controls and 

directs the activities and operations of 


ddrumheller on DSK120RN23PROD with PROPOSALS1
87970 Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Proposed Rules 

4See Gruber, 159 F.3d at 788 fn. 5 (listing DOL 

criteria); Int’l Ass’n of Entrepreneurs of Am. Ben. 

Tr. v. Foster, 883 F. Supp. at 1061 (same); Hall v. 

Maine Mun. Emps. Health Tr., 93 F. Supp. 2d 73, 

77 (D. Me. 2000); Assoc. Indus. Mgmt. Servs. v. 

Moda Health Plan, Inc., 2015 WL 4426241, at *3. 

5Section 2791(a)(1) and (d)(6) of the PHS Act. 

6Centers for Medicare & Medicaid Services, 

Application of Individual and Group Market 

Requirements under title XXVII of the Public Health 

Service Act when Insurance Coverage Is Sold to, or 

through Associations, Insurance Standards Bulletin 

Series—INFORMATION (Sept. 1, 2011), available at 

https://www.cms.gov/cciio/resources/files/ 

downloads/association_coverage_9_1_2011.pdf. 7 45 CFR 144.102(c). 

8 83 FR 28912, 28962 (June 21, 2018). 

9E.O. 13813, 82 FR 48385 (rescinded by E.O. 

14009, 86 FR 7793 (Jan. 28, 2021)). 

10See generally 83 FR 28912 (June 21, 2018). 

11 29 CFR 2510.3–5(a). 

the benefit program; and the extent of 

any employment-based common nexus 

or other genuine organizational 

relationship unrelated to the provision 

of benefits.4

C. Association Coverage Under the 

Public Health Service Act 

The Public Health Service Act (PHS 

Act) derives its definitions of group 

health plan and employer from the 

ERISA definitions of employee welfare 

benefit plan and employer.5 Thus, 

reference to ERISA is needed when 

determining whether a group health 

plan exists for PHS Act purposes and 

determining, if one does exist whether 

it exists at the individual employer level 

or at the association level. In other 

words, the ERISA definitions determine 

whether health insurance coverage sold 

to or through associations is individual 

or group coverage for purposes of title 

XXVII of the PHS Act, and if group 

coverage, whether the sponsor of the 

group coverage is the association, or 

whether each employer-member of the 

association sponsors its own group 

coverage. 

In general, unless health insurance 

coverage issued through a group or 

association constitutes a single group 

health plan, the group or association is 

disregarded in determining whether the 

coverage offered to an individual or 

employer member of the association is 

individual, small group, or large group 

market coverage. The Centers for 

Medicare & Medicaid Services (CMS) 

has long maintained that the test for 

determining whether association 

coverage is individual or group market 

coverage for purpose of title XXVII of 

the PHS Act is the same test as that 

applied to health insurance coverage 

offered directly to individuals or 

employers.6 As that guidance explained, 

coverage that is provided to associations 

but not related to employment is not 

considered group health insurance 

coverage for purposes of the PHS Act. If 

the coverage is offered to an association 

member other than in connection with 

a group health plan, the coverage is 

considered coverage in the individual 

market, regardless of whether it is 

considered group coverage under State 

law.7

On the other hand, if the health 

insurance coverage is offered in 

connection with a group health plan as 

defined at section 2791 of the PHS Act, 

it is considered group health insurance 

coverage. The group market is divided 

into the small group market and the 

large group market. In situations 

involving employment-based 

association coverage where the group 

health plan exists at the individual 

employer level, the size of each 

individual employer participating in the 

association determines whether that 

employer’s coverage is subject to the 

small group market or large group 

market rules. In instances where the 

group or association of employers is, in 

fact, sponsoring the group health plan 

and the association itself is deemed the 

‘‘employer,’’ the association coverage is 

considered a single group health plan. 

In that case, because the PHS Act 

definitions of large employer and small 

employer are based on the average 

number of employees employed on 

business days during the preceding 

calendar year, the number of employees 

employed by all the employers 

participating in the association 

determines whether the coverage is 

subject to the small group market or 

large group market rules. 

In a ‘‘mixed’’ association where 

different members have coverage that is 

subject to the individual market, small 

group market, and/or large group market 

rules under the PHS Act, as determined 

by each member’s circumstances, each 

association member must receive 

coverage that complies with the 

requirements arising out of its status as 

an individual, small employer, or large 

employer. For example, it is not 

permissible under the PHS Act for 

mixed association coverage to comply 

only with the large group market rules, 

with respect to its individual and small 

employer members. 

As explained below, by expanding 

access to AHPs, the 2018 AHP Rule 

sought to allow small employers and 

working owners to band together to 

purchase coverage in the large group 

market, thereby avoiding the application 

of certain legal provisions governing 

individual and small group markets, 

such as modified community rating, 

single risk pool, and essential health 

benefit requirements. 

D. The 2018 AHP Rule 

On June 21, 2018, the Department 

published the 2018 AHP Rule,8

intended to broaden the types of 

employer groups and associations that 

may sponsor a single group health plan 

under ERISA. The Department issued 

the 2018 AHP Rule in response to a 

2017 Executive order (E.O.) that was 

rescinded in 2021.9 The 2018 AHP Rule 

substantially loosened the requirements 

for groups or associations to be 

considered a bona fide group or 

association that is eligible to establish 

an employee welfare benefit plan or to 

otherwise meet the definition of 

‘‘employer’’ under ERISA section 3(5) 

(for example, by allowing such groups 

or associations to include ‘‘working 

owners’’ who have no employees).10 But 

the Department expressly noted in the 

2018 AHP Rule that the rule ‘‘does not 

invalidate any existing advisory 

opinions, or preclude future advisory 

opinions, from the Department under 

section 3(5) of ERISA that address other 

circumstances in which the Department 

will view a person as able to act directly 

or indirectly in the interest of direct 

employers in sponsoring an employee 

welfare benefit plan that is a group 

health plan.’’ 11

To establish the additional and 

broader standard, paragraph (b) of the 

2018 AHP Rule set forth eight overall 

criteria that a group or association must 

meet to be a bona fide group or 

association eligible to establish an 

ERISA plan, including criteria related to 

(1) purposes of the group or association, 

(2) status of each group member as an 

employer of at least one employee 

participant in the AHP, (3) formal 

organizational structure requirements 

for the group, (4) control of the group 

and the AHP by employer members, (5) 

a commonality requirement for 

employer members, (6) limitations on 

providing health coverage to persons 

other than employees and beneficiaries, 

(7) nondiscrimination requirements, and 

(8) a limitation on health insurance 

issuers’ ability to own or control the 

association or plan other than being an 

employer member of the group or 

association. Paragraphs (c) and (d) 

added specific details on the 

commonality and nondiscrimination 

requirements, and paragraph (e) 

addressed the dual classification of 

working owners without common-law 

employees who could be treated as both 

employers and employees for purposes 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Proposed Rules 87971 

12 29 CFR 2510.3–5(b)(4). 

13 Infra, section I.D. 

14 29 CFR 2510.3–5(c); see 83 FR 28912, 28924 

(June 21, 2018). 

15Under the 2018 AHP rule, in addition to the 

bona fide group or association, the underlying 

health coverage offered by the bona fide group or 

association must also meet these requirements for 

the bona fide group or association to qualify as an 

employer under the 2018 AHP Rule. 29 CFR 

2510.3–5(d). 

16 83 FR 28912, 28926–27 (June 21, 2018). 

17 29 CFR 2510.3–5(d)(4). 

18 83 FR 28927 (June 21, 2018). The preamble also 

noted that AHPs, like other group health plans, 

generally may make distinctions between groups of 

individuals based on bona fide employment-based 

classifications consistent with the employer’s usual 

business practice, provided such distinction is not 

directed at individual participants or beneficiaries 

based on a health factor. Id. The Department notes 

that no inference should be drawn based on this 

proposal to rescind the 2018 AHP Rule as to 

whether treating the employees of each employer 

member of an AHP as a distinct group of similarly 

situated individuals is a bona fide employmentbased classification for purposes of the HIPAA 

nondiscrimination rules. 

19 29 CFR 2510.3–5(e). 

20 83 FR 28912, 28928, fn. 40 (June 21, 2018). 

21New York v. United States Department of 

Labor, 363 F. Supp. 3d 109 (D.D.C. 2019). 

22 Id. at 131–34. 

23 Id. at 136–40. 

of participation in the employer group 

and the AHP.12

These criteria were modeled on 

elements of the pre-rule guidance, but 

the 2018 AHP Rule differed in several 

significant ways, discussed below,13

that were designed to loosen some 

requirements of the pre-rule guidance. 

While paragraph (b)(1) of the 2018 

AHP Rule provided that ‘‘the primary 

purpose of the group or association’’ 

could be ‘‘to offer and provide health 

coverage to its employer members and 

their employees,’’ the pre-rule guidance 

requires that the group or association 

acting as an employer must exist for 

purposes other than providing health 

benefits. The 2018 AHP Rule required 

that ‘‘the group or association also must 

have at least one substantial business 

purpose unrelated to offering and 

providing health coverage or other 

employee benefits to its employer 

members and their employees.’’ A group 

of employers could satisfy the business 

purpose standard through a safe harbor 

requiring only that it would be a 

‘‘viable’’ entity in the absence of 

sponsoring an employee benefit plan. 

The pre-rule guidance, however, does 

not equate the business purpose 

standard with whether the group or 

association could be viable even if it did 

not sponsor a plan. By equating purpose 

with viability, the 2018 AHP Rule 

weakened the business purpose 

standard and allowed the creation of 

groups or associations under ERISA 

section 3(5) primarily for the purpose of 

the provision of health benefits. 

Paragraph (c) of the 2018 AHP Rule 

provided for a broader commonality 

standard than the pre-rule guidance. 

Under the 2018 AHP Rule, a group or 

association of employers satisfied the 

commonality of interest requirement if 

either (1) its employer members were in 

the same trade or business; or (2) the 

principal places of business for their 

employer members were located within 

a region that did not exceed the 

boundaries of the same State or 

metropolitan area, such as the 

Washington Metropolitan Area of the 

District of Columbia (which also 

includes portions of Maryland and 

Virginia). No other common interests 

were required.14 Under the pre-rule 

guidance, geography alone is not 

sufficient to establish commonality 

between otherwise disparate businesses. 

