ACA implications: Employers confused on single, multi or multiple plans

As plan sponsors continue to work through Affordable Care Act compliance, there has been some discussion about what types of plans are being sponsored. I have also had some employers come to me recently and tell me that they have always thought they were one type of plan and discovered they were another. So, I think it’s productive to look at the basics of whether employers are single employer, multiple employer or multiemployer plan.

Generally, a single employer plan is just that. It is a plan sponsored by one employer or a group of employers under a common control structure and also may not be collectively bargained. This “control group” issue is one that can sometimes be problematic for plan sponsors. If a plan covers employees of more than one employer, but the employers are all part of the same control group, then the plan is really a single employer plan. So employers who are part of a control group (Code Section 414(a)), trades or businesses under common control (Section 414(c)) or affiliated service groups (Section 414(m)), are treated as a single employer and they have a single employer plan.

Multiple employer plans can look a lot like single employer plans except that the employers who sponsor the plans are not part of a control group. A multiple employer plan is a single plan, but it has multiple non-control group employers that sponsor it. It has separate rules that apply to it under Section 413(c). But the distinction between single and multiple is important because you can see they are both tied closely to the control group rules. It is not uncommon for sponsors to assume that companies with separate employer identification numbers are separate and create a multiple employer plan. This mistake can create real problems both from a reporting and compliance perspective because they are actually governed by different rules.

Lastly, multiemployer plans are a completely different animal from multiple employer plans. A multiemployer plan is a collectively bargained plan maintained by more than one employer, usually within the same or related industries, and a labor union. These plans are often referred to as “Taft-Hartley plans”. In the case of a multiemployer plan, control group concerns are not the defining characteristic. Instead, a multiemployer plan is defined by the existence of a collective bargaining agreement between a union and multiple employers, even if some of those multiple employers are part of the same control group. However, employers who are part of a control group are treated as a single employer when they are in a multiemployer plan, which can have serious consequences when considering withdrawal liability.

Used with permission from Fox Rothschild LLP. Keith R. McMurdy is an employee benefits attorney at the firm’s New York City office. To contact the author: kmcmurdy@foxrothschild.com. This Legal Alert is not intended to be, and should not be construed as, legal advice for any particular fact situation.

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