I

103D CONGRESS

1ST SESSION H. R. 1272

To amend title I of the Employee Retirement Income Security Act of 1974

to set standards under such title for multiple employer welfare arrangements providing health plan benefits.

IN THE HOUSE OF REPRESENTATIVES

MARCH 10, 1993

Mr. PETRI (for himself, Mr. MARTINEZ, Mr. GOODLING, Mr. GUNDERSON,

Mr. FAWELL, Mr. BALLENGER, Ms. MOLINARI, Mr. BARRETT of Nebraska, Mr. BOEHNER, Mr. GRANDY, Mr. SENSENBRENNER, Mr. OXLEY,

Mrs. MORELLA, Mr. LEWIS of Florida, and Mr. BARTON of Texas)

introduced the following bill; which was referred to the Committee on

Education and Labor

A BILL

To amend title I of the Employee Retirement Income Security Act of 1974 to set standards under such title for

multiple employer welfare arrangements providing health

plan benefits.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Multiple Employer

5 Health Benefits Protection Act of 1993’’.
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1 SEC. 2. LIMITED EXEMPTION UNDER PREEMPTION RULES

2 FOR MULTIPLE EMPLOYER PLANS PROVID3 ING HEALTH BENEFITS SUBJECT TO CERTAIN

4 FEDERAL STANDARDS.

5 (a) IN GENERAL.—Subtitle B of title I of the Em6 ployee Retirement Income Security Act of 1974 is amend7 ed by adding at the end the following new part:

8 ‘‘Part 7—Multiple Employer Health Plans

9 ‘‘SEC. 701. DEFINITIONS.

10 ‘‘For purposes of this part—

11 ‘‘(1) INSURER.—The term ‘insurer’ means an

12 insurance company, insurance service, or insurance

13 organization, licensed to engage in the business of

14 insurance by a State.

15 ‘‘(2) PARTICIPATING EMPLOYER.—The term

16 ‘participating employer’ means, in connection with a

17 multiple employer welfare arrangement, any em18 ployer if any of its employees, or any of the depend19 ents of its employees, are or were covered under

20 such arrangement during the employment of the

21 employees.

22 ‘‘(3) EXCESS/STOP LOSS COVERAGE.—The term

23 ‘excess/stop loss coverage’ means, in connection with

24 a multiple employer welfare arrangement, a contract

25 under which an insurer provides for payment with

26 respect to claims under the arrangement, relating to
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1 participants or beneficiaries individually or other2 wise, in excess of an amount or amounts specified in

3 such contract.

4 ‘‘(4) QUALIFIED ACTUARY.—The term ‘quali5 fied actuary’ means an individual who is a member

6 of the American Academy of Actuaries or meets

7 such reasonable standards and qualifications as the

8 Secretary may provide by regulation.

9 ‘‘(5) SPONSOR.—The term ‘sponsor’ means, in

10 connection with a multiple employer welfare arrange11 ment, the association or other entity which estab12 lishes or maintains the arrangement.

13 ‘‘(6) STATE LOCATION OF COVERED INDIVID14 UALS.—

15 ‘‘(A) IN GENERAL.—A multiple employer

16 welfare arrangement shall be treated as cover17 ing individuals located in a State only if the

18 minimum required number of individuals who

19 are covered under the arrangement are located

20 in such State, except that if the minimum re21 quired number of individuals are not located in

22 any State, such arrangement shall be treated as

23 covering individuals in any State in which any

24 covered individual is located.
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1 ‘‘(B) MINIMUM REQUIRED NUMBER.—For

2 purposes of subparagraph (A), the minimum re3 quired number is the greater of—

4 ‘‘(i) 5 percent of the total number of

5 individuals described in subparagraph (A),

6 or

7 ‘‘(ii) 50.

8 ‘‘(C) LOCATION OF INDIVIDUALS IN

9 STATE.—For purposes of subparagraph (A), an

10 individual shall be treated as located in a State

11 if such individual is employed in such State or

12 the address of such individual last known by

13 the arrangement is located in such State.

14 ‘‘(7) STATE INSURANCE COMMISSIONER.—The

15 term ‘State insurance commissioner’ means the in16 surance commissioner (or similar official) of a State.

17 ‘‘(8) DOMICILE STATE.—The term ‘domicile

18 State’ means, in connection with a multiple employer

19 welfare arrangement, the State in which, according

20 to the application for an exemption under this part,

21 most individuals to be covered under the arrange22 ment are located, except that, in any case in which

23 information contained in the latest annual report of

24 the arrangement filed under this part indicates that

25 most individuals covered under the arrangement are
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1 located in a different State, such term means such

2 different State.

3 ‘‘(9) FULLY INSURED ARRANGEMENT.—A mul4 tiple employer welfare arrangement shall be treated

5 as fully insured only if one or more insurers, health

6 maintenance organizations, similar organizations

7 regulated under State law for solvency, or any com8 bination thereof are liable under one or more insur9 ance policies or contracts for all benefits under the

10 arrangement (irrespective of any recourse they may

11 have against other parties).

12 ‘‘(10) MULTIPLE EMPLOYER HEALTH PLAN.—

13 The term ‘multiple employer health plan’ means a

14 multiple employer welfare arrangement treated as an

15 employee welfare benefit plan by reason of an

16 exemption under this part.

17 ‘‘SEC. 702. EXEMPTED MULTIPLE EMPLOYER PLANS PRO18 VIDING BENEFITS IN THE FORM OF MEDICAL

19 CARE RELIEVED OF CERTAIN RESTRICTIONS

20 ON PREEMPTION OF STATE LAW AND TREAT21 ED AS EMPLOYEE WELFARE BENEFIT PLANS.

22 ‘‘(a) IN GENERAL.—Subject to subsection (b), a mul23 tiple employer welfare arrangement which is not fully in24 sured and with respect to which there is in effect an ex25 emption granted by the Secretary under this part (or with
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1 respect to which there is pending a complete application

2 for such an exemption and the Secretary determines that

3 provisional protection under this part is appropriate)—

4 ‘‘(1) shall be treated for purposes of subtitle A

5 and the preceding parts of this subtitle as an em6 ployee welfare benefit plan, irrespective of whether

7 such arrangement is an employee welfare benefit

8 plan, and

9 ‘‘(2) shall be exempt from section

10 514(b)(6)(A)(ii).

11 ‘‘(b) BENEFITS MUST CONSIST OF MEDICAL

12 CARE.—Subsection (a) shall apply to a multiple employer

13 welfare arrangement only if the benefits provided there14 under consist solely of medical care described in section

15 607(1) (disregarding such incidental benefits as the

16 Secretary shall specify by regulation).

17 ‘‘(c) RESTRICTION ON COMMENCEMENT OF NEW AR18 RANGEMENTS.—A multiple employer welfare arrangement

19 providing benefits which consist of medical care described

20 in section 607(1) which has not commenced operations as

21 of January 1, 1994, may commence operations only if an

22 exemption granted to the arrangement under this part is

23 in effect (or there is pending with respect to the arrange24 ment a complete application for such an exemption and
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1 the Secretary determines that provisional protection under

2 this part is appropriate).

3 ‘‘SEC. 703. EXEMPTION PROCEDURE.

4 ‘‘(a) IN GENERAL.—The Secretary shall grant an ex5 emption described in section 702(a) to a multiple employer

6 welfare arrangement if—

7 ‘‘(1) an application for such exemption with re8 spect to such arrangement, identified individually or

9 by class, has been duly filed in complete form with

10 the Secretary in accordance with this part,

11 ‘‘(2) such application demonstrates compliance

12 with the requirements of section 704 with respect to

13 such arrangement, and

14 ‘‘(3) the Secretary finds that such exemption

15 is—

16 ‘‘(A) administratively feasible,

17 ‘‘(B) not adverse to the interests of the in18 dividuals covered under the arrangement, and

19 ‘‘(C) protective of the rights and benefits

20 of the individuals covered under the arrange21 ment.

