CSFS Course 7
MEWA and VEBA
Multiple employer welfare arrangements and voluntary employees’ beneficiary associations: what they are, how they are regulated, and why both attract more scrutiny than a single-employer plan.
225 practice questions · page 1 of 5, questions 1–50 · answers and explanations included · updated September 2026
50 questions on this page 1 of 5, each with the answer and the reasoning behind it. Read straight through, or quiz yourself on them and the ones you miss stay in rotation until you get them right.
- 1
According to the course, MEWAs in America originated in the 1970s primarily to address which problem?
- •Federal law required all employers with fewer than 50 employees to pool resources for benefits
- •Fewer options existed for small groups to access affordable health coverage
- •Large employers needed a mechanism to avoid state insurance premium taxes
- •Unions sought a replacement structure after the Taft-Hartley Act restricted collective bargaining on health benefits
Show answer
Fewer options existed for small groups to access affordable health coverage
The course states that MEWAs date to the 1970s, beginning as a way for small employers to pool their resources to provide health and welfare benefits because at the time there were fewer options for small groups to access affordable health coverage.
- 2
The course identifies a specific 1996 federal law that reinforced regulatory standards for MEWAs beyond what the 1983 ERISA amendments accomplished. Which law is cited, and what additional objective did it serve?
- •HIPAA, which set additional standards for MEWAs to ensure solvency and sound management
- •The Mental Health Parity Act, which required MEWAs to meet parity standards for behavioral health benefits
- •The Small Business Job Protection Act, which imposed minimum participation thresholds on MEWAs
- •The Taxpayer Relief Act, which limited the tax-exempt status of MEWAs that failed financial audits
Show answer
HIPAA, which set additional standards for MEWAs to ensure solvency and sound management
The course states that the Health Insurance Portability and Accountability Act (HIPAA) of 1996 set additional standards for MEWAs to ensure solvency and sound management, reinforcing the consumer protections begun by the 1983 ERISA amendments.
- 3
The course describes MEWAs becoming 'more prominent' after a specific federal enactment and explains the resulting regulatory complexity. What caused the complexity?
- •ERISA allowed preemption of certain state insurance laws, creating a complex regulatory environment for arrangements like MEWAs
- •HIPAA required MEWAs to maintain separate compliance programs for each state while simultaneously meeting federal portability standards
- •The ACA imposed conflicting federal benefit mandates on MEWAs that already had to meet state solvency rules
- •The Deficit Reduction Act subjected MEWAs to dual enforcement by both the IRS and state attorneys general
Show answer
ERISA allowed preemption of certain state insurance laws, creating a complex regulatory environment for arrangements like MEWAs
The course explains that ERISA was designed to protect employee benefits but also allowed for the preemption of certain state insurance laws, which created a complex regulatory environment. The intent was to provide federal standards, but the preemption framework led to ambiguity about state versus federal jurisdiction over MEWAs.
- 4
According to the course, what is the relationship between a MET and a MEWA?
- •A MET covers only pension benefits, while a MEWA covers welfare benefits such as health insurance
- •A MET is an older designation that was replaced by the MEWA classification under the Erlenborn Amendment
- •A MET is the funding mechanism, while a MEWA is the broader arrangement through which benefits are provided
- •A MEWA is the funding mechanism, while a MET is the broader arrangement that sets benefit design and compliance standards
Show answer
A MET is the funding mechanism, while a MEWA is the broader arrangement through which benefits are provided
The course explicitly states that essentially a MET is the funding mechanism, and a MEWA is the broader arrangement through which the benefits are provided. Employers join a MET and their contributions are pooled to fund the MEWA.
- 5
The course notes that both METs and MEWAs enable smaller employers to benefit from economies of scale, but they are subject to different regulatory requirements. Which federal laws does the course specifically name as applicable?
- •ERISA and HIPAA exclusively
- •ERISA and the Affordable Care Act (ACA) as applicable
- •ERISA and the Deficit Reduction Act as the sole federal frameworks
- •The Taft-Hartley Act and the McCarran-Ferguson Act
Show answer
ERISA and the Affordable Care Act (ACA) as applicable
The course states that METs and MEWAs are subject to different regulatory requirements and must comply with both state and federal laws, including ERISA and the Affordable Care Act (ACA) as applicable.
