What is a Multiemployer Health Plan?

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Contributor, Benzinga
February 8, 2022

Several types of employer-based insurance options are available. One of these options is the multiemployer health plan (MEP). Through an MEP, employees receive certain benefits. MEPs are also advantageous for employers, especially smaller businesses. Employees receive multiple types of coverage and benefits through collective bargaining, and the employer gets tax and investment benefits. MEPS may seem complicated, but they are simpler than they appear.  

What is a Multiemployer Health Plan?

A multiemployer health plan (MEP) is a retirement savings plan that uses collective bargaining. MEPs are usually formulated as an agreement between a labor union and two or more employers. The employers involved are usually within the same industry or related industries. MEPs are defined and authorized by the Employee Retirement Income Security Act (ERISA) of 1974, the federal law that establishes the standard margin for retirement and health plans within private industries. ERISA provides protection for individuals in the plans. 

These plans are a written agreement with the employer’s contributions and the number of trustees and how they are elected specified in the written agreement, otherwise known as the trust document. In addition, the trust agreement specifies how and what benefits will be provided for employees under the plan. The trustees typically have the power to decide the level of coverage and plan design.  

MEPs are sometimes referred to as Taft-Hartley plans. The plan is operated by a board of trustees made up of equal representation from the employer and the labor union. However, there are some industries that have other plan options, such as the sports industry. Workers must qualify for the benefits and to determine their level of coverage. Qualification usually pertains to the number of years the employee has been working with the company. However, the maximum benefit is set by law outside of the MEP agreement.      

The board of trustees that manages the plan is referred to as an MEP sponsor. The MEP sponsors are in charge of the administrative duties and operations pertaining to the plan, usually delegating these responsibilities to entities or people who have the proper experience to handle the function. The sponsor typically has fiduciary liability for the plan. As fiduciaries, trustees serve the participants and beneficiaries solely. 

In addition, the MEP is mainly funded by employer contributions and investment earnings. The contributions from employers are legally required to be held in trust with the sole purpose of paying benefits to employees — but only the specific benefits outlined previously in the trust document. There must be an established trust fund separate from the above trust that holds contributions specifically for pensions or annuities. These funds cannot be integrated into the welfare fund.  

There are two types of multiemployer insurance options, including multiemployer pension plans and multiemployer welfare plans. These plans offer myriad benefits, including life insurance, health insurance and child care. Common industries where MEPs are often found include construction, transportation, arts and entertainment, lodging and healthcare. 

While similar in name and commonly confused with each other, multiple employer plans and multiple employer welfare arrangements (MEWAs) are not the same thing as either type of MEPs. The main difference between the three is that MEPs use collective bargaining, while the other two do not.    

How do Multiemployer Plans Benefit Employees?

Employees are the main beneficiaries when it comes to MEPs. Because their employers take on the risk of the plans, the employee’s benefits associated with the plan are more secure. MEPs allow employees to move to different employers within the industry and still keep the same benefits. Employees don’t have to worry about waiting for benefits to begin if they switch from one employer within the same industry to another. The benefits transfer as soon as they begin their new job, eliminating gaps in plans such as health insurance coverage.

Employees are also able to be mobile and still retain the benefits. They are able to temporarily work in the jurisdiction of another employer while still earning the credit for their work. This is particularly beneficial for certain industries, such as construction, where there may not be immediate work available in the home location of an employer and they need to look elsewhere.    

The access to the multiemployer coverage options are one of the main benefits MEPs offer employees. MEPs give employees life insurance, occupational illness coverage, child care, healthcare benefits, accident coverage, training and education, pooled vacation and severance benefits, housing assistance and legal services. In addition, when multiple employers contribute to the plan, rates tend to drop and coverage tends to improve for employees. 

Benefits of a Multiemployer Health Plan for Employers

One of the main benefits of an MEP for employers is that the risk associated with the plan is pooled. This is beneficial because a single employer is never wholly responsible for the investment if the plan’s investments begin to do poorly. Some other benefits for the employer include:

  • Lower costs for the employers: The costs for employers are reduced because of the centralized administration increasing benefits. Because resources are pooled, this lowers the risk on each individual employer, too. 
  • Better administration: Administration and operation functions are allocated to people or entities that have specialized experience with that specific function. Administrative costs are reduced for the company.
  • Better access to investment advising: Employers have easier access to consulting and investment advisers because they’re part of a larger entity. 
  • Tax benefits: MEP employer contributions are tax deductible. This lowers the total taxable income of the business, allowing the employer to pay less in taxes while also contributing to their employees’ well-being. 

Compare Health Insurance

MEPs offer a wide range of benefits to their employees, including healthcare benefits, life insurance, accident insurance and disability or sickness insurance. However, MEPs are not common in all industries. Thankfully, if you work in an industry that is not a part of an MEP, you still have affordable options to protect yourself and your family with independent policies.

Exploring insurance options begins with doing your research and understanding the many types of coverage available to you. For example, did you know it’s possible to purchase both temporary and permanent life insurance coverage? Benzinga offers insights and reviews on the following insurance providers. You may want to begin your research using a few of the links below.  

  • securely through Blue Cross Blue Shield Health Insurance's website
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  • securely through Sidecar Health Access Plan's website
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    Plans referred to above are excepted benefit fixed indemnity insurance products marketed and administered by Sidecar Health Insurance Solutions, LLC and underwritten by Sirius America Insurance Company or United States Fire Insurance Company, depending on the state. As an excepted benefit plan, it does not provide comprehensive/major medical expenses coverage, minimum essential coverage, or essential health benefits. You cannot receive a subsidy (premium tax credit and/or cost-sharing reduction) under the ACA in connection with your purchase of such an excepted benefit fixed indemnity insurance plan. Also, the termination or loss of this policy does not entitle you to a special enrollment period to purchase a health benefit plan that qualifies as minimum essential coverage outside of an open enrollment period. Coverage and plan options may vary or may not be available in all states.

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The Benefits of an MEP

MEPs are essentially labor unions helping to provide employees benefits on behalf of their employers through the use of collective bargaining. Depending on the MEP, you might have access to benefits like:

  • Health insurance
  • Pensions that make retirement easier and less dependent upon your independent investments
  • Life insurance coverage
  • Assistance when you’re unemployed
  • Occupational or injury benefits and coverage
  • Childcare centers
  • Financial assistance for housing
  • Pooled vacation, holiday and severance benefits

If you don’t have access to an MEP and the benefits that come with it, you can still purchase these policies through independent insurance providers. Benzinga offers reviews and guides to help you supplement any coverage you receive through your employer. You may want to use these guides to begin your search for the coverages you need. 

Frequently Asked Questions

Q

What is a multiemployer plan under ERISA?

A

Under ERISA, a multiemployer plan, often referred to as a Taft-Hartley plan, is a collective bargain plan that is managed by two or more employers, typically within the same or relevant industries, and a labor union. 

Q

What are Taft-Hartley plans?

A

Taft-Hartley plans are multiemployer plans that use collective bargaining to create a health plan that two or more employers or unions provide their employees and workers. Taft-Hartley plan is another term for a multiemployer health plan. Taft-Hartley plans were named after the Taft-Hartley Act, more formally known as the Labor Management and Relations Act of 1947. These plans are sponsored by a board of trustees, which consists of equal representation of labor and management. Taft-Hartley plans are common multiemployer health plans for most industries but not all.

About Sarah Horvath

Sarah is an expert in the insurance, investing for retirement and cryptocurrency space.