22 ‘‘(b) NOTICE AND HEARING.—Before granting an ex23 emption under this section, the Secretary shall publish no24 tice in the Federal Register of the pendency of the exemp25 tion, shall require that adequate notice be given to inter-
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1 ested persons, including the State insurance commissioner

2 of each State in which covered individuals under the ar3 rangement are, or are expected to be, located, and shall

4 afford interested persons opportunity to present views.

5 The Secretary may not grant an exemption under this sec6 tion unless the Secretary affords an opportunity for a

7 hearing and makes a determination on the record with re8 spect to the findings required under subsection (a)(3). The

9 Secretary shall, to the maximum extent practicable, make

10 a final determination with respect to any application filed

11 under this section in the case of a newly established ar12 rangement within 90 days after the date which the Sec13 retary determines is the date on which such application

14 is filed in complete form.

15 ‘‘SEC. 704. ELIGIBILITY REQUIREMENTS.

16 ‘‘(a) APPLICATION FOR EXEMPTION.—

17 ‘‘(1) IN GENERAL.—An exemption may be

18 granted by the Secretary under this part only on the

19 basis of an application filed with the Secretary in

20 such form and manner as shall be prescribed in reg21 ulations of the Secretary. Any such application shall

22 be signed by the operating committee and the spon23 sor of the arrangement.

24 ‘‘(2) FILING FEE.—The arrangement shall pay

25 to the Secretary at the time of filing an application
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1 under this section a filing fee in the amount of

2 $5,000, which shall be available, to the extent pro3 vided in appropriation Acts, to the Secretary for the

4 sole purpose of administering the exemption proce5 dures under this part.

6 ‘‘(3) INFORMATION INCLUDED.—An application

7 filed under this section shall include, in a manner

8 and form prescribed in regulations of the Secretary,

9 at least the following information:

10 ‘‘(A) IDENTIFYING INFORMATION.—The

11 names and addresses of—

12 ‘‘(i) the sponsor, and

13 ‘‘(ii) the members of the operating

14 committee of the arrangement.

15 ‘‘(B) STATES IN WHICH ARRANGEMENT IN16 TENDS TO DO BUSINESS.—The States in which

17 individuals covered under the arrangement are

18 to be located and the number of such individ19 uals expected to be located in each such State.

20 ‘‘(C) BONDING REQUIREMENTS.—Evidence

21 provided by the operating committee that the

22 bonding requirements of section 412 will be met

23 as of the date of the application.

24 ‘‘(D) PLAN DOCUMENTS.—A copy of the

25 documents governing the arrangement (includ-
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1 ing any bylaws and trust agreements), the sum2 mary plan description, and other material de3 scribing the benefits and coverage that will be

4 provided to individuals covered under the ar5 rangement.

6 ‘‘(E) AGREEMENTS WITH SERVICE PROVID7 ERS.—A copy of any agreements between the

8 arrangement and contract administrators and

9 other service providers.

10 ‘‘(F) FUNDING REPORT.—A report setting

11 forth information determined as of a date with12 in the 120-day period ending with the date of

13 the application, including the following:

14 ‘‘(i) RESERVES.—A statement, cer15 tified by the operating committee of the ar16 rangement, and a statement of actuarial

17 opinion, signed by a qualified actuary, that

18 all applicable requirements of section 707

19 are or will be met in accordance with regu20 lations which the Secretary shall prescribe.

21 ‘‘(ii) ADEQUACY OF CONTRIBUTION

22 RATES.—A statement of actuarial opinion,

23 signed by a qualified actuary, which sets

24 forth a description of the extent to which

25 contribution rates are adequate to provide
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1 for the payment of all obligations and the

2 maintenance of required reserves under the

3 arrangement for the 12-month period be4 ginning with such date within such 120-

5 day period, taking into account the ex6 pected coverage and experience of the ar7 rangement. If the contribution rates are

8 not fully adequate, the statement of actu9 arial opinion shall indicate the extent to

10 which the rates are inadequate and the

11 changes needed to ensure adequacy.

12 ‘‘(iii) CURRENT AND PROJECTED

13 VALUE OF ASSETS AND LIABILITIES.—A

14 statement of actuarial opinion signed by a

15 qualified actuary, which sets forth the cur16 rent value of the assets and liabilities accu17 mulated under the arrangement and a pro18 jection of the assets, liabilities, income,

19 and expenses of the arrangement for the

20 12-month period referred to in clause (ii).

21 The income statement shall identify sepa22 rately the arrangement’s administrative ex23 penses and claims.

24 ‘‘(iv) COSTS OF COVERAGE TO BE

25 CHARGED AND OTHER EXPENSES.—A
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1 statement of the costs of coverage to be

2 charged, including an itemization of

3 amounts for administration, reserves, and

4 other expenses associated with the oper5 ation of the arrangement.

6 ‘‘(v) OTHER INFORMATION.—Any

7 other information which may be prescribed

8 in regulations of the Secretary as nec9 essary to carry out the purposes of this

10 part.

11 ‘‘(b) OTHER REQUIREMENTS.—A complete applica12 tion for an exemption under this part shall include infor13 mation which the Secretary determines to be complete and

14 accurate and sufficient to demonstrate that the following

15 requirements are met with respect to the arrangement:

16 ‘‘(1) SPONSOR.—The sponsor is, and has been

17 (together with its immediate predecessor, if any) for

18 a continuous period of not less than 3 years before

19 the date of the application, organized and main20 tained in good faith, with a constitution and bylaws

21 specifically stating its purpose, as a trade associa22 tion, an industry association, a professional associa23 tion, or a chamber of commerce or other business

24 group, for substantial purposes other than that of

25 obtaining or providing medical care described in sec-
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1 tion 607(1), and the applicant demonstrates to the

2 satisfaction of the Secretary that the sponsor is es3 tablished as a permanent entity which receives the

4 active support of its members.

5 ‘‘(2) OPERATING COMMITTEE.—The arrange6 ment is operated, pursuant to a trust agreement, by

7 an operating committee which has complete fiscal

8 control over the arrangement and which is respon9 sible for all operations of the arrangement, and the

10 operating committee has in effect rules of operation

11 and financial controls, based on a 3-year plan of op12 eration, adequate to carry out the terms of the ar13 rangement and to meet all requirements of this title

14 applicable to the arrangement. The members of the

15 committee are individuals selected from individuals

16 who are the owners, officers, directors, or employees

17 of the participating employers or who are partners

18 in the participating employers and actively partici19 pate in the business. No such member is an owner,

20 officer, director, or employee of, or partner in, a con21 tract administrator or other service provider to the

22 arrangement, except that officers or employees of a

23 sponsor which is a service provider (other than a

24 contract administrator) to the arrangement may be

25 members of the committee if they constitute not
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1 more than 25 percent of the membership of the com2 mittee and they do not provide services to the ar3 rangement other than on behalf of the sponsor. The

4 committee has sole authority to approve applications

5 for participation in the arrangement and to contract

6 with a service provider to administer the day-to-day

7 affairs of the arrangement.

8 ‘‘(3) CONTENTS OF GOVERNING INSTRU9 MENTS.—The instruments governing the arrange10 ment include a written instrument, meeting the re11 quirements of an instrument required under section

12 402(a)(1), which—

13 ‘‘(A) provides that the committee serves as

14 the named fiduciary required for plans under

15 section 402(a)(1) and serves in the capacity of

16 a plan administrator (referred to in section

17 3(16)(A)),

18 ‘‘(B) provides that the sponsor is to serve

19 as plan sponsor (referred to in section

20 3(16)(B)),

21 ‘‘(C) incorporates the requirements of sec22 tion 707, and

23 ‘‘(D) provides that, effective upon the

24 granting of an exemption under this part—
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1 ‘‘(i) all participating employers must

2 be members or affiliated members of the

3 sponsor, except that, in the case of a spon4 sor which is a professional association or

5 other individual-based association, if at

6 least one of the officers, directors, or em7 ployees of an employer, or at least one of

8 the individuals who are partners in an em9 ployer and who actively participates in the

10 business, is a member or affiliated member

11 of the sponsor, participating employers

12 may also include such employer, and

13 ‘‘(ii) all individuals thereafter com14 mencing coverage under the arrangement

15 must be—

16 ‘‘(I) active or retired owners, offi17 cers, directors, or employees of, or

18 partners in, participating employers,

19 or

20 ‘‘(II) the beneficiaries of individ21 uals described in subclause (I).

