Benefits Insights, Winter 2017
-- Gary Beckman, FCE CEO
Service Contract Act (SCA) regulations have long approved of the use of timely funded ERISA trusts that pay for a plan of bona fide benefits in satisfaction of the SCA Health and Welfare fringe requirement. While FCE’s administrative practice focuses on assisting Employers to establish a Single Employer Trust (SET), there are Third Party Administrators who mandate the use of a type of Multiple Employer Trust (MET), called a Group Insurance Arrangement (GIA). Under both SET and GIA trusts, the employer establishes an ERISA plan.
FCE believes that the greater flexibility of the SET makes it more accommodating, in that it allows an Employer to choose from a more extensive range of benefit solutions; especially the option to provide self-funded, level funded and stop-loss insured health and welfare benefits. Self-funded, level funded and stop-loss insured benefits are not permissible under a GIA, because a GIA, by law, can only provide fully insured benefits.
Under the SET method, an Employer is able to decide from year to year, based on the size of the fulltime employee group, their medical utilization pattern and, based on the comparative cost of coverage, whether they would best be served by fully insured major medical benefits, self-funded/stop-loss insured major medical benefits or level-funded major medical benefits. Under the GIA, there is only one option: fully insured.
Additionally, an Employer is free to add directly funded benefits which require a reserve such as an HRA, a premium stabilization, or extra vacation time under the SET method. Under the GIA, these types of benefits must be provided by a satellite Plan and Trust arrangement, such as a separate HRA MET. This creates Multiple Employer Welfare Arrangement (MEWA) related regulatory challenges of its own. Also, the reserves must disappear from the Trust balance sheet before the end of the reportable year. These design issues can be administratively burdensome to address.
That said, while the SET is the Trust of choice for Employers who do not want to restrict their benefit solutions solely to fully insured products, FCE’s global goal will always be to provide benefit solutions that match up to each Employer’s distinct benefit philosophies and unique benefit circumstances. With that in mind, FCE has a GIA arrangement available for those Employers who are committed exclusively to fully insured benefits, and we would be happy to discuss its applicability and potential implementation.