- 6
According to the course, MET failures after ERISA's passage were largely attributed to which combination of causes?
- •Excessive state regulation, inability to achieve critical mass of participants, and unfavorable actuarial assumptions
- •Federal preemption of fiduciary standards, lack of bonding requirements, and manipulation of Form 5500 filings
- •Financial instability, mismanagement, fraud, and regulatory gray areas that allowed operation without adequate reserves or oversight
- •Underfunding by participating employers, inadequate stop-loss coverage, and adverse court decisions
Show answer
Financial instability, mismanagement, fraud, and regulatory gray areas that allowed operation without adequate reserves or oversight
The course states that MET failures were largely attributed to financial instability, mismanagement, fraud, and the regulatory gray areas that allowed some METs to operate without adequate reserves or oversight.
- 7
The course describes three notable MET failures. Which entity is identified as having been the subject of a 1983 DOL action for operating an alleged illegal MET scheme?
- •American Chambers Life Insurance Company
- •International Workers' Order (IWO)
- •National Association of Health Underwriters
- •National Heritage Life Insurance Company
Show answer
National Heritage Life Insurance Company
The course specifically states that in 1983, the U.S. Department of Labor took action against the National Heritage Life Insurance Company for operating an alleged illegal MET scheme that affected numerous employers and left many without coverage.
- 8
The course identifies the International Workers' Order (IWO) MET failure and the American Chambers Life Insurance Company MET failure as occurring in different decades. In what order did these failures occur?
- •Both failures occurred in the early 1980s as a direct result of ERISA preemption gaps
- •The American Chambers Life failure preceded the IWO failure, occurring in the mid-1980s
- •The IWO MET experienced financial difficulties in the late 1980s, while the American Chambers Life Insurance Company MET failed in the early 1990s
- •The IWO MET failed in the early 1990s after the Erlenborn Amendment, while American Chambers failed in the late 1990s after HIPAA
Show answer
The IWO MET experienced financial difficulties in the late 1980s, while the American Chambers Life Insurance Company MET failed in the early 1990s
The course states that the IWO MET experienced financial difficulties in the late 1980s, leading to insolvency, and that the MET operated by American Chambers Life Insurance Company failed in the early 1990s, leaving thousands without health coverage.
- 9
The Erlenborn Amendment is named after Congressman John N. Erlenborn and was part of which legislation?
- •The 1947 Labor Management Relations Act (Taft-Hartley Act)
- •The 1974 Employee Retirement Income Security Act (ERISA)
- •The 1983 Deficit Reduction Act
- •The 1996 Health Insurance Portability and Accountability Act (HIPAA)
Show answer
The 1983 Deficit Reduction Act
The course states that the Erlenborn Amendment was named after Congressman John N. Erlenborn and was part of the 1983 Deficit Reduction Act. It is sometimes referred to as the MEWA amendment to ERISA.
- 10
Before the Erlenborn Amendment, some MEWAs operated without necessary reserves or oversight. What specific claim did these MEWAs make to justify avoiding state regulation?
- •They argued that the DOL had granted them advisory opinion letters exempting them from state oversight
- •They asserted that their fully insured status made state solvency requirements redundant
- •They claimed the McCarran-Ferguson Act only applied to licensed insurance companies, not pooled benefit arrangements
- •They claimed they were exempt from state insurance laws because they were ERISA plans
Show answer
They claimed they were exempt from state insurance laws because they were ERISA plans
The course states that before the Erlenborn Amendment, some MEWAs claimed they were exempt from state insurance laws due to ERISA's preemption of certain state laws. This led to situations where they operated without necessary reserves or oversight.
- 11
What did the Erlenborn Amendment explicitly establish regarding MEWAs and state insurance regulation?