22 ‘‘(4) CONTRIBUTION RATES.—The contribution

23 rates referred to in subsection (a)(3)(F)(ii) are

24 adequate.
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1 ‘‘(5) REGULATORY REQUIREMENTS.—Such

2 other requirements as the Secretary may prescribe

3 by regulation as necessary to carry out the purposes

4 of this part.

5 ‘‘(c) TREATMENT OF PARTY SEEKING EXEMPTION

6 WHERE PARTY IS SUBJECT TO DISQUALIFICATION.—

7 ‘‘(1) IN GENERAL.—In the case of any applica8 tion for an exemption under this part with respect

9 to a multiple employer welfare arrangement, if the

10 Secretary determines that the sponsor of the ar11 rangement or any other person associated with the

12 arrangement is subject to disqualification under

13 paragraph (2), the Secretary may deny the exemp14 tion with respect to such arrangement.

15 ‘‘(2) DISQUALIFICATION.—A person is subject

16 to disqualification under this paragraph if such per17 son—

18 ‘‘(A) has intentionally made a material

19 misstatement in the application for exemption;

20 ‘‘(B) has obtained or attempted to obtain

21 an exemption under this part through misrepre22 sentation or fraud;

23 ‘‘(C) has misappropriated or converted to

24 such person’s own use, or improperly withheld,
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1 money held under a plan or any multiple

2 employer welfare arrangement;

3 ‘‘(D) is prohibited (or would be prohibited

4 if the arrangement were a plan) from serving in

5 any capacity in connection with the arrange6 ment under section 411,

7 ‘‘(E) has failed to appear without reason8 able cause or excuse in response to a subpoena,

9 examination, warrant, or any other order law10 fully issued by the Secretary compelling such

11 response,

12 ‘‘(F) has previously been subject to a de13 termination under this part resulting in the de14 nial, suspension, or revocation of an exemption

15 under this part on similar grounds, or

16 ‘‘(G) has otherwise violated any provision

17 of this title with respect to a matter which the

18 Secretary determines of sufficient consequence

19 to merit disqualification for purposes of this

20 part.

21 ‘‘(d) FRANCHISE NETWORKS.—In the case of a mul22 tiple employer welfare arrangement established and main23 tained by a franchisor for a franchise network consisting

24 of its franchisees, such franchisor shall be treated as the

25 sponsor referred to in the preceding provisions of this sec-
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1 tion, such network shall be treated as an association re2 ferred to in such provisions, and each franchisee shall be

3 treated as a member (of the association and the sponsor)

4 referred to in such provisions, if all participating employ5 ers are such franchisees and the requirements of sub6 section (b)(1) with respect to a sponsor are met with

7 respect to the network.

8 ‘‘(e) CERTAIN COLLECTIVELY BARGAINED ARRANGE9 MENTS.—In applying the preceding provisions of this sec10 tion in the case of a multiple employer welfare arrange11 ment which would be described in section 3(40)(A)(i) but

12 for the failure to meet any requirement of section

13 3(40)(C)—

14 ‘‘(1) paragraphs (1) and (2) of subsection (b)

15 and subparagraphs (A), (B), and (D) of paragraph

16 (3) of subsection (b) shall be disregarded, and

17 ‘‘(2) the joint board of trustees shall be consid18 ered the operating committee of the arrangement.

19 ‘‘(f) CERTAIN ARRANGEMENTS NOT MEETING SIN20 GLE EMPLOYER REQUIREMENT.—

21 ‘‘(1) IN GENERAL.—In any case in which the

22 majority of the employees covered under a multiple

23 employer welfare arrangement are employees of a

24 single employer (within the meaning of clauses (i)

25 and (ii) of section 3(40)(B)), if all other employees
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1 covered under the arrangement are employed by em2 ployers who are related to such single employer, sub3 section (b)(3)(D) shall be disregarded.

4 ‘‘(2) RELATED EMPLOYERS.—For purposes of

5 paragraph (1), employers are ‘related’ if there is

6 among all such employers a common ownership in7 terest or a substantial commonality of business oper8 ations based on common suppliers or customers.

9 ‘‘SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO

10 EXEMPTED ARRANGEMENTS.

11 ‘‘(a) NOTICE OF MATERIAL CHANGES.—In the case

12 of any multiple employer welfare arrangement with respect

13 to which there is in effect an exemption granted under

14 this part, descriptions of material changes in any informa15 tion which was required to be submitted with the applica16 tion for the exemption shall be filed in such form and man17 ner as shall be prescribed in regulations of the Secretary.

18 The Secretary may require by regulation prior notice of

19 material changes with respect to specified matters which

20 might serve as the basis for suspension or revocation of

21 the exemption.

22 ‘‘(b) REPORTING REQUIREMENTS.—Under regula23 tions of the Secretary, the requirements of sections 102,

24 103, and 104 shall apply with respect to any multiple em25 ployer welfare arrangement with respect to which there is
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1 or has been in effect an exemption granted under this part

2 in the same manner and to the same extent as such re3 quirements apply to employee welfare benefit plans, irre4 spective of whether such exemption continues in effect.

5 The annual report required under section 103 for any plan

6 year in the case of any such multiple employer welfare ar7 rangement shall also include information described in sec8 tion 704(a)(3)(F) with respect to the plan year and, not9 withstanding section 104(a)(1)(A), shall be filed not later

10 than 90 days after the close of the plan year.

11 ‘‘(c) ENGAGEMENT OF QUALIFIED ACTUARY.—The

12 operating committee of each multiple employer welfare ar13 rangement with respect to which there is or has been in

14 effect an exemption granted under this part shall engage,

15 on behalf of all covered individuals, a qualified actuary

16 who shall be responsible for the preparation of the mate17 rials comprising information necessary to be submitted by

18 a qualified actuary under this part. The qualified actuary

19 shall utilize such assumptions and techniques as are nec20 essary to enable such actuary to form an opinion as to

21 whether the contents of the matters reported under this

22 part—

23 ‘‘(1) are in the aggregate reasonably related to

24 the experience of the arrangement and to reasonable

25 expectations, and
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1 ‘‘(2) represent such actuary’s best estimate of

2 anticipated experience under the arrangement.

3 The opinion by the qualified actuary shall be made with

4 respect to, and shall be made a part of, the annual report.

5 ‘‘(d) FILING NOTICE OF EXEMPTION WITH

6 STATES.—An exemption granted to a multiple employer

7 welfare arrangement under this part shall not be effective

8 unless written notice of such exemption is filed with the

9 State insurance commissioner of each State in which at

10 least 5 percent of the individuals covered under the ar11 rangement are located. For purposes of this paragraph,

12 an individual shall be considered to be located in the State

13 in which a known address of such individual is located or

14 in which such individual is employed. The Secretary may

15 by regulation provide in specified cases for the application

16 of the preceding sentence with lesser percentages in lieu

17 of such 5 percent amount.