The 2018 AHP Rule also included 

express nondiscrimination standards 

that had to be met—aside from other 

health coverage requirements—in order 

for an employer group or association to 

act as an employer within the meaning 

of ERISA section 3(5) in sponsoring a 

single group health plan.15 The 2018 

AHP Rule incorporated and adapted 

existing health nondiscrimination 

provisions already applicable to group 

health plans, including AHPs, under the 

Health Insurance Portability and 

Accountability Act of 1996 (HIPAA).16

In applying the HIPAA health 

nondiscrimination rules for defining 

similarly situated individuals, under the 

2018 AHP Rule, the group or association 

could not treat member employers as 

distinct groups of similarly situated 

individuals if it wished to qualify as a 

bona fide group or association for 

purposes of sponsoring an AHP.17 The 

pre-rule guidance does not include any 

explicit nondiscrimination 

requirements. The Department noted in 

the preamble to the 2018 AHP Rule, 

however, that the HIPAA 

nondiscrimination rules apply to group 

health plans, including AHPs, and 

noted, therefore, that AHPs, like any 

other group health plan, cannot 

discriminate in eligibility, benefits, or 

premiums against an individual within 

a group of similarly situated individuals 

based on a health factor.18

Lastly, paragraph (e) of the 2018 AHP 

Rule allowed working owners without 

any common-law employees to 

participate in AHPs, stating that a 

working owner would be treated both as 

an ‘‘employer’’ and ‘‘employee’’ for 

purposes of participating in, and being 

covered by, an AHP, notwithstanding 

the absence of any employment 

relationship with common-law 

employees.19 Under the pre-rule 

guidance, working owners without 

common-law employees are not 

permitted to be treated as employers for 

the purpose of participating in a bona 

fide employer group or association and 

generally are not treated as employees 

able to be participants in an ERISAcovered employee welfare benefit 

plan.20

E. Decision Setting Aside Core 

Provisions of the 2018 AHP Rule 

In July 2018, eleven States and the 

District of Columbia (collectively, the 

States) sued the Department in Federal 

district court. They argued that the 2018 

AHP Rule violates the Administrative 

Procedure Act (APA), 5 U.S.C. 551 et 

seq., because it exceeds the 

Department’s statutory authority and is 

arbitrary or capricious. The States 

moved for summary judgment, and the 

Department moved to dismiss the 

lawsuit for lack of standing and crossmoved in the alternative for summary 

judgment. On March 28, 2019, the U.S. 

District Court for the District of 

Columbia denied the Department’s 

motions and granted the States’ motion 

for summary judgment. In granting the 

States’ motion, the court set aside the 

2018 AHP Rule’s definition of bona fide 

group or association of employers and 

the language permitting working owners 

without common-law employees to be 

treated as employees when participating 

in an AHP.21 The Department’s pre-rule 

guidance was not affected by the district 

court’s decision. 

Specifically, the district court 

concluded that the 2018 AHP Rule’s 

criteria for establishing AHPs 

unreasonably construed ERISA’s 

requirement that the association act 

‘‘indirectly in the interest of an 

employer’’ because the 2018 AHP Rule’s 

‘‘substantial business purpose’’ and 

‘‘geographical commonality’’ 

requirements were not drawn narrowly 

enough to limit AHPs to those that act 

in the interest of employers, thus 

unreasonably expanding the definition 

of ‘‘employer.’’ 22 In addition, the 

district court ruled that the 2018 AHP 

Rule’s expansion of the term 

‘‘employer’’ under ERISA to include 

working owners without common-law 

employees (when members of an 

association) was unreasonable because 

it was contrary to ERISA’s text and 

central purpose of regulating 

employment-based relationships.23

Regarding ERISA’s text and purpose, the 

district court held that Congress did not 

intend for working owners without 

common-law employees to be included 


ddrumheller on DSK120RN23PROD with PROPOSALS1
87972 Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Proposed Rules 

24 Id. at 137. The district court concluded that the 

provision was contrary to ERISA and the APA and 

that it relied on ‘‘a tortured reading’’ of the 

Affordable Care Act (ACA). Id. at 141. 

25 Id. at 128. 

26 Id. at 141. 

27New York v. United States Department of 

Labor, 363 F. Supp. 3d 109, appeal docketed, No. 

19–5125 (D.C. Cir. May 31, 2019). 

28New York v. United States Department of 

Labor, No. 19–5125 (D.C. Cir. Feb. 8, 2021) (order 

granting consent motion to hold case in abeyance). 

29Press Release, Employee Benefits Security 

Administration, U.S. Department of Labor 

Statement Relating to the U.S. District Court Ruling 

in State of New York v. United States Department 

of Labor (Apr. 29, 2019), available at https://

www.dol.gov/newsroom/releases/ebsa/ 

ebsa20190429. 

30 Id. 

31 In addition, as explained in the April 29, 2019 

statement, the Department of Health and Human 

Services (HHS) had advised the Department that 

HHS would not pursue enforcement against 

nonfederal governmental plans or health insurance 

issuers for potential violations of title XXVII of the 

PHS Act caused by actions taken before the district 

court’s decision in good faith reliance on the rule’s 

validity, through the remainder of the applicable 

plan year or contract term that was in force at the 

time of the district court’s decision. HHS had also 

advised the Department that HHS would not 

consider States to be failing to substantially enforce 

applicable requirements under title XXVII of the 

PHS Act in cases where the State adopted a similar 

approach with respect to health insurance coverage 

issued within the State. Id. 

32 29 U.S.C. 1135 (delegating authority to the 

Secretary of Labor to ‘‘prescribe such regulations as 

he finds necessary or appropriate to carry out the 

provisions of [ERISA]’’); see Black & Decker 

Disability Plan v. Nord, 538 U.S. 822, 831 (2003) 

(deferring to the Department’s interpretation of an 

ERISA provision). 

33See 2018 AHP Rule, 83 FR 28912, 28914 (June 

21, 2018); New York v. United States Department 

of Labor, 363 F. Supp. 3d 109, 128 (D.D.C. 2019). 

See also Advisory Opinions Nos. 94–07A (Mar. 14, 

1994), 95–01A (Feb. 13, 1995), 96–25A (Oct. 31, 

1996), 2001–04A (Mar. 22, 2001), 2003–13A (Sept. 

30, 2003), 2003–17A (Dec. 12, 2003), 2007–06A 

(Aug. 16, 2007), 2012–04A (May 25, 2012), and 

2019–01A (July 8. 2019). 

34 ‘‘We are mindful of the potentially harmful 

effects of an overly broad interpretation of the term 

‘employee benefit plan’ when coupled with the 

policy of section 514. As we have already noted, we 

do not believe that the statute and legislative 

history will support the inclusion of what amounts 

to commercial products within the umbrella of the 

definition. Where a ‘plan’ is, in effect, an 

entrepreneurial venture, it is outside the policy of 

within ERISA—either as individuals or 

when joined in an employer 

association.24 In conclusion, the district 

court held that the 2018 AHP Rule was 

inconsistent with ERISA and the APA 

because the provisions unlawfully failed 

to limit bona fide associations to those 

acting ‘‘in the interest of’’ their 

employer members, within the meaning 

of ERISA, thus exceeding the 

Department’s statutory authority.25 The 

district court remanded the 2018 AHP 

Rule to the Department to consider how 

the severability provision of the 2018 

AHP Rule affects any of its remaining 

provisions.26

The Department appealed the district 

court’s decision.27 Thereafter, at the 

Department’s request, the U.S. Court of 

Appeals for the District of Columbia 

Circuit granted the Department’s request 

to stay the appeal.28 Subsequently, the 

Department informed the appeals court 

that it would undertake notice and 

comment rulemaking on a proposal to 

rescind the 2018 AHP Rule. The appeal 

pending before the D.C. Circuit remains 

stayed. 

The Department considered the 

severability clause issue raised by the 

district court and concluded that, 

without the core provisions that the 

district court set aside, the 2018 AHP 

Rule would have no operationalizable 

substance and provide no meaningful 

guidance. To minimize consequences of 

the district court’s decision on AHP 

participants, the Department announced 

a temporary enforcement policy on 

April 29, 2019.29 Specifically, the 

Department announced that it would 

not pursue enforcement actions against 

parties for potential violations stemming 

from actions taken prior to the district 

court’s decision and in good faith 

reliance on the 2018 AHP Rule, as long 

as parties met their responsibilities to 

association members and their 

participants and beneficiaries to pay 

health benefit claims as promised.30 In 

addition, the Department announced 

that it would not take action against 

existing AHPs for continuing, through 

the remainder of the applicable plan 

year or contract term that was in force 

at the time of the district court’s 

decision, to provide health benefits to 

members who enrolled in good faith 

reliance on the 2018 AHP Rule before 

the district court’s order.31 Because the 

2018 AHP Rule ceased being an 

alternative pathway for entities to be 

treated as bona fide employer groups or 

associations after the district court’s 

decision, the Department anticipated 

that parties who established AHPs in 

reliance on the 2018 AHP Rule would 

wind them down and that no new AHPs 

would be formed in reliance on the 2018 

AHP rule until the judicial process 

ended. The Department’s temporary 

enforcement policy period expired long 

ago, and the Department is not aware of 

any AHPs that currently exist in 

reliance on the 2018 AHP Rule. 

II. Proposal To Rescind 

The Department proposes to remove 

the 29 CFR 2510.3–5 regulation 

established by the 2018 AHP Rule and 

the related amendment to the 29 CFR 

2510.3–3 regulation made by the 2018 

AHP Rule. This proposed rule, if 

finalized, would rescind the 2018 AHP 

Rule in its entirety. 

A. Authority To Define ‘‘Employer’’ in 

ERISA Section 3(5) 

Congress tasked the Department with 

administering ERISA.32 The Department 

has clear authority to interpret the term 

‘‘employer,’’ including defining when a 

‘‘group or association of employers’’ 

may act ‘‘indirectly in the interest of an 

employer’’ in establishing an employee 

benefit plan and has done so in 

numerous advisory opinions.33 As 

emphasized elsewhere in this preamble, 

the courts and the Department have 

consistently stressed that ERISA’s 

definition of ‘‘employee benefit plan,’’ 

including the definition’s reference to 

arrangements ‘‘established or 

maintained by an employer or employee 

organization, or both,’’ envisions 

employment-based arrangements. No 

court decision or guidance from the 

Department, including the 2018 AHP 

Rule, has suggested the ‘‘employer 

group or association’’ provision in the 

ERISA section 3(5) definition of 

‘‘employer’’ extends the concept of an 

‘‘employee benefit plan’’ to commercial 

insurance-type arrangements. 

As described above, the Department’s 

pre-rule guidance, as articulated in 

advisory opinions, has traditionally 

applied a facts-and-circumstances 

approach to determine whether a group 

or association of employers is a bona 

fide employer group or association 

capable of sponsoring an ERISA plan on 

behalf of its employer members. As 

noted above, this pre-rule guidance 

focuses on three general criteria: (1) 

whether the group or association has 

business or organizational purposes and 

functions unrelated to the provision of 

benefits; (2) whether the employers 

share some commonality of interest and 

genuine organizational relationship 

unrelated to the provision of benefits; 

and (3) whether the employers that 

participate in a benefit program, either 

directly or indirectly, exercise control 

over the program, both in form and 

substance. While there are many 

organizations of employers, the 

Department’s pre-rule guidance makes 

clear that only certain entities consisting 

of more than one employer meet the 

definition of a bona fide group or 

association of employers under ERISA. 

Before the 2018 AHP Rule, the 

Department’s approach to these 

determinations had consistently focused 

on employment-based arrangements, as 

contemplated by ERISA, rather than 

commercial insurance-type 

arrangements that lack the requisite 

connection to the employment 

relationship.34 The Department’s 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Proposed Rules 87973 

section 514 . . . . In short, to be properly 

characterized as an ERISA employee benefit plan, 

a plan must satisfy the definitional requirement of 

section 3(3) in both form and substance.’’ Wisconsin 

Educ. Ass’n Ins. Trust v. Iowa State Bd. of Public 

Instruction, 804 F.2d 1059, 1063–64 (8th Cir. 1986) 

(quoting H.R. Rep. No. 1785, 94th Cong., 2d Sess. 