- •MEWAs are fully preempted from state regulation if they file Form M-1 with the DOL annually
- •MEWAs are not exempt from state insurance regulation merely because they are ERISA plans
- •Only self-funded MEWAs are subject to state insurance regulation, while fully insured MEWAs are entirely federally regulated
- •States may only regulate MEWAs that have fewer than 100 participating employers
Show answer
MEWAs are not exempt from state insurance regulation merely because they are ERISA plans
The course states that the Erlenborn Amendment amended ERISA to explicitly state that MEWAs are not exempt from state insurance regulation merely because they are ERISA plans. It allowed states to enforce their insurance laws on MEWAs.
- 12
The course states that with the Erlenborn Amendment, the scope of ERISA's preemption over state insurance laws was clarified, but the core categories of plans defined by ERISA remained consistent. Which of the following is NOT one of the ERISA plan categories listed?
- •Cafeteria plans under IRC Section 125
- •Other benefit plans providing benefits like severance pay, supplemental unemployment benefits, life insurance, and disability insurance
- •Pension plans providing retirement income or deferral of income to termination of employment or beyond
- •Welfare benefit plans providing medical, surgical, hospital care, or benefits for sickness, accident, disability, or death
Show answer
Cafeteria plans under IRC Section 125
The course lists three categories of ERISA plans: pension plans, welfare benefit plans, and other benefit plans (severance pay, supplemental unemployment, life insurance, disability insurance). Cafeteria plans under IRC Section 125 are not listed as an ERISA plan category.
- 13
According to the course, the Erlenborn Amendment made it clear that MEWAs are subject to state insurance regulations 'unless' a specific condition is met. What is that condition?
- •Unless the MEWA files Form 5500 annually with the DOL and IRS
- •Unless the MEWA is fully insured
- •Unless the MEWA is maintained pursuant to a collective bargaining agreement
- •Unless the MEWA's participating employers are all located within a single state
Show answer
Unless the MEWA is fully insured
The course states that the Erlenborn Amendment made it clear that although MEWAs are subject to federal regulation under ERISA, they are also subject to state insurance regulations unless they are fully insured.
- 14
Under ERISA, what characterizes a single-employer plan?
- •It is a plan covering only the owner-employees of a single proprietorship or partnership
- •It is a plan maintained by one employer that must be fully insured and cannot be self-funded
- •It is any plan with fewer than 100 participants, regardless of how many employers sponsor it
- •It is established or maintained by one company and covers individuals who have a common employment relationship with that specific employer
Show answer
It is established or maintained by one company and covers individuals who have a common employment relationship with that specific employer
The course states that a single-employer plan is typically established or maintained by one company or organization and covers individuals who have a common employment relationship with that specific employer. These plans can provide a range of benefits including retirement income, health insurance, life insurance, and disability benefits.
- 15
Which of the following is NOT listed by the course as a key feature of a Taft-Hartley Trust?
- •Compliance with ERISA regulations in addition to the stipulations of the Taft-Hartley Act
- •Exclusive governance by the participating labor union without employer representation on the board of trustees
- •Funding from multiple employers who contribute as determined by collective bargaining agreements
- •Joint administration between labor and management
Show answer
Exclusive governance by the participating labor union without employer representation on the board of trustees
The course lists key features of a Taft-Hartley Trust including joint administration between labor and management, funding from multiple employers via collective bargaining agreements, provision of benefits to employees of participating unions, and compliance with both ERISA and the Taft-Hartley Act. The trust is managed by a board with equal representation from both employers and the union, not exclusively by the union.
- 16
According to the course, Taft-Hartley Trusts are designed to benefit which specific type of worker?
- •Government employees transitioning to private-sector employment who need portable benefits
- •Part-time workers who are excluded from their employer's single-employer benefit plan
- •Self-employed individuals in professional fields who lack access to group health plans
- •Workers who may work for multiple employers within the same industry during their career, allowing them to accumulate benefits in a single plan
Show answer
Workers who may work for multiple employers within the same industry during their career, allowing them to accumulate benefits in a single plan
The course states that Taft-Hartley Trusts are designed to benefit workers who may work for multiple employers within the same industry during their career, allowing them to accumulate benefits in a single plan despite changing employers.
- 17
Which two federal reports must a MEWA file under ERISA reporting requirements?