18 ‘‘SEC. 706. DISCLOSURE TO PARTICIPATING EMPLOYERS BY

19 ARRANGEMENTS PROVIDING MEDICAL CARE.

20 ‘‘(a) IN GENERAL.—A multiple employer welfare ar21 rangement providing benefits consisting of medical care

22 described in section 607(1) shall issue to each participat23 ing employer—

24 ‘‘(1) a document equivalent to the summary

25 plan description required of plans under part 1,
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1 ‘‘(2) information describing the contribution

2 rates applicable to participating employers, and

3 ‘‘(3) a statement indicating—

4 ‘‘(A) whether or not the arrangement is

5 fully insured,

6 ‘‘(B) whether or not there is in effect with

7 respect to the arrangement an exemption grant8 ed under this part and, if there is in effect such

9 an exemption, that the arrangement is (or is

10 treated as) an employee welfare benefit plan

11 under this title, and

12 ‘‘(C) that the arrangement is not a li13 censed insurer under the laws of any State.

14 ‘‘(b) TIME FOR DISCLOSURE.—Such information

15 shall be issued to employers within such reasonable period

16 of time before becoming participating employers as may

17 be prescribed in regulations of the Secretary.

18 ‘‘SEC. 707. MAINTENANCE OF RESERVES.

19 ‘‘(a) IN GENERAL.—Each multiple employer welfare

20 arrangement with respect to which there is or has been

21 in effect an exemption granted under this part and which

22 is not fully insured shall establish and maintain reserves,

23 consisting of—

24 ‘‘(1) a reserve for unearned contributions,
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1 ‘‘(2) a reserve for payment of claims reported

2 and not yet paid and claims incurred but not yet re3 ported, and for expected administrative costs with

4 respect to such claims, and

5 ‘‘(3) a reserve, in an amount recommended by

6 the qualified actuary, for any other obligations of

7 the arrangement.

8 ‘‘(b) MINIMUM AMOUNT FOR CERTAIN RESERVES.—

9 The total of the reserves described in subsection (a)(2)

10 shall not be less than an amount equal to 25 percent of

11 expected incurred claims and expenses for the plan year.

12 ‘‘(c) REQUIRED MARGIN.—In determining the

13 amounts of reserves required under this section in connec14 tion with any multiple employer welfare arrangement, the

15 qualified actuary shall include a margin for error and

16 other fluctuations taking into account the specific

17 circumstances of such arrangement.

18 ‘‘(d) ADDITIONAL REQUIREMENTS.—The Secretary

19 may provide such additional requirements relating to re20 serves and excess/stop loss coverage as the Secretary con21 siders appropriate. Such requirements may be provided,

22 by regulation or otherwise, with respect to any arrange23 ment or any class of arrangements.

24 ‘‘(e) ADJUSTMENTS FOR EXCESS/STOP LOSS COV25 ERAGE.—The Secretary may provide for adjustments to
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1 the levels of reserves otherwise required under subsections

2 (a) and (b) with respect to any arrangement or class of

3 arrangements to take into account excess/stop loss cov4 erage provided with respect to such arrangement or ar5 rangements.

6 ‘‘SEC. 708. CORRECTIVE ACTIONS.

7 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE8 SERVES.—A multiple employer welfare arrangement with

9 respect to which there is or has been in effect an exemp10 tion granted under this part shall continue to meet the

11 requirements of section 707, irrespective of whether such

12 exemption continues in effect. The operating committee of

13 such arrangement shall determine semiannually whether

14 the requirements of section 707 are met. In any case in

15 which the committee determines that there is reason to

16 believe that there is or will be a failure to meet such re17 quirements, or the Secretary makes such a determination

18 and so notifies the committee, the committee shall imme19 diately notify the qualified actuary engaged by the ar20 rangement, and such actuary shall, not later than the end

21 of the next following month, make such recommendations

22 to the committee for corrective action as the actuary deter23 mines necessary to ensure compliance with section 707.

24 Not later than 10 days after receiving from the actuary

25 recommendations for corrective actions, the committee
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1 shall notify the Secretary (in such form and manner as

2 the Secretary may prescribe by regulation) of such rec3 ommendations of the actuary for corrective action, to4 gether with a description of the actions (if any) that the

5 committee has taken or plans to take in response to such

6 recommendations. The committee shall thereafter report

7 to the Secretary, in such form and frequency as the Sec8 retary may specify to the committee, regarding corrective

9 action taken by the committee until the requirements of

10 section 707 are met.

11 ‘‘(b) TERMINATION.—

12 ‘‘(1) NOTICE OF TERMINATION.—In any case in

13 which the operating committee of a multiple em14 ployer welfare arrangement with respect to which

15 there is or has been in effect an exemption granted

16 under this part determines that there is reason to

17 believe that the arrangement will terminate, the

18 committee shall so inform the Secretary, shall de19 velop a plan for winding up the affairs of the ar20 rangement in connection with such termination in a

21 manner which will result in timely payment of all

22 benefits for which the arrangement is obligated, and

23 shall submit such plan in writing to the Secretary.

24 Actions required under this paragraph shall be taken
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1 in such form and manner as may be prescribed in

2 regulations of the Secretary.

3 ‘‘(2) ACTIONS REQUIRED IN CONNECTION WITH

4 TERMINATION.—In any case in which—

5 ‘‘(A) the Secretary has been notified under

6 subsection (a) of a failure of a multiple em7 ployer welfare arrangement with respect to

8 which there is or has been in effect an exemp9 tion granted under this part to meet the re10 quirements of section 707 and has not been no11 tified by the operating committee of the ar12 rangement that corrective action has restored

13 compliance with such requirements, and

14 ‘‘(B) the Secretary determines that the

15 continuing failure to meet the requirements of

16 section 707 can be reasonably expected to result

17 in a continuing failure to pay benefits for which

18 the arrangement is obligated,

19 the operating committee of the arrangement shall, at

20 the direction of the Secretary, terminate the ar21 rangement and, in the course of the termination,

22 take such actions as the Secretary may require as

23 necessary to ensure that the affairs of the arrange24 ment will be, to the maximum extent possible, wound

25 up in a manner which will result in timely payment
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1 of all benefits for which the arrangement is

2 obligated.

3 ‘‘SEC. 709. EXPIRATION, SUSPENSION, OR REVOCATION OF

4 EXEMPTION.

5 ‘‘(a) EXPIRATION AND RENEWAL OF EXEMPTION.—

6 An exemption granted to a multiple employer welfare ar7 rangement under this part shall expire 3 years after the

8 date on which the exemption is granted. An exemption

9 which has expired may be renewed by means of application

10 for an exemption in accordance with section 704.

11 ‘‘(b) SUSPENSION OR REVOCATION OF EXEMPTION

12 BY SECRETARY.—The Secretary may suspend or revoke

13 an exemption granted to a multiple employer welfare

14 arrangement under this part—

15 ‘‘(1) for any cause that may serve as the basis

16 for the denial of an initial application for such an

17 exemption under section 704, or

18 ‘‘(2) if the Secretary finds that—

19 ‘‘(A) the arrangement, or the sponsor

20 thereof, in the transaction of business while

21 under the exemption, has used fraudulent, coer22 cive, or dishonest practices, or has dem23 onstrated incompetence, untrustworthiness, or

24 financial irresponsibility,
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1 ‘‘(B) the arrangement, or the sponsor

2 thereof, is using such methods or practices in

3 the conduct of its operations, so as to render its

4 further transaction of operations hazardous or

5 injurious to participating employers, or covered

6 individuals,

7 ‘‘(C) the arrangement, or the sponsor

8 thereof, has refused to be examined in accord9 ance with this part or to produce its accounts,

10 records, and files for examination in accordance

11 with this part, or

12 ‘‘(D) any of the officers of the arrange13 ment, or the sponsor thereof, has refused to

14 give information with respect to the affairs of

15 the arrangement or the sponsor or to perform

16 any other legal obligation relating to such an

17 examination when required by the Secretary in

18 accordance with this part.

19 Any such suspension or revocation under this subsection

20 shall be effective only upon a final decision of the Sec21 retary made after notice and opportunity for a hearing

22 is provided in accordance with section 710.