48 (1977)). 

35ERISA section 3(40)(A) (defining MEWAs). 

36For discussions of this history, see: (1) U.S. 

Gov’t Accountability Office, GAO–92–40, ‘‘States 

Need Labor’s Help Regulating Multiple Employer 

Welfare Arrangements.’’, March 1992, at https://

www.gao.gov/assets/220/215647.pdf; (2) U.S. Gov’t 

Accountability Office, GAO–04–312, ‘‘Employers 

and Individuals Are Vulnerable to Unauthorized or 

Bogus Entities Selling Coverage.’’ Feb. 2004, at 

https://www.gao.gov/new.items/d04312.pdf; and (3) 

Kofman, M. and Jennifer Libster, ‘‘Turbulent Past, 

Uncertain Future: Is It Time to Re-evaluate 

Regulation of Self-Insured Multiple Employer 

Arrangements?’’, Journal of Insurance Regulation, 

2005, Vol. 23, Issue 3, pp. 17–33. 

37ERISA section 514(b)(6), 29 U.S.C. 1144(b)(6). 

38Based on DOL enforcement data, since 2001, 

the Department has taken civil and criminal 

enforcement action, such as criminal indictments, 

civil complaints filed, temporary restraining orders, 

and cease and desist orders on 108 fraudulent and 

mismanaged MEWAs and their operators. Just since 

2018, the Department was forced to take civil and 

criminal enforcement action against 21 MEWAs in 

order to protect participants and beneficiaries from 

fraud or mismanagement of these arrangements. 

Further, the Department has civilly recovered over 

$95 million from mismanaged or fraudulent 

MEWAs in the last five years alone. See EBSA 

National Enforcement Project—Health Enforcement 

Initiatives at www.dol.gov/agencies/ebsa/aboutebsa/our-activities/enforcement#nationalenforcement-projects; U.S. Department of Labor 

Files Complaint to protect Participants and 

Beneficiaries of failing Medova MEWA operating in 

38 states, available at https://www.dol.gov/ 

newsroom/releases/ebsa/ebsa20201218; Federal 

Court Appoints Independent Fiduciary as Claims 

Administrator of Medova Arrangement, available at 

https://www.dol.gov/newsroom/releases/ebsa/ 

ebsa20210412; Federal Court Orders Kentucky 

Bankers Association to Pay $1,561,818 In Losses to 

Benefits Plan After U.S. Department of Labor Finds 

Violations, available at https://www.dol.gov/ 

newsroom/releases/ebsa/ebsa20201015; MEWA 

Enforcement Fact Sheet, available at https://

www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/ 

our-activities/resource-center/fact-sheets/mewaenforcement.pdf. 

39See 83 FR 28912, 28952 (June 21, 2018) 

(highlighting that many of the Department’s civil 

enforcement cases involving MEWAs involved 

failure to follow plan terms or health care laws, 

failure to provide plan benefits, or reporting and 

disclosure deficiencies). 

40 During the COVID–19 public health emergency, 

States were required to maintain enrollment of 

nearly all Medicaid enrollees. This ‘‘continuous 

enrollment condition’’ ended on March 31, 2023, 

under the Consolidated Appropriations Act, 2023. 

State Medicaid programs have 12 months to initiate, 

and 14 months to complete, a renewal for all 

individuals enrolled in Medicaid. CHIP provides 

health coverage to eligible children, through both 

Medicaid and separate CHIP programs. HHS has 

estimated that 15 million beneficiaries could lose 

Medicaid or CHIP coverage as a result of Medicaid 

unwinding. See HHS, Assistant Secretary for 

Planning and Evaluation, Office of Health Policy, 

‘‘Unwinding the Medicaid Continuous Enrollment 

Provision: Projected Enrollment Effects and Policy 

Approaches,’’ August 19, 2022, available at https:// 

aspe.hhs.gov/sites/default/files/documents/ 

404a7572048090ec1259d216f3fd617e/aspe-endmcaid-continuous-coverage_IB.pdf. 

41 83 FR 28912 (‘‘[T]he regulation continues to 

distinguish employment-based plans, the focal 

point of Title I of ERISA, from commercial 

insurance programs and other service provider 

arrangements.’’). 

42U.S. Gov’t Accountability Office, GAO–92–40, 

‘‘States Need Labor’s Help Regulating Multiple 

Employer Welfare Arrangements.’’ March 1992, pg. 

2–3 at https://www.gao.gov/assets/220/215647.pdf. 

longstanding pre-rule guidance has also 

been informed by its extensive 

experience with unscrupulous 

promoters, marketers, and operators of 

multiple employer welfare arrangements 

(MEWAs).35 AHPs generally qualify as 

MEWAs under ERISA. Although 

MEWAs can provide valuable coverage, 

historically MEWAs, particularly selffunded MEWAs, have 

disproportionately suffered from 

financial mismanagement or abuse, 

leaving participants and providers with 

unpaid benefits and bills and putting 

small businesses at financial risk.36

Because of this history of abuse by 

MEWA promoters claiming ERISA 

coverage and protection from State 

regulation, Congress amended ERISA in 

1983 to provide an exception to ERISA’s 

broad preemption provisions for the 

regulation of plan and non-plan MEWAs 

under State insurance laws.37

Employees and their dependents have 

too often become financially responsible 

for paying medical claims they were 

promised would be covered by the plan 

after paying premiums to fraudulent or 

mismanaged MEWAs, which could 

include AHPs. Because these entities 

often become insolvent, individuals and 

families bear the risk, and the impact 

can be devastating and can include 

being deprived of medical services if 

they cannot afford to pay out-of-pocket 

for medical claims that are not paid by 

the AHP.38 Even before such MEWAs 

become insolvent, employees and their 

dependents may still become financially 

responsible for medical claims where 

the AHP failed to adequately disclose 

the limitations and exclusions under the 

plan.39 The Department is concerned 

about the potential uptake and 

expansion of fraudulent and 

mismanaged MEWAs, especially at a 

time when over 90 million low-income 

children and adults are in the process of 

renewing their Medicaid and Children’s 

Health Insurance Program (CHIP) 

coverage, and may need to transition to 

other sources of coverage if they no 

longer qualify.40

ERISA’s overarching purpose is to 

protect participants and beneficiaries. 

The provisions of Title I of ERISA were 

initially enacted primarily to address 

public concern that funds of private 

pension plans were being mismanaged 

and abused. ERISA’s protections have 

expanded over time for private group 

health plans as well. Both Federal 

regulators and State insurance 

regulators have devoted substantial 

resources to detecting and correcting 

mismanagement and abuse, and in some 

cases, prosecuting wrongdoers. Even the 

2018 AHP Rule makes clear that DOL 

did not intend to depart too 

dramatically from its traditional 

interpretation of the word 

‘‘employer.’’ 41 While the Department 

sought to expand the scope of covered 

entities, it recognized the danger that 

too broad an expansion could result in 

‘‘associations’’ masquerading as bona 

fide employer groups or associations 

merely to promote the commercial sale 

of insurance. For that reason, DOL 

adopted and clarified the pre-rule 

guidance condition that the employers 

who participate in the AHP must 

control the group or association and the 

plan, and added an express 

nondiscrimination requirement as a 

counterweight to abuse. Thus, even in 

the context of the 2018 AHP Rule, DOL 

was concerned about the danger of 

expanding the meaning of the ‘‘group or 

association of employers’’ clause in 

ERISA section 3(5) to cover commercial 

insurance-type arrangements. 

In fact, because available oversight 

resources are extremely limited and 

fraudulent operations resist detection 

until claims go unpaid, significant 

damage can be done before the 

Government even receives a complaint 

about an arrangement, making it 

difficult for regulators to mitigate 

damages and stop bad actors. The 

vulnerability of participants, 

beneficiaries, and the small employers 

whose employees receive benefits 

through an AHP is further heightened 

when the standard for becoming a bona 

fide group or association is weakened. A 

weakened standard also can hinder 

efforts by States to regulate MEWAs, 

including AHPs, within their borders.42

The preamble of the 2018 AHP Rule 

implies as much in explaining the 

importance of incorporating the 

nondiscrimination provision in 

paragraph (d)(4) of the 2018 AHP Rule. 

As noted above, paragraph (d)(4) of the 

2018 AHP Rule sought to prohibit AHPs 

from treating member employers as 

distinct groups to distinguish AHPs 

from commercial insurance issuers. In 

discussing the importance of a requisite 

connection or commonality to lessen 

concerns about fraud, the preamble of 

the 2018 AHP Rule explained that 

because the final rule relaxed the 

Department’s pre-rule guidance on the 

groups or associations that may sponsor 

a single ERISA-covered group health 


ddrumheller on DSK120RN23PROD with PROPOSALS1
87974 Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Proposed Rules 

43 83 FR 28912, 28928–29 (June 21, 2018). 

44Encino Motorcars, LLC v. Navarro, 579 U.S. 

211, 220–23 (2016); see id. At 225 (Ginsburg, J., 

concurring) (restating the rule governing an 

agency’s reversal in policy, as articulated in F.C.C. 

v. Fox Television Stations, Inc., 556 U.S. 502, 515 

(2009)). 

45See 83 FR 28957 (June 21, 2018). 

46The American Medical Association noted that 

AHPs could exclude benefits like insulin, maternity 

care, mental health services and rehabilitative 

services that are particularly important to certain 

workers in blue-collar professions. See, e.g., Brief 

for American Medical Association and Medical 

Society of the State of New York as Amici Curiae 

in Support of Plaintiffs’ Motion for Summary 

Judgment, at *16, New York v. U.S. Department of 

Labor, 363 F. Supp. 3d 109 (D.D.C. 2019) (No. 1:18– 

CV–01747–JDB). 

plan, paragraph (d)(4) was especially 

important in the context of the new, 

broader arrangements to distinguish a 

group or association sponsored AHP 

from commercial-insurance-type 

arrangements, which lack the requisite 

connection to the employment 

relationship and whose purpose was, 

instead, principally to identify and 

manage risk on a commercial basis.43

The Department is no longer of the 

view that the business purpose 

standard, commonality standard, and 

working owner provision in the 2018 

AHP Rule, even bolstered by the 

nondiscrimination standards in 

paragraph (d)(4), are sufficient to 

distinguish between meaningful 

employment-based relationships as 

compared to commercial insurance-type 

arrangements whose purpose is 

principally to identify and manage risk. 

The Department continues to be 

mindful of the unique risks to 

participants, beneficiaries, small 

employers, and health care providers in 

the context of AHPs and any other form 

of MEWAs. These concerns underscore 

the need to limit ERISA-covered AHPs 

to true employee benefit plans that are 

the product of a genuine employment 

relationship and not artificial structures 

marketed as employee benefit plans, 

often with an objective of attempting to 

sidestep otherwise applicable insurance 

regulations or misdirect State insurance 

regulators. Such artificial vehicles are 

not ‘‘employee benefit plans’’ as defined 

in ERISA section 3(3), nor, as explained 

above, would it be consistent with the 

purpose of the statute to treat them as 

such. In sum, upon further evaluation 

and consistent with the sound 

administration of ERISA, the 

Department has concluded that it 

should rescind the 2018 AHP Rule from 

the Code of Federal Regulations (CFR). 