- •Form 5500 and IRS Form 990, both filed annually with the IRS
- •Form 5500 and the Summary Annual Report (SAR), both filed with the state insurance department
- •Form M-1 (filed annually with the DOL) and Form 5500 (if it covers ERISA-subject plans)
- •Form M-1 and IRS Form 1041, both filed annually with the DOL
Show answer
Form M-1 (filed annually with the DOL) and Form 5500 (if it covers ERISA-subject plans)
The course states that MEWAs must file Form M-1 annually with the DOL, providing information on operations, ERISA compliance, and state insurance law compliance. If a MEWA covers plans subject to ERISA, it must also annually file Form 5500.
- 18
The course identifies specific MET reporting requirements under ERISA. Which of the following documents is required to be provided directly to plan participants rather than filed with a government agency?
- •Form 5500 and the summary annual report (SAR)
- •Form M-1 and the summary plan description (SPD)
- •Plan documents and Form 5500
- •The summary plan description (SPD) and the summary annual report (SAR)
Show answer
The summary plan description (SPD) and the summary annual report (SAR)
The course states that MET reporting requirements include providing participants with the SAR (a narrative summary of Form 5500 information) and the SPD (a detailed document about plan operation and management). Form 5500 is filed with the government, while these documents go directly to participants.
- 19
According to the course, METs that are not fully insured may be subject to state-level reporting requirements. Which of the following does the course identify as a potential state filing requirement for METs?
- •Annual IRS Form 990, state premium tax returns, and DOL compliance certificates
- •Audited Form 5500, quarterly claims reconciliation reports, and PBGC insurance premium filings
- •Financial statements, actuarial certifications, or evidence of excess insurance or bonds
- •Form M-1 filing, quarterly solvency reports, and proof of federal bonding coverage
Show answer
Financial statements, actuarial certifications, or evidence of excess insurance or bonds
The course states that in addition to ERISA requirements, METs may be subject to state laws requiring additional reporting, especially if not fully insured. These state requirements can include filings like Form M-1 required of MEWAs, financial statements, actuarial certifications, or evidence of excess insurance or bonds.
- 20
The course describes the role of 'notices and disclosures' in MET reporting. What types of matters may these notices address?
- •Annual premium rate adjustments, provider network changes, or plan termination procedures
- •Changes in IRS tax treatment, new DOL enforcement actions, or state licensing renewals
- •Changes in the plan, funding deficiencies, or special healthcare options
- •Investment performance, actuarial assumption changes, or stop-loss carrier substitutions
Show answer
Changes in the plan, funding deficiencies, or special healthcare options
The course states that various notices may be required to be provided to plan participants on matters such as changes in the plan, funding deficiencies, or special healthcare options.
- 21
The course identifies pooling as providing four distinct advantages for MET/MEWA participants. Which advantage specifically references the ability to offer benefits that individual employers could not afford independently?
- •Enhanced benefit offerings — pooling resources may allow employers to offer a wider range of benefits, making packages more attractive to current and prospective employees
- •Increased purchasing power — a larger pool gives the MET or MEWA greater leverage to negotiate better rates with vendors
- •Reduced administrative costs — benefits administration costs spread across the larger group result in lower per-participant costs
- •Spread risk — risks of high claims from a few individuals are distributed over the larger group to stabilize costs
Show answer
Enhanced benefit offerings — pooling resources may allow employers to offer a wider range of benefits, making packages more attractive to current and prospective employees
The course identifies four pooling advantages. The 'enhance benefit offerings' advantage specifically states that pooling resources may allow employers to offer a wider range of benefits than they could afford on their own, potentially making their benefit packages more attractive to current and prospective employees.
- 22
Which of the following health insurance arrangements is described by the course as involving co-employment with client companies, distinguishing it from METs and MEWAs?
- •Association health plans (AHPs)
- •Captive insurance companies
- •Health reimbursement arrangements (HRAs)
- •Professional employer organizations (PEOs)
Show answer
Professional employer organizations (PEOs)
The course states that PEOs provide HR services to small and medium-sized businesses, including health insurance, and become co-employers with their client companies, which is not the case with METs or MEWAs.
- 23
The course lists six types of health insurance products often confused with METs and MEWAs. Which product is described as a 'hybrid of self-insured and fully insured plans' that can sometimes be mistaken for a MEWA?