23 ‘‘(c) SUSPENSION OR REVOCATION OF EXEMPTION

24 UNDER COURT PROCEEDINGS.—An exemption granted to

25 a multiple employer welfare arrangement under this part
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1 may be suspended or revoked by a court of competent ju2 risdiction in an action by the Secretary brought under

3 paragraph (2), (5), or (6) of section 502(a), except that

4 the suspension or revocation under this subsection shall

5 be effective only upon notification of the Secretary of such

6 suspension or revocation.

7 ‘‘(d) NOTIFICATION OF PARTICIPATING EMPLOY8 ERS.—All participating employers in a multiple employer

9 welfare arrangement shall be notified of the expiration,

10 suspension, or revocation of an exemption granted to such

11 arrangement under this part, by such persons and in such

12 form and manner as shall be prescribed in regulations of

13 the Secretary, not later than 20 days after such expiration

14 or after receipt of notice of a final decision requiring such

15 suspension or revocation.

16 ‘‘(e) PUBLICATION OF EXPIRATIONS, SUSPENSIONS,

17 AND REVOCATIONS.—The Secretary shall publish all expi18 rations of, and all final decisions to suspend or revoke,

19 exemptions granted under this part.

20 ‘‘SEC. 710. REVIEW OF ACTIONS OF THE SECRETARY.

21 ‘‘(a) IN GENERAL.—Any decision by the Secretary

22 which involves the denial of an application by a multiple

23 employer welfare arrangement for an exemption under this

24 part or the suspension or revocation of such an exemption

25 shall contain a statement of the specific reason or reasons
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1 supporting the Secretary’s action, including reference to

2 the specific terms of the exemption and the statutory pro3 vision or provisions relevant to the determination.

4 ‘‘(b) DENIALS OF APPLICATIONS.—In the case of the

5 denial of an application for an exemption under this part,

6 the Secretary shall send a copy of the decision to the appli7 cant by certified or registered mail at the address specified

8 in the records of the Secretary. Such decision shall con9 stitute the final decision of the Secretary unless the ar10 rangement, or any party that would be prejudiced by the

11 decision, files a written appeal of the denial within 30 days

12 after the mailing of such decision. The Secretary may af13 firm, modify, or reverse the initial decision. The decision

14 on appeal shall become final upon the mailing of a copy

15 by certified or registered mail to the arrangement or party

16 that filed the appeal.

17 ‘‘(c) SUSPENSIONS OR REVOCATIONS OF EXEMP18 TION.—In the case of the suspension or revocation of an

19 exemption granted under this part, the Secretary shall

20 send a copy of the decision to the arrangement by certified

21 or registered mail at its address, as specified in the

22 records of the Secretary. Upon the request of the arrange23 ment, or any party that would be prejudiced by the sus24 pension or revocation, filed within 15 days of the mailing

25 of the Secretary’s decision, the Secretary shall schedule
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1 a hearing on such decision by written notice, sent by cer2 tified or registered mail to the arrangement or party

3 requesting such hearing. Such notice shall set forth—

4 ‘‘(1) a specific date and time for the hearing,

5 which shall be within the 10-day period commencing

6 20 days after the date of the mailing of the notice,

7 and

8 ‘‘(2) a specific place for the hearing, which shall

9 be in the District of Columbia or in the State and

10 county thereof (or parish or other similar political

11 subdivision thereof) in which is located the arrange12 ment’s principal place of business.

13 The decision as affirmed or modified in such hearing shall

14 constitute the final decision of the Secretary, unless such

15 decision is reversed in such hearing.’’.

16 (b) CONFORMING AMENDMENT TO DEFINITION OF

17 PLAN SPONSOR.—Section 3(16)(B) of such Act (29

18 U.S.C. 1002(16)(B)) is amended by adding at the end the

19 following new sentence: ‘‘Such term also includes the spon20 sor (as defined in section 701(5)) of a multiple employer

21 welfare arrangement, or a multiple employer health plan

22 (as defined in section 701(10)), with respect to which

23 there is or has been in effect an exemption granted under

24 part 7.’’.
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1 (c) ALTERNATIVE MEANS OF DISTRIBUTION OF

2 SUMMARY PLAN DESCRIPTIONS.—Section 110 of such

3 Act (29 U.S.C. 1030) is amended by adding at the end

4 the following new subsection:

5 ‘‘(c) The Secretary shall prescribe, as an alternative

6 method for distributing summary plan descriptions in

7 order to meet the requirements of section 104(b)(1) in the

8 case of multiple employer welfare arrangements providing

9 benefits consisting of medical care described in section

10 607(1), a means of distribution of such descriptions by

11 participating employers.’’.

12 (d) CLERICAL AMENDMENT.—The table of contents

13 in section 1 of the Employee Retirement Income Security

14 Act of 1974 is amended by inserting after the item relat15 ing to section 608 the following new items:

‘‘PART 7—MULTIPLE EMPLOYER HEALTH PLANS

‘‘Sec. 701. Definitions.

‘‘Sec. 702. Exempted multiple employer welfare arrangements treated as employee welfare benefit plans and exempt from certain restrictions on preemption.

‘‘Sec. 703. Exemption procedure.

‘‘Sec. 704. Eligibility requirements.

‘‘Sec. 705. Additional requirements applicable to exempted arrangements.

‘‘Sec. 706. Disclosure to participating employers by arrangements providing

medical care.

‘‘Sec. 707. Maintenance of reserves.

‘‘Sec. 708. Corrective actions.

‘‘Sec. 709. Expiration, suspension, or revocation of exemption.

‘‘Sec. 710. Review of actions of the Secretary.’’.

16 SEC. 3. CLARIFICATION OF SCOPE OF PREEMPTION RULES.

17 (a) IN GENERAL.—Section 514(b)(6)(A)(ii) of the

18 Employee Retirement Income Security Act of 1974 (29
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1 U.S.C. 1144(b)(6)(A)(ii)) is amended by inserting ‘‘, but

2 only, in the case of an arrangement which provides medi3 cal care described in section 607(1) and with respect to

4 which an exemption under part 7 is not in effect,’’ before

5 ‘‘to the extent not inconsistent with the preceding sections

6 of this title’’.

7 (b) CROSS-REFERENCE.—Section 514(b)(6) of such

8 Act (29 U.S.C. 1144(b)(6)) is amended by adding at the

9 end the following new subparagraph:

10 ‘‘(E) For additional rules relating to exemption from

11 subparagraph (A)(ii) of multiple employer welfare ar12 rangements providing medical care, see part 7.’’.

13 SEC. 4. CLARIFICATION OF TREATMENT OF SINGLE EM14 PLOYER ARRANGEMENTS.

15 Section 3(40)(B) of the Employee Retirement Income

16 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amend17 ed—

18 (1) in clause (i), by inserting ‘‘for any plan year

19 of any such plan, or any fiscal year of any such

20 other arrangement,’’ after ‘‘single employer’’, and by

21 inserting ‘‘during such year or at any time during

22 the preceding 1-year period’’ after ‘‘common con23 trol’’;

24 (2) in clause (iii), by striking ‘‘common control

25 shall not be based on an interest of less than 25 per-
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1 cent’’ and inserting ‘‘an interest of greater than 25

2 percent may not be required as the minimum inter3 est necessary for common control’’, and by striking

4 ‘‘and’’ at the end,

5 (3) by redesignating clause (iv) as clause (v),

6 and

7 (4) by inserting after clause (iii) the following

8 new clause:

9 ‘‘(iv) in determining, after the application of

10 clause (i), whether benefits are provided to employ11 ees of two or more employers, the arrangement shall

12 be treated as having only 1 participating employer

13 if, at the time the determination under clause (i) is

14 made, the number of individuals who are employees

15 and former employees of any one participating em16 ployer and who are covered under the arrangement

17 is greater than 95 percent of the aggregate number

18 of all individuals who are employees or former em19 ployees of participating employers and who are

20 covered under the arrangement.’’.