The Department now believes that the 

provisions of the 2018 Rule that the 

district court set aside as inconsistent 

with the APA and in excess of the 

Department’s authority are, at a 

minimum, not consistent with the best 

reading of the statutory requirements 

governing group health plans. 

B. Discussion of Decision To Propose To 

Rescind 

Under Supreme Court precedent, an 

agency has the discretion to change a 

policy position provided that the agency 

acknowledges changing its position, the 

new policy is permissible under the 

governing statute, there are good reasons 

for the new position, the agency 

believes that the new policy is better, as 

evidenced by the agency’s conscious 

action to change its policy, and the 

agency takes into account any serious 

reliance interests in the prior policy.44

The Department has further reviewed 

the relevant statutory language, judicial 

decisions, and pre-rule guidance, and 

further considered ERISA’s statutory 

purposes and related policy goals. Based 

on this review, the Department has 

concluded it is appropriate to propose 

to rescind the regulatory provisions 

adopted in the 2018 AHP Rule in order 

to ensure that guidance being provided 

to the regulated community is in 

alignment with ERISA’s text, purposes, 

and policies, resolve and mitigate any 

uncertainty regarding the status of the 

standards that were set under the 2018 

AHP Rule, and facilitate a 

reexamination of the criteria for a group 

or association of employers to be able to 

sponsor an AHP. 

The intent of the 2018 AHP Rule was 

to expand access to affordable health 

coverage for employees of small 

employers and certain self-employed 

individuals by lessening restrictions on 

the formation of AHPs, and thereby 

allow for the purchase of health 

insurance through the less regulated 

large group market. As discussed further 

in this rulemaking, the Department is 

now of the view, however, that the 

business purpose standard, the viability 

safe harbor in the business purpose 

standard, the geography-based 

commonality standard, and the working 

owner provisions of the 2018 AHP Rule 

do not align with the best reading of 

ERISA’s text and statutory purposes. 

In addition, and independently, 

information presented to the 

Department during the public comment 

process of the 2018 AHP rulemaking 

indicates that implementation of the 

2018 AHP Rule would have increased 

adverse selection against the individual 

and small group markets by drawing 

healthier, younger people into AHPs, 

thus increasing premiums for those 

remaining in those markets.45 AHPs can 

also tailor plan benefits so that 

individuals with preexisting conditions, 

or those who are otherwise anticipated 

to have higher health care costs are 

discouraged from joining AHPs, causing 

further adverse selection, market 

segmentation, and higher premiums in 

the individual and small group 

markets.46 The Department 

acknowledged in the 2018 AHP Rule 

that the rule’s ‘‘increased regulatory 

flexibility’’ would necessarily result in 

some segmentation of risk that favors 

AHPs over individual and small group 

markets and some premium increase for 

individuals and other small businesses 

remaining in the individual and small 

group markets. The Department 

concluded, however, that practical 

considerations and Federal 

nondiscrimination rules would limit 

such segmentation, and that States may 

further limit risk segmentation through 

regulation of AHPs as MEWAs and 

assumed some premium protection for 

subsidy-eligible taxpayers with 

household incomes at or below 400 

percent of the federal poverty level 

purchasing coverage on Exchanges. The 

Department is now of the view that the 

Department should give greater 

attention to the long-term impacts on 

market risk that the 2018 AHP Rule 

introduced, especially in the small 

group and individual markets. 

Additionally, health insurance 

coverage offered through AHPs in the 

large group markets is not subject to the 

requirement to offer essential health 

benefits, which means that individuals 

who join these AHPs may become 

underinsured if their AHP offers only 

‘‘skinny’’ coverage. Health plans that do 

not include benefits that nongrandfathered small group and 

individual market health insurance 

coverage are required to cover, such as 

maternity or prescription drug benefits, 

or even inpatient hospital coverage, are 

sometimes referred to as ‘‘skinny 

plans.’’ Because they offer less than 

comprehensive coverage, they are 

cheaper to purchase; however, 

participants and beneficiaries may not 

understand the significant limitations 

on such coverage. As discussed in this 

preamble at section I.C., the 2018 AHP 

Rule allowed small employers and 

working owners to band together to 

qualify as a single group health plan to 

purchase coverage in the large group 

market, thus avoiding the requirements 

on small group market and individual 

health insurance coverage and making it 

easier for AHPs to offer such skinny 

plans, resulting in participants and 

beneficiaries being vulnerable to high 

out-of-pocket costs and potentially not 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Proposed Rules 87975 

47The Department notes concerns expressed by 

commenters that low barriers to entry to become an 

AHP could result in groups or associations with less 

of a connection to the member employer’s 

community and unscrupulous operators siphoning 

off members by limiting their membership to 

healthier groups and offering lower rates for health 

coverage to their members. Commenters to the 2018 

AHP notice of proposed rulemaking (NPRM) also 

expressed the concern that it could fragment the 

individual and small group markets, resulting in 

increased premiums. Commenters further 

communicated that organizations that form on the 

basis of offering health benefits could increase the 

prevalence of unscrupulous promoters that do not 

have strong incentives to maintain a credible 

reputation. See 83 FR 28912, 28917, and 28943 

(June 21, 2018). 

48See 83 FR 28951, 28953 (June 21, 2018). 

49See supra note 25. 

50Wisconsin Educ. Ass’n Ins. Trust v. Iowa State 

Board of Public Instruction, 804 F.2d 1059, 1065 

(8th Cir. 1986) [hereinafter WEAIT] (‘‘Our decision 

is premised on ERISA’s language and Congress’ 

intent. There is no need to resort to the Department 

of Labor’s interpretations.’’); see MDPhysicians & 

Associates, Inc. v. State Bd. Of Ins., 957 F.2d 178, 

186 n.9 (5th Cir. 1992) (‘‘Although we ground our 

decision on the statutory language of ERISA and the 

intent of Congress, we recognize that [Department 

of Labor] opinions ‘constitute a body of experience 

and informed judgment to which courts and 

litigants may properly resort for guidance.’ ’’) 

(citation omitted). 

51 804 F.2d 1059, 1064 (8th Cir. 1986) (emphasis 

added); accord MDPhysicians, 957 F.2d 178, 185 

(5th Cir. 1992). 

52See, e.g., MDPhysicians, supra note 3, at 185– 

87 (holding that a MEWA that made health coverage 

available to ‘‘‘employers at large’ in the Texas 

panhandle’’ did not have sufficient common 

economic or representational interest) (citation 

omitted); Gruber v. Hubbard Bert Karle Weber, Inc., 

159 F.3d 780, 787 (3d Cir. 1998) (endorsing district 

court’s finding of no commonality of interest 

‘‘because ‘there was no nexus among the 

individuals benefitted by the [p]lan and the entity 

providing those benefits, other than the [p]lan itself’ 

since [the association] ‘was comprised of disparate 

and unaffiliated businesses’ who [sic] had no 

relationship prior to the inception of the [p]lan’’) 

(citation omitted); Plog v. Colorado Ass’n of Soil 

Conservation Districts, 841 F. Supp. 350, 353 (D. 

Colo. 1993) (rejecting claim that association was an 

‘‘employer’’ under ERISA because the association 

was open to any person who paid the association 

fee); Advisory Opinion No. 2019–01A (July 8, 2019) 

(‘‘Ace is a hardware retailer cooperative and is the 

largest cooperative, by sales, in the hardware 

industry. . . . Ace facilitates access to materials, 

supplies and services, as well as engages in 

activities that support Ace retail owners’ operation 

of their retail hardware businesses. Ace currently 

serves approximately 2,700 retail owners who 

operate approximately 4,400 Ace stores in the U.S. 

In addition, approximately 120 corporate stores are 

owned and operated as wholly-owned subsidiaries 

of Ace.’’); Advisory Opinion 2017–02AC (May 16, 

2017) (‘‘The First District Association (FDA) has 

been operating as an independent dairy cooperative 

organized under Minnesota Chapter 308A since 

1921. . . . FDA’s articles of incorporation provide 

that, among other related purposes, FDA’s purposes 

and activities include the purchase, sale, 

manufacture, promotion and marketing of its 

members’ dairy and agricultural products and 

engaging in other activities in connection with 

manufacture, sale or supply of machineries, 

equipment or supplies to its members.’’); Advisory 

Opinion 2005–24A (Dec. 30, 2005) (‘‘WAICU’s 

purposes and activities include representing its 

members at State and national forums, encouraging 

cooperation among its members to utilize resources 

effectively, and encouraging collaboration with 

other institutions of higher learning for the benefit 

of Wisconsin citizens. WAICU’s services to its 

members include professional development for 

officers, research, public relations, marketing, 

admissions support, and managing collaborative 

ventures among the members (e.g., WAICU Study 

Abroad Collaboration).’’); Advisory Opinion 2001– 

04A (Mar 22, 2001) (‘‘The Association was 

incorporated in Wisconsin in 1935 for the purpose 

of promoting automotive trade in the State of 

Wisconsin . . . .’’). 

53 29 CFR 2520.3–5(b)(1). 

54 Id. 

having access to benefits for care when 

they most need it.47

The Department is also concerned 

that the 2018 AHP Rule could interfere 

with the goal of increasing affordable, 

quality coverage because the rule 

increases the possibility that individuals 

who join AHPs will be subject to 

mismanaged plans. As noted above, 

ERISA generally classifies AHPs as 

MEWAs. Historically, MEWAs, 

especially self-funded MEWAs, have 

disproportionately suffered from 

financial mismanagement or abuse, 

leaving participants and providers with 

unpaid benefits and bills.48

The 2018 AHP Rule reflected a 

substantial change and significant 

departure from the Department’s prerule guidance. While the alternative 

pathway provided in the 2018 AHP Rule 

has been unavailable as a basis for 

forming an AHP since the district 

court’s decision, the Department’s 

proposal to rescind the 2018 AHP Rule, 

if finalized, would make clear that this 

significant departure from pre-rule 

guidance no longer represents the 

Department’s interpretation of when a 

group or association can constitute an 

‘‘employer’’ for purposes of sponsoring 

a group health plan under ERISA. The 

proposed rescission leaves in place the 

longstanding pre-rule guidance that has 

been consistently supported and relied 

upon in numerous judicial decisions 

because it fosters a sufficient employeremployee nexus and proper oversight of 

AHPs, while remaining consistent with 

ERISA’s text and purpose. The proposed 

rescission would also facilitate a 

reexamination of the rule’s ‘‘business 

purpose’’ standard and viability safe 

harbor, the geography-based 

commonality alternative, and the 

working-owner provisions, including 

the potential those provisions have for 

encouraging abusive health care 

arrangements, especially self-insured 

programs, that sell low quality or 

otherwise unreliable health insurance 

products through MEWAs to 

unsuspecting employers, particularly 

small businesses. Further, the 

Department does not believe that there 

is a basis for reliance on the 2018 AHP 

Rule given the fact that the temporary 

enforcement policy period announced 

by the Department immediately 

following the district court’s decision 

has long expired.49 The Department has 

thus concluded for several reasons that 

it is appropriate to propose to rescind 

the 2018 AHP Rule. 