- •Association health plans (AHPs)
- •Captive insurance companies
- •Health reimbursement arrangements (HRAs)
- •Level-funded health plans
Show answer
Level-funded health plans
The course describes level-funded health plans as a type of health plan in which an employer pays a set amount each month to cover anticipated claim costs and administrative fees. They are characterized as a hybrid of self-insured and fully insured plans and can sometimes be mistaken for MEWAs.
- 24
According to the course, captive insurance companies are sometimes confused with METs and MEWAs. What distinguishes captives from MEWAs?
- •Captives are exempt from both ERISA and state insurance regulation, while MEWAs are subject to both
- •Captives are insurance companies owned and controlled by those they insure and are distinct entities with different regulatory and financial structures
- •Captives are limited to providing property and casualty coverage, whereas MEWAs provide employee welfare benefits
- •Captives may only be formed by a single employer, while MEWAs require participation by multiple employers
Show answer
Captives are insurance companies owned and controlled by those they insure and are distinct entities with different regulatory and financial structures
The course states that captives are insurance companies that are owned and controlled by those they insure. In some cases, captives may be set up by a group of employers to provide health benefits, which can lead to confusion with METs and MEWAs. However, captives are distinct entities with different regulatory and financial structures.
- 25
The course describes association health plans (AHPs) as a source of confusion with MEWAs. What specific characteristic of AHPs does the course identify as contributing to this confusion?
- •AHPs allow small businesses to band together by common geography or industry to obtain coverage as though they were a single large employer, and their rules were recently expanded
- •AHPs are governed by the same ERISA fiduciary standards as MEWAs, with identical bonding requirements
- •AHPs are required to file Form M-1 with the DOL just like MEWAs, making them appear identical in regulatory terms
- •AHPs must be self-funded and maintain reserves identical to those required of MEWAs under state insurance law
Show answer
AHPs allow small businesses to band together by common geography or industry to obtain coverage as though they were a single large employer, and their rules were recently expanded
The course states that AHPs allow small businesses to band together by common geography or industry to obtain healthcare coverage as though they were a single large employer. The rules governing AHPs were expanded in recent years, causing some confusion with MEWAs, although AHPs are subject to different regulatory standards.
- 26
What distinguishes an employer-sponsored MEWA from an association-sponsored MEWA?
- •An employer-sponsored MEWA can only provide health insurance, while an association-sponsored MEWA can provide any type of welfare benefit
- •An employer-sponsored MEWA is established and maintained by the participating employers themselves, rather than by an outside organization or association
- •An employer-sponsored MEWA is exempt from ERISA, while an association-sponsored MEWA must comply with ERISA
- •An employer-sponsored MEWA may operate only within a single state, while an association-sponsored MEWA may operate across multiple states
Show answer
An employer-sponsored MEWA is established and maintained by the participating employers themselves, rather than by an outside organization or association
The course states that an employer-sponsored MEWA is specifically established and maintained by the participating employers, rather than an outside organization or association. In contrast, an association-sponsored MEWA is established and maintained by an association linked by a common trade, industry, profession, or shared interest.
- 27
According to the course, an employer-sponsored MEWA's administration can be handled in two ways. Which of the following correctly identifies both options?
- •By an independent fiduciary appointed by the DOL, or by the sponsoring association's executive director
- •By the DOL through a federally appointed plan administrator, or by a state-licensed insurance carrier
- •By the participating employers' HR departments on a rotating basis, or by a court-appointed receiver in the case of solvency concerns
- •Internally by the board or committee of participating employers, or externally by contracting with a third-party administrator (TPA)
Show answer
Internally by the board or committee of participating employers, or externally by contracting with a third-party administrator (TPA)
The course states that the administration of an employer-sponsored MEWA can be handled internally by the board or committee, or the MEWA can contract with a third-party administrator (TPA) to manage day-to-day operations.
- 28
According to the course, which term does the DOL generally use when referring to groups of employees who receive benefits under a plan?