21 SEC. 5. CLARIFICATION OF TREATMENT OF CERTAIN COL22 LECTIVELY BARGAINED ARRANGEMENTS.

23 (a) IN GENERAL.—Section 3(40)(A)(i) of the Em24 ployee Retirement Income Security Act of 1974 (29

25 U.S.C. 1002(40)(A)(i)) is amended to read as follows:
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1 ‘‘(i) under or pursuant to one or more collective

2 bargaining agreements,’’.

3 (b) LIMITATIONS.—Section 3(40) of such Act (29

4 U.S.C. 1002(40)) is amended by adding at the end the

5 following new subparagraphs:

6 ‘‘(C) Clause (i) of subparagraph (A) shall

7 apply only if—

8 ‘‘(i) the plan or other arrangement,

9 and the employee organization or any other

10 entity sponsoring the plan or other ar11 rangement, do not—

12 ‘‘(I) utilize the services of any li13 censed insurance agent or broker for

14 soliciting or enrolling employers or in15 dividuals as participating employers or

16 covered individuals under the plan or

17 other arrangement, or

18 ‘‘(II) pay a commission or any

19 other type of compensation to a per20 son that is related either to the vol21 ume or number of employers or indi22 viduals solicited or enrolled as partici23 pating employers or covered individ24 uals under the plan or other arrange25 ment, or to the dollar amount or size
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1 of the contributions made by partici2 pating employers or covered individ3 uals to the plan or other arrangement,

4 ‘‘(ii) not less than 85 percent of the

5 covered individuals under the plan or other

6 arrangement are individuals who—

7 ‘‘(I) are employed within a bar8 gaining unit covered by at least one of

9 the collective bargaining agreements

10 with a participating employer (or are

11 covered on the basis of an individual’s

12 employment in such a bargaining

13 unit), or

14 ‘‘(II) are present or former em15 ployees of the sponsoring employee or16 ganization, of an employer who is or

17 was a party to at least one of the col18 lective bargaining agreements, or of

19 the plan or other arrangement or a

20 related plan or arrangement (or are

21 covered on the basis of such present

22 or former employment),

23 ‘‘(iii) the plan or other arrangement

24 does not provide benefits to individuals

25 (other than individuals described in clause
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1 (ii)(II)) who work outside the standard

2 metropolitan statistical area in which the

3 sponsoring employee organization rep4 resents employees (or to individuals (other

5 than individuals described in clause

6 (ii)(II)) on the basis of such work by oth7 ers), except that in the case of a sponsor8 ing employee organization that represents

9 employees who work outside of any stand10 ard metropolitan statistical area, this

11 clause shall be applied by reference to the

12 State in which the sponsoring organization

13 represents employees,

14 ‘‘(iv) the employee organization or

15 other entity sponsoring the plan or other

16 arrangement certifies to the Secretary each

17 year, in a form and manner which shall

18 be prescribed in regulations of the Sec19 retary—

20 ‘‘(I) that the plan or other ar21 rangement meets the requirements of

22 clauses (i), (ii), and (iii), and

23 ‘‘(II) if, for any year, 10 percent

24 or more of the covered individuals

25 under the plan are individuals not de-
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1 scribed in subclause (I) or (II) of

2 clause (ii), the total number of cov3 ered individuals and the total number

4 of covered individuals not so de5 scribed.

6 ‘‘(D)(i) Clause (i) of subparagraph (A)

7 shall not apply to a plan or other arrangement

8 that is established or maintained pursuant to

9 one or more collective bargaining agreements

10 which the National Labor Relations Boards de11 termines to have been negotiated or otherwise

12 agreed to in a manner or through conduct

13 which violates section 8(a)(2) of the National

14 Labor Relations Act (29 U.S.C. 158(a)(2)).

15 ‘‘(ii)(I) Whenever a State insurance com16 missioner has reason to believe that this sub17 paragraph is applicable to part or all of a plan

18 or other arrangement, the State insurance com19 missioner may file a petition with the National

20 Labor Relations Board for a determination

21 under clause (i), along with sworn written testi22 mony supporting the petition.

23 ‘‘(II) The Board shall give any such peti24 tion priority over all other petitions and cases,

25 other than other petitions under subclause (I)
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1 or cases given priority under section 10 of the

2 National Labor Relations Act (29 U.S.C. 160).

3 ‘‘(III) The Board shall determine, upon

4 the petition and any response, whether, on the

5 facts before it, the plan or other arrangement

6 was negotiated, created, or otherwise agreed to

7 in a manner or through conduct which violates

8 section 8(a)(2) of the National Labor Relations

9 Act (29 U.S.C. 158(a)(2)). Such determination

10 shall constitute a final determination for pur11 poses of this subparagraph and shall be binding

12 in all Federal or State actions with respect to

13 the status of the plan or other arrangement

14 under this subparagraph.

15 ‘‘(IV) A person aggrieved by the deter16 mination of the Board under subclause (III)

17 may obtain review of the determination in any

18 United States court of appeals in the circuit in

19 which the collective bargaining at issue oc20 curred. Commencement of proceedings under

21 this subclause shall not, unless specifically or22 dered by the court, operate as a stay of any

23 State administrative or judicial action or pro24 ceeding related to the status of the plan or

25 other arrangement, except that in no case may
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1 the court stay, before the completion of the re2 view, an order which prohibits the enrollment of

3 new individuals into coverage under a plan or

4 arrangement.’’.

5 SEC. 6. EMPLOYEE LEASING HEALTHCARE ARRANGE6 MENTS.

7 (a) EMPLOYEE LEASING HEALTHCARE ARRANGE8 MENT DEFINED.—Section 3 of the Employee Retirement

9 Income Security Act of 1974 (29 U.S.C. 1002) is amended

10 by adding at the end the following new paragraph:

11 ‘‘(43) EMPLOYEE LEASING HEALTHCARE ARRANGE12 MENT.—

13 ‘‘(A) IN GENERAL.—Subject to subparagraph

14 (B), the term ‘employee leasing healthcare arrange15 ment’ means any labor leasing arrangement, staff

16 leasing arrangement, extended employee staffing or

17 supply arrangement, or other arrangement under

18 which—

19 ‘‘(i) one business or other entity (herein20 after in this paragraph referred to as the ‘les21 see’), under a lease or other arrangement en22 tered into with any other business or other en23 tity (hereinafter in this paragraph referred to

24 as the ‘lessor’), receives from the lessor the
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1 services of individuals to be performed under

2 such lease or other arrangement, and

3 ‘‘(ii) benefits consisting of medical care de4 scribed in section 607(1) are provided to such

5 individuals or such individuals and their de6 pendents as participants and beneficiaries.

7 ‘‘(B) EXCEPTION.—Such term does not include

8 an arrangement described in subparagraph (A) if,

9 under such arrangement, the lessor retains, both le10 gally and in fact, a complete right of direction and

11 control within the scope of employment over the in12 dividuals whose services are supplied under such

13 lease or other arrangement, and such individuals

14 perform a specified function for the lessee which is

15 separate and divisible from the primary business or

16 operations of the lessee.’’.

17 (b) TREATMENT OF EMPLOYEE LEASING

18 HEALTHCARE ARRANGEMENTS AS MULTIPLE EMPLOYER

19 WELFARE ARRANGEMENTS.—Section 3(40) of such Act

20 (29 U.S.C. 1002(40)) (as amended by the preceding provi21 sions of this Act) is further amended by adding at the

22 end the following new subparagraph:

23 ‘‘(E) The term ‘multiple employer welfare arrange24 ment’ includes any employee leasing healthcare arrange25 ment, except that such term does not include any employee
42

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1 leasing healthcare arrangement which is a multiple em2 ployer health plan (as defined in section 701(10)).’’.