1. Business Purpose Standard 

The courts of appeals have uniformly 

interpreted ERISA’s definition of 

employer to require common interests 

other than the provision of welfare 

benefits, independent of any deference 

to the Department’s historical 

guidance.50 The decision of the Eighth 

Circuit Court of Appeals in WEAIT is 

instructive; there, the court held that 

‘‘[t]he definition of an employee welfare 

benefit plan is grounded on the premise 

that the entity that maintains the plan 

and the individuals that benefit from the 

plan are tied by a common economic or 

representation interest, unrelated to the 

provision of benefits.’’ 51 The pre-rule 

guidance also uniformly emphasized 

that a purpose unrelated to the 

provision of benefits is a critical factor 

for any group or association of 

employers to be a bona fide group or 

association able to act as an ‘‘employer’’ 

sponsoring an ‘‘employee benefit plan’’ 

under ERISA. Although neither the 

courts nor the DOL’s pre-rule guidance 

articulated a generally applicable 

standard for measuring the sufficiency 

or substantiality of the unrelated 

purpose, employer groups or 

associations that were found to be able 

to sponsor an ERISA plan tended to 

have well developed and shared 

business purposes unrelated to the 

provision of benefits.52

Paragraph (b) of the 2018 AHP Rule 

also contained a business purpose 

standard. In relevant part, it provided 

that a group or association of employers 

must have at least one ‘‘substantial’’ 

business purpose unrelated to offering 

and providing health coverage or other 

employee benefits to its employer 

members and their employees, even if 

the primary purpose of the group or 

association is to offer such coverage to 

its members.53 The 2018 AHP Rule did 

not define ‘‘substantial’’ for this 

purpose, but created a broad safe harbor 

that allowed a group or association to 

meet the business purpose standard ‘‘if 

the group or association would be a 

viable entity in the absence of 

sponsoring an employee benefit 

plan.’’ 54 On further consideration, the 

Department is concerned that the 

business purpose standard and 

accompanying viability safe harbor are 

too loose to ensure that the group or 


ddrumheller on DSK120RN23PROD with PROPOSALS1
87976 Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Proposed Rules 

55 83 FR 28912, 28918 (June 21, 2018). 

56 Id. at 28929. 

57See supra fn. 39. 

58 804 F.2d at 1063 (8th Cir. 1986). 

59 Id. at 1065. 

60 MDPhysicians, 957 F.2d at 186 n.9 (‘‘Although 

we ground our decision on the statutory language 

of ERISA and the intent of Congress, we recognize 

that [Department of Labor] opinions ‘constitute a 

body of experience and informed judgment to 

which courts and litigants may properly resort for 

guidance.’ ’’) (citation omitted); id. at 185–87 

(holding that a MEWA that made health coverage 

available to ‘‘ ‘employers at large’ in the Texas 

panhandle’’ did not have sufficient common 

economic or representational interest). 

61But see Advisory Opinion No. 2008–07A (Sept. 

26, 2008) (‘‘In the Department’s view, however, the 

Bend Chamber [of Commerce]’s structure is not the 

type of connection between employer members that 

the Department requires for a group or association 

of employers to sponsor a single ‘multiple employer 

plan.’ Rather, the Department would view the 

employers that use the Bend Chamber’s 

arrangement as each having established separate 

employee benefit plans for their employees. 

Although we do not question the Bend Chamber’s 

status as a genuine regional chamber of commerce 

with legitimate business and associational 

purposes, the primary economic nexus between the 

member employers is a commitment to private 

business development in a common geographic 

area. This would appear to open membership in the 

Bend Chamber, and in turn participation in the 

proposed health insurance arrangement, to virtually 

any employer in the region. The other factors the 

Bend Chamber cites do not directly relate to a 

connection between the member employers, the 

association, and the covered employees; instead, 

such factors are characteristics that evidence the 

reliability of the Bend Chamber’s operations (e.g., 

cash assets of $100,000 or more, physical office 

space, years in operation, etc.).’’). 

62 83 FR 28912, 28926 (June 21, 2018). 

association sponsoring the AHP is 

actually acting in the employers’ 

interest or to effectively differentiate an 

employee health benefit program offered 

by such an association from a 

commercial insurance venture. 

Although the rule provided that a 

business purpose had to be 

‘‘substantial,’’ the preamble’s discussion 

of what counts as ‘‘substantial’’ was 

confusing and in some tension with the 

word’s ordinary meaning. At one point, 

the preamble suggested that merely 

‘‘offering classes or educational 

materials on business issues of interest 

to members’’ was per se sufficient to 

qualify as substantial.55 Moreover, the 

existence of the viability safe harbor 

suggested that some associations that 

were not viable (but for sponsoring an 

AHP) could still have a substantial 

business purpose under the rule. 

In the preamble to the 2018 AHP rule, 

DOL posited that this relaxation of the 

standard would nonetheless work to 

differentiate employer groups or 

associations from commercial insurance 

ventures because the rule’s control 

requirement and its new 

nondiscrimination requirement would 

ensure that only bona fide associations 

become AHPs. However, as described 

above, DOL has reexamined the rule’s 

treatment of those features and does not 

view those elements of the 2018 AHP 

Rule as sufficient to mitigate problems 

with the business purpose standard and 

ensure the rule distinguishes bona fide 

employer groups or associations acting 

as an employer with respect to an 

employee benefit plan from a 

commercial insurance venture. For 

example, under the 2018 AHP Rule, 

especially the working owner 

provisions, promoters would be able to 

set up arrangements with separate 

contribution rates for ‘‘employer’’ 

members based on a variety of nonhealth factors, such as industry, 

occupation, or geography, in ways that 

would make the arrangement look 

strikingly similar to a commercial 

insurance venture.56 The 2018 AHP 

Rule attempted to address the 

Department’s policy concerns related to 

fraud and insolvency by requiring that 

a group or association of employers 

have at least one substantial business 

purpose unrelated to offering or 

providing employee welfare benefits. In 

the Department’s current view, based on 

its long and significant experience in 

this area as well as current concerns 

about abuse, by permitting the provision 

of benefits as the entity’s primary 

purpose and the low bar of the 

substantial business purpose standard 

and viability safe harbor, the 2018 AHP 

Rule does not establish conditions that 

appropriately distinguish an employer 

group sponsoring an employee benefit 

plan from a commercial insurance 

venture. Rather, for the reasons 

discussed in this preamble, it may 

instead expose participants, 

beneficiaries, and unsuspecting small 

employers to unscrupulous operators.57

Moreover, the Department no longer 

believes that the 2018 AHP Rule 

appropriately addressed the concerns 

expressed by commenters, and now 

shared by the Department, related to 

market fragmentation and reduction in 

the average size of AHPs, which could 

impact employer groups’ ability to take 

advantage of their market power and 

economies of scale, which would 

ultimately impact the affordability for 

participants receiving benefits through 

the AHP. 

2. Geographic Commonality 

There is a substantial body of case law 

interpreting ERISA’s definition of 

employer to require common interests 

other than the provision of welfare 

benefits, independent of any deference 

to the Department’s historical guidance. 

For example, in WEAIT the Eighth 

Circuit concluded that ‘‘[t]he definition 

of an employee welfare benefit plan is 

grounded on the premise that the entity 

that maintains the plan and the 

individuals that benefit from the plan 

are tied by a common economic or 

representation interest, unrelated to the 

provision of benefits.’’ 58 The court 

further explained that ‘‘[o]ur decision is 

premised on ERISA’s language and 

Congress’ intent’’ and that ‘‘[t]here [wa]s 

no need to resort to the Department of 

Labor’s interpretations.’’ 59 Like the 

commonality of interest requirement 

articulated by the Eighth Circuit in 

WEAIT—a requirement that court 

explained was grounded in ERISA—in 

MDPhysicians, the court also found that 

ERISA required a commonality of 

interest among employer members.60

Paragraph (c) of the 2018 AHP Rule 

set forth alternative ways an association 

could be treated as having the requisite 

commonality of interest necessary to 

constitute a bona fide group or 

association of employers. The 

employers who participate in the group 

or association could have had ‘‘industry 

commonality,’’ which means they were 

in the same trade, industry, line of 

business, or profession. Alternatively, 

the participating employers could have 

had ‘‘geographic commonality’’ if each 

employer had a principal place of 

business in the same geographic region 

that did not exceed the boundaries of a 

single State or metropolitan area (even 

if the metropolitan area included more 

than one State). In a departure from the 

pre-rule guidance, the 2018 AHP Rule 

permitted an employer group or 

association to establish the requisite 

commonality of interest based on a 

common geographic location alone, 

even if the membership within the 

geographic locale comprises otherwise 

unrelated employers in multiple 

unrelated trades, industries, lines of 

business, or professions.61

The preamble of the 2018 AHP Rule 

focused on the desired goal of the rule, 

to spur AHP formation, but did not 

adequately address the fundamental 

question of how geography alone 

provided for a commonality of interest. 

The preamble to 2018 AHP Rule did not 

dispute the importance of commonality. 

Indeed, the 2018 AHP Rule rejected 

suggestions that commonality could be 

established by shared ownership 

characteristics (all women-owned 

businesses; all minority-owned 

businesses; all veteran-owned 

businesses), shared business models 

(e.g., all non-profit businesses), shared 

religious/moral convictions, or shared 

business size.62 DOL did so because it 

concluded that a standard this lax 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Proposed Rules 87977 

63 Id. 

64The preamble of the 2018 AHP Rule explained 

that a test that would treat all nationwide 

franchises, all nationwide small businesses, or all 

nationwide minority-owned businesses, as having a 

common employment-based nexus—no matter the 

differences in their products, services, regions, or 

lines of work—wouldn’t be sufficient to establish 

commonality of interest for a national group or 

association and AHP because it would be 

impossible to define or limit (e.g., business owners 

who support democracy) and, ‘‘in the Department’s 

view, would effectively eviscerate the genuine 

commonality of interest required under ERISA.’’ 83 

FR 28912, 28926 (June 21, 2018). 

65 29 CFR 2510.3–5(e). 66See id.at § 2510.3–3(c). 

67 83 FR 28931 (June 21, 2018). 

68Raymond B. Yates, M.D., P.C. Profit Sharing 

Plan v. Hendon, 541 U.S. 1, 6 (2004). 

would be ‘‘impossible to define or 

limit’’ and would ‘‘eviscerate’’ the 

commonality requirement.63 The AHP 

rule concluded that, as a policy matter, 

these line-drawing concerns did not 

apply to groups with geographical 

commonality, but the discussion was 

incomplete at best because it focused 

mostly on the benefits of having more 

AHPs, without providing any 

convincing explanation of how 

geographic commonality was an 

employment-based commonality that 

was different from the shared 

ownership, shared business models, 

shared religious/moral convictions, and 

shared business size criteria that the 

Department rejected. Upon further 

consideration, DOL now agrees that a 

commonality requirement based on 

common geography alone (same State or 

multi-State area) is not adequate as a 

means for making sure that 

commonality exists. The same reasons 

why DOL rejected other expansions of 

the commonality requirement militate 

against adopting geographic 

commonality as well. Although it is true 

that the existence of state-wide 

chambers of commerce demonstrates 

that certain statewide groups might have 

shared interests such that they could 

create an association, this form of 

commonality is too loose and 

undermines the commonality 

requirement’s ability to ensure that AHP 

status is restricted to bona fide 

associations. 

While the Department acknowledges 

that employers within the same 

geographic locale can share other factors 

that rise to the level of sufficient 

economic and representational interest, 

the Department is now concerned that 

the 2018 AHP Rule did not articulate an 

appropriate basis for treating common 

geography alone as a shared interest 

with respect to the employment 

relationship. Just as would be the case 

for associations consisting of employers 

whose membership is based on common 

business size, the Department is 

concerned that recognizing under 

ERISA section 3(5) an association 

composed of unrelated employers all 

operating in any specific State with no 

other commonality also would not 

sufficiently respect the genuine 

commonality of interest requirement 

under ERISA, which is intended to 

ensure that AHPs are operating in the 

interest of employers and are not merely 

operating as traditional health insurance 

issuers in all but name.64

3. Working Owners 

The 2018 AHP Rule allowed certain 

self-employed persons without any 

common-law employees to participate 

in AHPs as ‘‘working owners.’’ 65 The 

2018 AHP Rule established wage, hours 

of service, and other conditions for 

when a working owner would be treated 

as both an ‘‘employer’’ and ‘‘employee’’ 

for purposes of participating in, and 

being covered by, an AHP.66 The 2018 

AHP Rule treated persons as employers 

even though they had no employment 

relationship with anybody other than 

themselves. Thus, a group or association 

could become an employer by virtue of 

its working owner members being 

classified as both an employer and an 

employee, even though the working 

owners had no employees and also were 

not employed by another person or 

entity. 

The Department believes that the 

2018 AHP Rule struck the wrong 

balance between ensuring a sufficient 

employment nexus and enabling the 

creation of plan MEWAs and failed to 

appropriately account for the 

consequences of the working owner 

provision. ERISA applies when there is 

an employer-employee nexus. This 

employer-employee nexus is the heart of 

what makes an entity a bona fide group 

or association of employers capable of 

sponsoring an AHP. In other words, the 

standard is meant to reflect genuine 

employment relationships. The 

Department is now of the view that 

ERISA calls for a higher standard for 

what constitutes a bona fide group or 

association of employers than is 

evidenced in the 2018 AHP Rule. In the 

ERISA context, the bona fide group or 

association of employers consists of 

actual employers who, as of the time 

they join the group or association, hire, 

and pay wages or salaries to other 

people who are their common-law 

employees working for them. Under the 

2018 AHP Rule, although working 

owners had to meet requirements 

related to the number of hours devoted 

to providing personal services to the 

trade or business or the amount of 

income earned from the trade or 

business in order to participate in an 

AHP, these requirements related to 

differentiating self-employed 

individuals from individuals engaged in 

hobbies that generate income or other de 

minimis commercial activities.67 They 

did not, however, reflect the existence 

of an employer-employee relationship 

as in the exchange between an employee 

and an employer of personal services for 

wages and other compensation (such as 

health benefits offered through a group 

health plan) that would be expected in 

a common-law employment 

relationship. 

By removing the requirement for a 

genuine employer-employee nexus, we 

now are concerned on further reflection 

that the 2018 AHP Rule departs too far 

from ERISA’s essential purpose and fails 

to take appropriate account of the 

underlying basis for the bona fide group 

or association of employers standard. As 

stated previously, this purpose and 

basis require drawing appropriate 

distinctions between employers and 

associations acting ‘‘in the interest of an 

employer’’ on the one hand, and 

entrepreneurial ventures selling 

insurance on the other. A strong 

employer-employee nexus condition 

also helps reduce the vulnerability of 

MEWAs to fraudulent behavior and 

mismanagement. Routinely treating 

people as ‘‘employers’’ when they have 

no employees risks converting ERISA 

from an employment-based statute, as 

Congress intended, to one that regulates 

the sale of insurance to individuals, 

without regard to an employment 

relationship. 

The Department, upon further review 

of relevant Supreme Court and circuit 

court judicial decisions, and consistent 

with the Department’s reconsidered 

view of working owners (without 

common-law employees) for purposes of 

ERISA section 3(5), has concluded that 

the better interpretation of such case 

law, for purposes of furthering ERISA’s 

statutory purposes and related policy 

goals, is that a working owner may act 

as an employer for purposes of 

participating in a bona fide employer 

group or association under 

circumstances where there are also 

common-law employees of the working 

owner. In the Supreme Court’s decision, 

Raymond B. Yates, M.D., P.C. Profit 

Sharing Plan v. Hendon, the Court held 

that a working owner and spouse were 

eligible to participate in the 

corporation’s ERISA plan, provided that 

at least one common-law employee of 

the corporation participated in its 

plan.68 Several circuit court opinions 


ddrumheller on DSK120RN23PROD with PROPOSALS1
87978 Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Proposed Rules 

69 Donovan v. Dillingham, 688 F.2d 1367, 1371 

(11th Cir. 1982) (emphasis added). 

70 Meredith v. Time Ins. Co., 980 F.2d 352, 358 

(5th Cir. 1993); id. (‘‘When the employee and 

employer are one and the same, there is little need 

to regulate plan administration. . . . It would 

appear axiomatic that the employee-employer 

relationship is predicated on the relationship 

between two different people. . . . We conclude 

that the power to so define the scope of ERISA has 

been delegated by Congress to the Department of 

Labor, and find no reason to disturb the 

Department’s conclusion that ERISA does not 

intend to treat the spouse of a sole proprietor as an 

employee.’’). 

71 Marcella v. Capital Districts Health Plan, Inc., 

293 F.3d 42, 48 (2d Cir. 2002); id. at 49 (holding 

that ‘‘a group or association . . . that contains nonemployers cannot be an ‘employer’ within the 

meaning of ERISA’’). 

72Baucom v. Pilot Life Ins. Co., 674 F. Supp. 

1175, 1180 (M.D.N.C. 1987). In Baucom, 

‘‘[r]eturning to ERISA’s language, the court 

observe[d] that, despite its limitations, the statutory 

definition of ‘employee’ mandates that an employee 

must work for another.’’ Id. (citation omitted). 

73 In 1996, HIPAA added provisions of ERISA and 

the PHS Act, which specified that for purposes of 

part 7 of title 1 of ERISA and title XXVII of the PHS 

Act ‘‘[a]ny plan, fund, or program which would not 

be (but for this subsection) an employee welfare 

benefit plan and which is established or maintained 

by a partnership, to the extent that such plan, fund, 

or program provides medical care . . . to present 

or former partners in the partnership . . . shall be 

treated (subject to paragraph (2)) as an employee 

welfare benefit plan which is a group health plan.’’ 

ERISA section 732(d); PHS Act section 2722(d). For 

a group health plan, the term employee also 

includes any bona fide partner. 26 CFR 54.9831– 

1(d)(2); 29 CFR 2590.732(d)(2); 45 CFR 

146.145(c)(2). 

74See, e.g., Gruber v. Hubbard Bert Karla Weber, 

Inc., 159 F.3d 780, 787 (3d Cir. 1988) (‘‘[T]o qualify 

as an ‘employer’ for ERISA purposes, an employer 

group or association must satisfy both the 

commonality of interest and control 

requirements.’’). 

75Advisory opinions are issued pursuant to 

ERISA Procedure 76–1, which in Section 10 

describes the effect of advisory opinions as follows: 

‘‘An advisory opinion is an opinion of the 

department as to the application of one or more 

sections of the Act, regulations promulgated under 

the Act, interpretive bulletins, or exemptions. The 

opinion assumes that all material facts and 

representations set forth in the request are accurate 

and applies only to the situation described therein. 

Only the parties described in the request for 

opinion may rely on the opinion, and they may rely 

on the opinion only to the extent that the request 

fully and accurately contains all the material facts 

and representations necessary to issuance of the 

opinion and the situation conforms to the situation 

described in the request for opinion.’’ 

also emphasize the existence of an 

employment relationship when 

determining if an owner is an employer 

and/or employee. As the Eleventh 

Circuit stated in Donovan v. Dillingham, 

‘‘[t]he gist of ERISA’s definitions of 

employer, employee organization, 

participant, and beneficiary is that a 

plan, fund, or program falls within the 

ambit of ERISA only if the plan, fund, 

or program covers ERISA participants 

because of their employee status in an 

employment relationship. . . .’’ 69 In 

Meredith v. Time Insurance Company, 

the Fifth Circuit held that the 

Department could reasonably decline to 

treat a sole proprietor both as an 

employer and employee under ERISA 

section 3(5) because the ‘‘employeeemployer relationship is predicated on 

the relationship between two different 

people.’’ 70 Similarly, in Marcella v. 

Capital Districts Health Plan, Inc., the 

Second Circuit found that working 

owners without common-law employees 

are not employers.71 Further, as 

indicated in Donovan, just as the 

statutory definition of ‘‘employer’’ 

under ERISA requires an employee, the 

statutory definition of ‘‘employee’’ 

under ERISA requires the employee to 

work for another.72 These holdings are 

consistent with the Department’s 

traditional interpretation of ‘‘employee’’ 

in 29 CFR 2510.3–3(b) and (c).73

C. Alternatives To Complete Rescission 

of the 2018 AHP Rule 

As part of its deliberations as to 

whether to propose rescission, the 

Department considered several 

alternatives for this rulemaking. The 

Department contemplated proposing 

rescission to remove only certain 

provisions of the 2018 AHP Rule. For 

example, the Department considered 

proposing to rescind the working owner 

provision, which represents the most 

significant departure from the pre-rule 

guidance. Similarly, the Department 

considered proposing to remove the 

geographic commonality provision, 

another provision representing a 

dramatic departure from the pre-rule 

guidance, since geography is not, on its 

own, an interest with respect to an 

employment relationship. However, the 

Department decided against proposing a 

rescission of just the specific provisions 

set aside by the district court. The 

Department is concerned that the 

provisions that would remain in the 

2018 AHP Rule would not provide an 

adequate definition of ‘‘employer’’ in 

ERISA section 3(5) that properly reflect 

the limits of ERISA’s definition of 

‘‘employer’’ and Congress’ focus on 

employment-based arrangements, as 

opposed to the ordinary commercial 

provision of insurance outside the 

employment context, and, for the 

reasons discussed above, would be 

missing key elements necessary for a 

comprehensive framework for a group 

or association to demonstrate that it is 

acting ‘‘indirectly in the interest of an 

employer’’ within the meaning of 

section 3(5) of ERISA.74

The Department also considered a 

proposal to rescind the 2018 AHP Rule 

and instead codify, in the CFR, the prerule guidance. The Department 

recognizes that there could be benefits 

to codifying the pre-rule guidance. The 

pre-rule guidance is largely in the form 

of advisory opinions, which do not have 

the same applicability as regulations 

and technically are not precedential.75

Application of the Department’s prerule guidance thus requires interested 

parties to compare their specific 

circumstances to various opinions the 

Department issued to determine 

whether the Department has addressed 

analogous facts and circumstances. 