3 (c) SPECIAL RULES FOR EMPLOYEE LEASING

4 HEALTHCARE ARRANGEMENTS.—

5 (1) IN GENERAL.—Part 7 of subtitle B of title

6 I of such Act (as added by the preceding provisions

7 of this Act) is amended by adding at the end the fol8 lowing new section:

9 ‘‘SEC. 711. SPECIAL RULES FOR EMPLOYEE LEASING

10 HEALTHCARE ARRANGEMENTS.

11 ‘‘(a) IN GENERAL.—The requirements of paragraphs

12 (1), (2), and (3) of section 704(b) shall be treated as satis13 fied in the case of a multiple employer welfare arrange14 ment that is an employee leasing healthcare arrangement

15 if the application for exemption includes information

16 which the Secretary determines to be complete and accu17 rate and sufficient to demonstrate that the following

18 requirements are met with respect to the arrangement:

19 ‘‘(1) 3-YEAR TENURE.—The lessor has been in

20 operation for not less than 3 years.

21 ‘‘(2) SOLICITATION RESTRICTIONS.—Employee

22 leasing services provided under the arrangement are

23 not solicited, advertised, or marketed through li24 censed insurance agents or brokers acting in such

25 capacity.
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1 ‘‘(3) CREATION OF EMPLOYMENT RELATION2 SHIP.—

3 ‘‘(A) DISCLOSURE STATEMENT.—Written

4 notice is provided to each applicant for employ5 ment subject to coverage under the arrange6 ment, at the time of application for employment

7 and before commencing coverage under the ar8 rangement, stating that the employer is the les9 sor under the arrangement.

10 ‘‘(B) INFORMED CONSENT.—Each such

11 applicant signs a written statement consenting

12 to the employment relationship with the lessor.

13 ‘‘(C) INFORMED RECRUITMENT OF LES14 SEE’S EMPLOYEES.—In any case in which the

15 lessor offers employment to an employee of a

16 lessee under the arrangement, the lessor in17 forms each employee in writing that his or her

18 acceptance of employment with the lessor is vol19 untary and that refusal of such offer will not be

20 deemed to be resignation from or abandonment

21 of current employment.

22 ‘‘(4) REQUISITE EMPLOYER-EMPLOYEE RELA23 TIONSHIP UNDER ARRANGEMENT.—Under the em24 ployer-employee relationship with the employees of

25 the lessor—
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1 ‘‘(A) the lessor retains the ultimate author2 ity to hire, terminate, and reassign such em3 ployees,

4 ‘‘(B) the lessor is responsible for the pay5 ment of wages, payroll-related taxes, and em6 ployee benefits, without regard to payment by

7 the lessee to the lessor for its services,

8 ‘‘(C) the lessor maintains the right of di9 rection and control over its employees, except to

10 the extent that the lessee is responsible for su11 pervision of the work performed consistent with

12 the lessee’s responsibility for its product or

13 service, and

14 ‘‘(D) in accordance with section 301(a) of

15 the Labor Management Relations Act, 1947 (29

16 U.S.C. 185(a)), the lessor retains in the ab17 sence of an applicable collective bargaining

18 agreement, the right to enter into arbitration

19 and to decide employee grievances, and

20 ‘‘(E) no owner, officer, or director of, or

21 partner in, a lessee is an employee of the lessor,

22 and not more than 10 percent of the individuals

23 covered under the arrangement consist of own24 ers, officers, or directors of, or partners in,

25 such a lessee (or any combination thereof).
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1 ‘‘(b) DEFINITIONS.—For purposes of this section—

2 ‘‘(1) LESSOR.—The term ‘lessor’ means the

3 business or other entity from which services of indi4 viduals are obtained under an employee leasing

5 healthcare arrangement.

6 ‘‘(2) LESSEE.—The term ‘lessee’ means a busi7 ness or other entity which receives the services of in8 dividuals provided under an employee leasing

9 healthcare arrangement.’’.

10 (2) CLERICAL AMENDMENT.—The table of con11 tents in section 1 of such Act (as amended by the

12 preceding provisions of this Act) is further amended

13 by inserting after the item relating to section 710

14 the following new item:

‘‘Sec. 711. Employee leasing healthcare arrangements.’’.

15 SEC. 7. ENFORCEMENT PROVISIONS RELATING TO MUL16 TIPLE EMPLOYER WELFARE ARRANGEMENTS

17 AND EMPLOYEE LEASING HEALTHCARE AR18 RANGEMENTS.

19 (a) ENFORCEMENT OF FILING REQUIREMENTS.—

20 Section 502 of the Employee Retirement Income Security

21 Act of 1974 (29 U.S.C. 1132) is amended—

22 (1) in subsection (a)(6), by striking ‘‘subsection

23 (c)(2) or (i) or (l)’’ and inserting ‘‘paragraph (2) or

24 (4) of subsection (c) or subsection (i) or (l)’’; and
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1 (2) by adding at the end of subsection (c) the

2 following new paragraph:

3 ‘‘(4) The Secretary may assess a civil penalty against

4 any person of up to $1,000 a day from the date of such

5 person’s failure or refusal to file the information required

6 to be filed with the Secretary under section 101(e).’’.

7 (b) ACTIONS BY STATES IN FEDERAL COURT.—Sec8 tion 502(a) of such Act (29 U.S.C. 1132(a)) is amended—

9 (1) in paragraph (5), by striking ‘‘or’’ at the

10 end;

11 (2) in paragraph (6), by striking the period and

12 inserting ‘‘, or’’; and

13 (3) by adding at the end the following:

14 ‘‘(7) by a State official having authority under

15 the law of such State to enforce the laws of such

16 State regulating insurance, to enjoin any act or

17 practice which violates any provision of part 7 which

18 such State has the power to enforce under part 7.’’.

19 (c) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

20 MISREPRESENTATIONS.—Section 501 of such Act (29

21 U.S.C. 1131) is amended—

22 (1) by inserting ‘‘(a)’’ after ‘‘SEC. 501.’’; and

23 (2) by adding at the end the following new sub24 section:
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1 ‘‘(b) Any person who, either willfully or with willful

2 blindness, falsely represents, to any employee, any employ3 ee’s beneficiary, any employer, the Secretary, or any State,

4 an arrangement established or maintained for the purpose

5 of offering or providing any benefit described in section

6 3(1) to employees or their beneficiaries as being a multiple

7 employer welfare arrangement granted an exemption

8 under part 7, as being an employee leasing healthcare ar9 rangement under such an exemption, or as having been

10 established or maintained under or pursuant to a collective

11 bargaining agreement shall, upon conviction, be impris12 oned not more than five years, be fined under title 18,

13 United States Code, or both.’’.

14 (d) CEASE ACTIVITIES ORDERS.—Section 502 of

15 such Act (29 U.S.C. 1132) is amended by adding at the

16 end the following new subsection:

17 ‘‘(m)(1) Subject to paragraph (2), upon application

18 by the Secretary showing the operation, promotion, or

19 marketing of a multiple employer welfare arrangement

20 providing benefits consisting of medical care described in

21 section 607(1) that—

22 ‘‘(A) is not licensed, registered, or otherwise ap23 proved under the insurance laws of the States in

24 which the arrangement offers or provides benefits, or
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1 ‘‘(B) is not operating in accordance with the

2 terms of an exemption granted by the Secretary

3 under part 7,

4 a district court of the United States shall enter an order

5 requiring that the arrangement cease activities.

6 ‘‘(2) Paragraph (1) shall not apply in the case of a

7 multiple employer welfare arrangement if the arrangement

8 shows that it—

9 ‘‘(A) is fully insured, within the meaning of

10 section 701(9),

11 ‘‘(B) is licensed, registered, or otherwise ap12 proved in each State in which it offers or provides

13 benefits, except to the extent that such State does

14 not require licensing, registration, or approval of

15 fully insured multiple employer welfare arrange16 ments, and

17 ‘‘(C) with respect to each such State, is operat18 ing in accordance with applicable State insurance

19 laws that are not superseded under section 514.

20 ‘‘(3) The court may grant such additional equitable

21 or remedial relief, including any relief available under this

22 title, as it deems necessary to protect the interests of the

23 public and of persons having claims for benefits against

24 the arrangement.’’.
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1 (e) RESPONSIBILITY FOR CLAIMS PROCEDURE.—

2 Section 503 of such Act (29 U.S.C. 1133) is amended by

3 adding at the end (after and below paragraph (2)) the fol4 lowing new sentence: ‘‘The terms of each multiple em5 ployer welfare arrangement to which this section applies

6 and which provides benefits consisting of medical care de7 scribed in section 607(1) shall require the operating com8 mittee or the named fiduciary (as applicable) to ensure

9 that the requirements of this section are met in connection

10 with claims filed under the arrangement.’’.

11 SEC. 8. FILING REQUIREMENTS FOR HEALTH BENEFIT

12 MULTIPLE EMPLOYER WELFARE ARRANGE13 MENTS.

14 Section 101 of the Employee Retirement Income Se15 curity Act of 1974 (29 U.S.C. 1021) is amended—

16 (1) by redesignating subsection (e) as sub17 section (f); and

18 (2) by inserting after subsection (d) the follow19 ing new subsection:

20 ‘‘(e)(1) Each multiple employer welfare arrangement

21 shall file with the Secretary a registration statement de22 scribed in paragraph (2) within 60 days before commenc23 ing operations (in the case of an arrangement commencing

24 operations on or after January 1, 1994) and no later than

25 February 15 of each year (in the case of an arrangement
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1 in operation since the beginning of such year), unless, as

2 of the date by which such filing otherwise must be made,

3 such arrangement provides no benefits consisting of medi4 cal care described in section 607(1).

5 ‘‘(2) Each registration statement—

6 ‘‘(A) shall be filed in such form, and contain

7 such information concerning the multiple employer

8 welfare arrangement and any persons involved in its

9 operation (including whether the arrangement is

10 fully insured), as shall be provided in regulations

11 which shall be prescribed by the Secretary, and

12 ‘‘(B) if the arrangement is not fully insured,

13 shall contain a certification that copies of such reg14 istration statement have been transmitted by cer15 tified mail to—

16 ‘‘(i) in the case of an arrangement with re17 spect to which an exemption under part 7 is in

18 effect, the State insurance commissioner of the

19 domicile State of such arrangement, or

20 ‘‘(ii) in the case of an arrangement which

21 is not so exempt, the State insurance commis22 sioner of each State in which the arrangement

23 is located.

24 ‘‘(3) The person or persons responsible for filing the

25 annual registration statement are—
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1 ‘‘(A) the trustee or trustees so designated by

2 the terms of the instrument under which the mul3 tiple employer welfare arrangement is established or

4 maintained, or

5 ‘‘(B) in the case of a multiple employer welfare

6 arrangement for which the trustee or trustees can7 not be identified, or upon the failure of the trustee

8 or trustees of an arrangement to file, the person or

9 persons actually responsible for the acquisition, dis10 position, control, or management of the cash or

11 property of the arrangement, irrespective of whether

12 such acquisition, disposition, control, or management

13 is exercised directly by such person or persons or

14 through an agent designated by such person or

15 persons.

16 ‘‘(4) Any agreement entered into under section

17 506(c) with a State as the primary domicile State with

18 respect to any multiple employer welfare arrangement

19 shall provide for simultaneous filings of reports required

20 under this subsection with the Secretary and with the

21 State insurance commissioner of such State.’’.
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1 SEC. 9. COOPERATION BETWEEN FEDERAL AND STATE AU2 THORITIES.

3 Section 506 of the Employee Retirement Income Se4 curity Act of 1974 (29 U.S.C. 1136) is amended by adding

5 at the end the following new subsection:

6 ‘‘(c) RESPONSIBILITY WITH RESPECT TO MULTIPLE

7 EMPLOYER WELFARE ARRANGEMENTS.—

8 ‘‘(1) STATE ENFORCEMENT.—

9 ‘‘(A) AGREEMENTS WITH STATES.—A

10 State may enter into an agreement with the

11 Secretary for delegation to the State of some or

12 all of the Secretary’s authority under sections

13 502 and 504 to enforce the provisions of this

14 title applicable to multiple employer welfare ar15 rangements with respect to which an exemption

16 under part 7 is or has been in effect. The Sec17 retary shall enter into the agreement if the Sec18 retary determines that the delegation provided

19 for therein would not result in a lower level or

20 quality of enforcement of the provisions of this

21 title.

22 ‘‘(B) DELEGATIONS.—Any department,

23 agency, or instrumentality of a State to which

24 authority is delegated pursuant to an agree25 ment entered into under this paragraph may, if

26 authorized under State law and to the extent
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1 consistent with such agreement, exercise the

2 powers of the Secretary under this title which

3 relate to such authority.

4 ‘‘(C) CONCURRENT AUTHORITY OF THE

5 SECRETARY.—If the Secretary delegates author6 ity to a State in an agreement entered into

7 under subparagraph (A), the Secretary may

8 continue to exercise such authority concurrently

9 with the State.

10 ‘‘(D) RECOGNITION OF PRIMARY DOMICILE

11 STATE.—In entering into any agreement with a

12 State under subparagraph (A), the Secretary

13 shall ensure that, as a result of such agreement

14 and all other agreements entered into under

15 subparagraph (A), only one State will be recog16 nized, with respect to any particular multiple

17 employer welfare arrangement, as the primary

18 domicile State to which authority has been dele19 gated pursuant to such agreements.

20 ‘‘(2) ASSISTANCE TO STATES.—The Secretary

21 shall—

22 ‘‘(A) provide enforcement assistance to the

23 States with respect to multiple employer welfare

24 arrangements, including, but not limited to, co25 ordinating Federal and State efforts through
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1 the establishment of cooperative agreements

2 with appropriate State agencies under which

3 the Pension and Welfare Benefits Administra4 tion keeps the States informed of the status of

5 its cases and makes available to the States in6 formation obtained by it,

7 ‘‘(B) provide continuing technical assist8 ance to the States with respect to issues involv9 ing multiple employer welfare arrangements

10 and this Act,

11 ‘‘(C) assist the States in obtaining from

12 the Office of Regulations and Interpretations

13 timely and complete responses to requests for

14 advisory opinions on issues described in sub15 paragraph (B), and

16 ‘‘(D) distribute copies of all advisory opin17 ions described in subparagraph (C) to the State

18 insurance commissioner of each State.’’.

19 SEC. 10. EFFECTIVE DATE; TRANSITIONAL RULES.

20 (a) EFFECTIVE DATE.—The amendments made by

21 this Act shall take effect January 1, 1994, except that

22 the Secretary of Labor may issue regulations before such

23 date under such amendments. The Secretary shall issue

24 all regulations necessary to carry out the amendments

25 made by this Act before the effective date thereof.
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1 (b) TRANSITIONAL RULES.—If the sponsor of a mul2 tiple employer welfare arrangement which, as of January

3 1, 1994, provides benefits consisting of medical care de4 scribed in section 607(1) of the Employee Retirement In5 come Security Act of 1974 (29 U.S.C. 1167(1)) files with

6 the Secretary of Labor an application for an exemption

7 under part 7 of subtitle B of title I of such Act within

8 180 days after such date and the Secretary has not, as

9 of 90 days after receipt of such application, found such

10 application to be materially deficient, section 514(b)(6)(A)

11 of such Act (29 U.S.C. 1144(b)(6)(A)) shall not apply

12 with respect to such arrangement during the 18-month pe13 riod following such date. If the Secretary determines, at

14 any time after the date of enactment of this Act, that any

15 such exclusion from coverage under the provisions of such

16 section 514(b)(6)(A) of a multiple employer welfare ar17 rangement would be detrimental to the interests of individ18 uals covered under such arrangement, such exclusion shall

19 cease as of the date of the determination. Any determina20 tion made by the Secretary under this subsection shall be

21 in the Secretary’s sole discretion.

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