Nonetheless, the Department concluded 

that it would be better to seek comment 

from interested parties on whether the 

Department should first propose a rule 

either codifying the pre-rule guidance or 

creating alternative criteria and then 

consider that input as part of a 

comprehensive reevaluation of the 

definition of ‘‘employer’’ in the AHP 

context. 

III. Requests for Public Comments 

The Department seeks comments from 

interested parties on all aspects of this 

proposal to rescind the 2018 AHP Rule 

in its entirety. In the Department’s view, 

ERISA’s statutory purposes would be 

better served by rescinding the 2018 

AHP Rule and removing it from the 

published CFR while the Department 

considers alternatives and engages with 

interested parties. In addition to 

comments on rescission of the 2018 

AHP Rule, the Department also seeks 

comments on whether the Department 

should propose a rule for group health 

plans that codifies and replaces the prerule guidance, issue additional guidance 

clarifying the application of the 

Department’s pre-rule guidance as it 

relates to group health plans (including, 

for example, the HIPAA 

nondiscrimination rule application to 

AHPs), propose revised alternative 

criteria for multiple employer 

association-based group health plans, or 

pursue some combination of those or 

other alternative steps. The public 

comments will inform the Department’s 

decision on whether to finalize this 

proposal to rescind the 2018 AHP Rule 

and will also assist the Department in 

determining if it should engage in future 

rulemaking on AHPs under ERISA 

section 3(5). The Department intends 

that its evaluation will focus on 

ensuring that the Department’s 

regulatory policy and actions in this 

area honor the Department’s long held 

view, reiterated in the preamble to the 

2018 AHP Rule, that Congress did not 

intend to treat commercial health 

insurance products marketed by private 

entrepreneurs, who lack the close 

economic or representational ties to 

participating employers and employees, 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Proposed Rules 87979 

76 83 FR 28912, 28928 (June 21, 2018); Advisory 

Opinions Nos. 94–07A (Mar. 14, 1994), available at 

www.dol.gov/agencies/ebsa/employers-andadvisers/guidance/advisory-opinions/1994-07a, and 

2001–04A (Mar. 22, 2001), available at 

www.dol.gov/agencies/ebsa/employersandadvisers/guidance/advisory-opinions/2001-04a. 

77 29 CFR 2510.3–55; Definition of ‘‘Employer’’ 

Under Section 3(5) of ERISA—Association 

Retirement Plans and Other Multiple-Employer 

Plans, 84 FR 37508 (July 31, 2019). 

78 58 FR 51735 (Oct. 4, 1993). 

79 76 FR 3821 (Jan. 21, 2011). 

80The applicability date provision in the 2018 

AHP Rule allowed fully insured plans to begin 

operating under the rule on September 1, 2018, 

existing self-insured AHPs could begin operating 

under the rule on January 1, 2019, and new selfinsured AHPs could begin operating under the rule 

on April 1, 2019. The preamble explained that this 

phased approach was intended to allot some 

additional time for the Department and State 

authorities to address concerns about self-insured 

AHPs’ vulnerability to financial mismanagement 

and abuse. See 83 FR 28912, 28953 (June 21, 2018). 

as ERISA-covered welfare benefit 

plans.76 Comments should be submitted 

in accordance with the instructions at 

the beginning of this document. 

This proposal and solicitation of 

public comments is focused on group 

health plans and does not include 

retirement plans and welfare plans other 

than group health plans (e.g., disability 

plans). The Department acknowledges 

that its final rule on association 

retirement plans (ARPs), which was 

issued after the 2018 AHP Rule and after 

the district court decision in New York 

v. United States Department of Labor, 

includes commonality, business 

purpose, and working owner provisions 

that parallel the provisions in the 2018 

AHP Rule.77 In addition, ERISA has 

parallel language in the definitions of 

pension and welfare plan and does not 

explicitly provide a basis for 

distinguishing between the two rules. 

However, there are specific retirement 

plan considerations that involve issues 

beyond the scope of this rescission 

proposal. The Department does not 

intend to address the ARP rule, which 

was separately promulgated, in this 

rulemaking. 

IV. Regulatory Impact Analysis 

A. Relevant Executive Orders for 

Regulatory Impact Analyses 

Executive Orders (E.O.s) 12866 78 and 

13563 79 direct agencies to assess all 

costs and benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects; distributive impacts; and 

equity). E.O. 13563 emphasizes the 

importance of quantifying costs and 

benefits, reducing costs, harmonizing 

rules, and promoting flexibility. E.O. 

13563 directs agencies to propose or 

adopt a regulation only upon a reasoned 

determination that its benefits justify its 

costs; the regulation is tailored to 

impose the least burden on society, 

consistent with achieving the regulatory 

objectives; and in choosing among 

alternative regulatory approaches, the 

agency has selected those approaches 

that maximize net benefits. E.O. 13563 

recognizes that some benefits are 

difficult to quantify and provides that, 

where appropriate and permitted by 

law, agencies may consider and discuss 

qualitative values that are difficult or 

impossible to quantify, including 

equity, human dignity, fairness, and 

distributive impacts. 

Under E.O. 12866 (as amended by 

E.O. 14094), the Office of Management 

and Budget’s (OMB) Office of 

Information and Regulatory Affairs 

determines whether a regulatory action 

is significant and, therefore, subject to 

the requirements of the E.O. and review 

by OMB. As amended by E.O. 14094, 

section 3(f) of E.O. 12866 defines a 

‘‘significant regulatory action’’ as a 

regulatory action that is likely to result 

in a rule that may: (1) have an annual 

effect on the economy of $200 million 

or more; or adversely affect in a material 

way the economy, a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or State, local, Territorial, or 

Tribal governments or communities; (2) 

create a serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; (3) 

materially alter the budgetary impact of 

entitlements, grants, user fees or loan 

programs or the rights and obligations of 

recipients thereof; or (4) raise legal or 

policy issues for which centralized 

review would meaningfully further the 

President’s priorities or the principles 

set forth in the Executive order. 

OMB has designated this action a 

‘‘significant regulatory action’’ within 

the meaning of section 3(f)(1) of E.O. 

12866, as amended. Key to this 

designation is that the Department is 

proposing to rescind a rule that was 

itself significant under section 3(f)(1). 

However, it should also be noted that 

the 2018 AHP Rule was never fully 

implemented.80 While the Department 

gave AHPs established under the 2018 

AHP Rule a temporary safe harbor from 

enforcement after the district court’s 

decision setting aside the 2018 AHP 

Rule, that time has long expired, and the 

Department is not aware of any AHPs 

that currently exist under the framework 

of the 2018 AHP Rule. 

Consequently, any costs and benefits 

that would have been anticipated in 

response to the approach taken in the 

2018 AHP Rule were never fully 

experienced and have long since lapsed 

for those plans that formed and briefly 

existed pursuant to the 2018 AHP Rule. 

The 2018 AHP Rule hypothesized that 

plans serving small employers and their 

participants potentially would have 

benefitted from the ability to band 

together to offer less generous benefits, 

and thus reduce their costs. At the same 

time, however, other plans and 

participants were assumed to bear the 

costs, with the 2018 AHP Rule’s 

economic analysis projecting that those 

employers and participants that 

remained in the small-group and 

individual markets could face premium 

increases between 0.5 and 3.5 percent, 

resulting in an increase in the number 

of uninsured individuals caused by 

those that exited the individual market 

due to higher premiums. The 

Department’s regulatory impact analysis 

accompanying the 2018 AHP Rule did 

not anticipate the litigation or the 

district court’s decision, which largely 

nullified the assumed costs and 

benefits. Accordingly, the Department 

assumes that the costs of this proposal, 

the rescission of the 2018 AHP Rule, 

would effectively be zero, while the 

benefits would be limited to settling any 

uncertainty caused by the litigation 

surrounding the regulation and the 

Department’s reexamination of the 

appropriate criteria for a group or 

association of employers to sponsor an 

AHP. 

In accordance with E.O. 12866, this 

proposed rule was reviewed by OMB. 

B. Background 

An AHP is a health plan formed by a 

group or association of employers to 

provide health care coverage for their 

employees. AHPs have been in 

existence for some time and are a subset 

of MEWAs. Under the pre-rule 

guidance, to qualify as a bona fide 

employer group or association capable 

of establishing a single group health 

plan under ERISA, the group or 

association had to satisfy the business 

purpose standard, commonality 

standard, and control standard, which, 

along with factors that may be 

considered in applying these standards, 

are described above in section II.B. of 

this preamble. If these standards are not 

satisfied, a health care arrangement 

sponsored by the group or association is 

not treated as a single group health plan. 

Rather, in general, unless health 

insurance coverage issued through a 

group or association constitutes a single 

group health plan, the group or 


ddrumheller on DSK120RN23PROD with PROPOSALS1
87980 Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Proposed Rules 

81See supra note 25. 

82See supra at section II.E. of this preamble for 

a discussion of the decision in New York v. United 

States Department of Labor. 83 44 U.S.C. 3501 et seq. 84 5 U.S.C. 551 et seq. 

association is disregarded in 

determining whether the coverage 

offered to an individual or employer 

member of the association is individual, 

small group, or large group market 

coverage. The scope of these standards, 

additional nondiscrimination and 

working owner provisions, and how 

treatment of AHPs is different under the 

2018 AHP Rule are discussed in section 

I.C. of the preamble. 

As noted in section I.E. of this 

preamble, on March 28, 2019, the U.S. 

District Court for the District of 

Columbia set aside the 2018 AHP Rule’s 

definition of bona fide employer groups 

or associations and the language 

equating working owners with 

employees. In response, the Department 

announced its temporary enforcement 

policy designed to minimize undue 

consequences of the district court’s 

decision on AHP participants.81

C. Need for Regulatory Action 

As discussed in section I.E. of this 

preamble, the district court set aside the 

2018 AHP Rule as inconsistent with 

ERISA’s definition of ‘‘employer’’ and of 

persons ‘‘acting in the interest of an 

employer.’’ The district court concluded 

that the 2018 AHP Rule’s standards for 

determining ‘‘employer’’ status were 

overbroad and inconsistent with 

Congress’ intent to draw a distinction 

between genuine employers and persons 

standing in the shoes of employers, on 

the one hand, and commercial entities 

marketing benefits to unrelated 

employers, on the other.82 After further 

consideration, the Department has 

concluded that the 2018 AHP Rule does 

not comport with the best interpretation 

of ERISA’s text and animating purposes 

in the context of AHPs and should be 

rescinded while the Department 

reconsiders its specific provisions and 

possible different regulatory 

approaches. The Department is 

proposing to rescind the 2018 AHP Rule 

in its entirety to provide clarity to 

entities that wish to sponsor an AHP 

about the need to rely upon the criteria 

in the Department’s pre-rule guidance 

and court decisions on the ERISA 

section 3(5) definition, as opposed to 

the terms of the 2018 AHP Rule. 

D. Affected Entities 

The Department does not believe that 

any entities currently rely upon the 

2018 AHP Rule, now that the district 

court has set aside most of the 2018 

AHP Rule and the temporary 

enforcement policy period has long 

expired. Rescinding the 2018 AHP Rule 

would simply maintain the status quo. 

At the time the Department first 

promulgated the 2018 AHP Rule, the 

Department identified 153 entities as 

potential ‘‘early adopters’’ that had 

signaled their intent to form an AHP 

under the 2018 AHP Rule. Of these early 

adopters, 112 of these entities ultimately 

submitted the required Form M–1, one 

other entity advised the Department that 

it intended to file a Form M–1, two 

indicated they were not required to file 

a Form M–1, 15 told the Department 

that they were not pursuing an AHP, 

one was under investigation for reasons 

unrelated to the early adopter program, 

and the remainder were unresponsive to 

further Department outreach. 

E. Benefits 

The proposed rule would rescind the 

2018 AHP Rule and provide clarity to 

parties about the continuing 

unavailability of the 2018 AHP Rule as 

an alternative to the Department’s prerule guidance. At the time the 2018 AHP 

Rule was finalized, the Department also 

anticipated that it would have to 

increase dramatically its MEWA 

enforcement efforts and enhance its 

coordination with State regulators 

because of the anticipated increase in 

the number of AHPs attributable to the 

new 2018 AHP Rule. Because the 2018 

AHP Rule was set aside by the district 

court, the Department has not had to 

address a dramatic increase in the 

number of insolvent MEWAs, although 

existing fraudulent and mismanaged 

MEWAs remain a significant challenge 

to the agency. 

F. Costs 

Although the 2018 AHP Rule was 

finalized, it was never fully 

implemented, and no parties appear to 

currently rely on the 2018 AHP Rule, 

given the district court’s decision and 

the expiration of the Department’s 

temporary enforcement policy. As a 

result, the Department does not believe 

that rescinding the 2018 AHP Rule 

would result in any costs. The 

Department seeks comments on this 

assumption and any costs interested 

parties anticipate related to this 

proposal. 

V. Paperwork Reduction Act 

The 2018 AHP Rule was not subject 

to the requirements of the Paperwork 

Reduction Act of 1995 83 because it did 

not contain a collection of information 

as defined in 44 U.S.C. 3502(3). 

Accordingly, this proposal to rescind 

the 2018 AHP Rule also does not 

contain an information collection as 

defined in 44 U.S.C. 3502(3). 

VI. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA) 

imposes certain requirements on rules 

subject to the notice and comment 

requirements of section 553(b) of the 

APA or any other law.84 Under section 

603 of the RFA, agencies must submit 

an initial regulatory flexibility analysis 

(IRFA) of a proposal that is likely to 

have a significant economic impact on 

a substantial number of small entities, 

such as small businesses, organizations, 

and governmental jurisdictions. 

However, because the 2018 AHP Rule 

was never fully implemented and the 

Department is not aware of any existing 

AHP that was formed in reliance on the 

rule, this proposed rescission of the 

2018 AHP Rule would not have a 

significant economic impact on a 

substantial number of small entities. 

Pursuant to section 605(b) of the RFA, 

the Assistant Secretary of the Employee 

Benefits Security Administration hereby 

certifies that the proposed rule, if 

promulgated, would not have a 

significant economic impact on a 

substantial number of small entities. 

The Department invites comments on 

this certification. As discussed above, at 

the time the Department first 

promulgated the 2018 AHP Rule, the 

Department identified only 153 entities 

as potential ‘‘early adopters’’ that had 

signaled their intent to form an AHP 

under the 2018 AHP Rule. Ultimately, 

112 of these entities submitted the 

required Form M–1, one other entity 

advised the Department that it intended 

to file a Form M–1, two indicated they 

were not required to file a Form M–1, 

15 told the Department that they were 

not pursuing an AHP, one was under 

investigation for reasons unrelated to 

the early adopter program, and the 

remainder were unresponsive to further 

Department outreach. Since the district 

court set aside the 2018 AHP Rule and 

the temporary enforcement policy 

period has expired, any AHPs that 

formed before the decision in reliance 

on the 2018 AHP Rule should have 

wound down, and the Department is not 

aware of any new AHPs that have 

formed in reliance on the 2018 AHP 

Rule. Accordingly, rescission of the 

2018 AHP Rule would not have an 

impact on existing AHPs formed in 

accordance with the pre-rule guidance. 

VII. Unfunded Mandates 

Title II of the Unfunded Mandates 

Reform Act of 1995 requires each 


ddrumheller on DSK120RN23PROD with PROPOSALS1
Federal Register / Vol. 88, No. 243 / Wednesday, December 20, 2023 / Proposed Rules 87981 

85 2 U.S.C. 1501 et seq. (1995). 

86 58 FR 58093 (Oct. 28, 1993). 

87The CMS letter, dated September 6, 2023, is 

available at www.cms.gov/files/document/lettervirginia-governor-and-insurnace-commissioner-hb768sb-335-2022-final-determination.pdf. 

Federal agency to prepare a written 

statement assessing the effects of any 

Federal mandate in a proposed or final 

agency rule that may result in an 

expenditure of $100 million or more 

(adjusted annually for inflation with the 

base year 1995) in any one year by State, 

local, and Tribal governments, in the 

aggregate, or by the private sector.85 In 

2023, that threshold is approximately 

$177 million. For purposes of the 

Unfunded Mandates Reform Act, as well 

as E.O. 12875, this proposal does not 

include any Federal mandate that the 

Department expects would result in 

such expenditures by State, local, or 

Tribal governments, or the private 

sector.86

VIII. Federalism 

E.O. 13132 outlines the fundamental 

principles of federalism. It also requires 

Federal agencies to adhere to specific 

criteria in formulating and 

implementing policies that have 

‘‘substantial direct effects’’ on the 

States, the relationship between the 

National Government and States, or on 

the distribution of power and 

responsibilities among the various 

levels of government. Federal agencies 

promulgating regulations that have 

these federalism implications must 

consult with State and local officials 

and describe the extent of their 

consultation and the nature of the 

concerns of State and local officials in 

the preamble to the proposal. The 

preamble to the 2018 AHP Rule 

included a discussion of federalism 

implications of the rule, which largely 

focused on and confirmed that the 2018 

AHP Rule did not modify State 

authority under ERISA section 

514(b)(6), which gives the Department 

and State insurance regulators joint 

authority over MEWAs, including 

AHPs, to ensure appropriate regulatory 

and consumer protections for employers 

and employees relying on an AHP for 

health care coverage. Because the 2018 

AHP Rule was never fully implemented 

and the Department is not aware of any 

entities currently relying on the 2018 

AHP Rule, the Department does not 

believe its rescission would have a 

substantial direct effect on the States, on 

the relationship between the National 

Government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government that were 

discussed in the 2018 AHP Rule. 

Nonetheless, the Department notes that 

the level and type of State regulation of 

MEWAs vary widely. The Department is 

aware that some States have enacted or 

are considering State laws modeled on 

the 2018 AHP Rule that are intended to 

recognize AHPs as employee benefit 

plans for purposes of State regulation. In 

fact, CMS on behalf of HHS recently 

issued a final determination pursuant to 

section 2723(a)(2) of the PHS Act, 

section 1321(c)(2) of the ACA, and 45 

CFR 150.219 that the Commonwealth of 

Virginia has not corrected the failure to 

substantially enforce certain Federal 

market reforms with respect to issuers 

offering health insurance coverage 

through an association of real estate 

salespersons under such a State law, 

specifically section 38.2–3521.1 G of the 

Code of Virginia, as enacted by HB 768/ 

SB 335 (2022).87 The Department is 

interested in input from affected States, 

including State insurance regulators and 

other State officials, regarding whether 

they see potential federalism 

implications that might arise from 

rescission of the 2018 AHP Rule. 

List of Subjects in 29 CFR Part 2510 

Employee benefit plans, Pensions. 

For the reasons stated in the 

preamble, the Department of Labor 

proposes to amend 29 CFR part 2510 as 

follows: 

PART 2510—DEFINITIONS OF TERMS 

USED IN SUBCHAPTERS C, D, E, F, G, 

AND L OF THIS CHAPTER 

■ 1. The authority citation for part 2510 

is revised to read as follows: 

Authority: 29 U.S.C. 1002(1), 1002(2), 

1002(3), 1002(5), 1002(16), 1002(21), 

1002(37), 1002(38), 1002(40), 1002(42), 

1002(43), 1002(44), 1031, and 1135; and 

Secretary of Labor’s Order No. 1–2011, 77 FR 

1088. Secs. 2510.3–101 and 2510.3–102 also 

issued under sec. 102 of Reorganization Plan 

No. 4 of 1978, 5 U.S.C. App. (E.O. 12108, 44 

FR 1065, 3 CFR, 1978 Comp., p. 275) and 29 

U.S.C. 1135 note. 

■ 2. Section 2510.3–3 is amended by 

revising paragraph (c) introductory text 

to read as follows: 

§ 2510.3–3 Employee benefit plan. 

* * * * * 

(c) Employees. For purposes of this 

section and except as provided in 

§ 2510.3–55(d): 

* * * * * 

§ 2510.3–5 [Removed and Reserved] 

■ 3. Remove and reserve § 2510.3–5. 

Signed at Washington, DC, this 11th day of 

December 2023. 

Lisa M. Gomez, 

Assistant Secretary, Employee Benefits 

Security Administration, U.S. Department of 

Labor. 

[FR Doc. 2023–27510 Filed 12–19–23; 8:45 am] 

BILLING CODE 4510–29–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R09–OAR–2023–0524; FRL–11525– 

01–R9] 

Air Plan Revisions; California; Vehicle 

Inspection and Maintenance 

Contingency Measure 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: Under the Clean Air Act 

(CAA or ‘‘Act’’), the Environmental 

Protection Agency (EPA) is proposing to 

approve revisions to the California State 

Implementation Plan (SIP). These 

revisions concern an amendment to the 

California motor vehicle inspection and 

maintenance (I/M) program (also 

referred to as ‘‘Smog Check’’) to include 

a contingency measure that, if triggered, 

would narrow the Smog Check 

inspection exemption for newer model 

year vehicles in certain California 

nonattainment areas. The EPA is 

proposing to approve, as part of the 

California SIP, the contingency measure 

and a related statutory provision that 

authorizes the contingency measure 

because they meet all the applicable 

requirements. We are taking comments 

on this proposal and plan to follow with 

a final action. 

DATES: Comments must be received on 

or before January 19, 2024. 

ADDRESSES: Submit your comments, 

identified by Docket ID No. EPA–R09– 

OAR–2023–0524 at https://

www.regulations.gov. For comments 

submitted at Regulations.gov, follow the 

online instructions for submitting 

comments. Once submitted, comments 

cannot be edited or removed from 

Regulations.gov. The EPA may publish 

any comment received to its public 

docket. Do not submit electronically any 

information you consider to be 

Confidential Business Information (CBI) 

or other information whose disclosure is 

restricted by statute. Multimedia 

submissions (audio, video, etc.) must be 

accompanied by a written comment. 

The written comment is considered the 

official comment and should include 


ddrumheller on DSK120RN23PROD with PROPOSALS1