- •Covered lives or enrollees
- •Employee beneficiary organization members
- •Employee organization members
- •Participants or beneficiaries
Show answer
Participants or beneficiaries
The course states that if the DOL refers to groups of employees who are beneficiaries of a plan, it generally uses terms such as 'participants' or 'beneficiaries' in reference to their relationship to the plan.
- 29
The course distinguishes between an 'employee organization' and an 'employee beneficiary organization' in the MEWA context. What is the key difference?
- •An employee organization is a group formed by employees or their representatives (such as a union or trade association) for providing welfare benefits, while an employee beneficiary organization is specifically established to provide benefits to its members as beneficiaries of the plan
- •An employee organization is defined by ERISA and regulated by the DOL, while an employee beneficiary organization is defined by the IRC and regulated exclusively by the IRS
- •An employee organization must have at least 100 members, while an employee beneficiary organization has no minimum membership requirement
- •An employee organization provides only pension benefits, while an employee beneficiary organization provides welfare benefits such as health insurance
Show answer
An employee organization is a group formed by employees or their representatives (such as a union or trade association) for providing welfare benefits, while an employee beneficiary organization is specifically established to provide benefits to its members as beneficiaries of the plan
The course defines an employee organization as a group formed by employees or representatives (such as a labor union or trade association) for providing welfare benefits, specifically defined in ERISA. An employee beneficiary organization is less commonly referenced in DOL regulations but is understood as an organization specifically established to provide benefits to members who are the beneficiaries of the welfare benefit plans.
- 30
According to the course, what common characteristic links the employers in an association-sponsored MEWA?
- •A common collective bargaining agreement with the same union
- •A common geographic location within a single state
- •A common number of employees, typically all having fewer than 50 workers
- •A common trade, industry, profession, or other shared interest
Show answer
A common trade, industry, profession, or other shared interest
The course states that an association-sponsored MEWA is established by an association that is typically a group of employers linked by a common trade, industry, profession, or other shared interest.
- 31
The course notes that the ACA has influenced association-sponsored MEWAs. Which specific impacts does the course attribute to the ACA?
- •A federal mandate requiring all association-sponsored MEWAs to convert to fully insured status by 2020
- •A requirement that association-sponsored MEWAs participate in state health insurance exchanges
- •Elimination of the Erlenborn Amendment's state regulatory authority over association-sponsored MEWAs
- •New coverage requirements and prohibitions on discriminatory practices that have influenced how MEWAs are structured and operated
Show answer
New coverage requirements and prohibitions on discriminatory practices that have influenced how MEWAs are structured and operated
The course states that the ACA introduced new regulations and standards that impact MEWAs, such as coverage requirements and prohibitions on discriminatory practices. These changes have influenced how MEWAs are structured and operated.
- 32
According to the course, what is a key structural difference between a buying co-op and a MEWA?
- •Buying co-ops are limited to employers with more than 100 employees, while MEWAs serve only small employers
- •Buying co-ops are required to self-fund their plans, while MEWAs must be fully insured
- •Buying co-ops must be registered with the DOL, while MEWAs must only register with state insurance departments
- •MEWAs often involve the creation of a new entity that provides benefits, whereas buying co-ops may act more as a facilitator between members and insurance providers
Show answer
MEWAs often involve the creation of a new entity that provides benefits, whereas buying co-ops may act more as a facilitator between members and insurance providers
The course identifies several differences between buying co-ops and MEWAs. A key structural distinction is that MEWAs often involve the creation of a new entity that provides benefits, whereas buying co-ops may act more as a facilitator between members and insurance providers.
- 33
The course identifies four important differences between buying co-ops and MEWAs. Which of the following correctly describes the difference in insurance risk?
- •Both MEWAs and buying co-ops bear insurance risk equally, but buying co-ops are not subject to state solvency requirements
- •Buying co-ops assume all insurance risk through captive reinsurance, while MEWAs transfer risk entirely to stop-loss carriers
- •MEWAs are prohibited from bearing insurance risk under the Erlenborn Amendment, while buying co-ops may assume limited risk
- •MEWAs may bear the insurance risk especially if self-funded, while buying co-ops typically do not assume risk but rather arrange for the purchase of insurance from third-party carriers
Show answer
MEWAs may bear the insurance risk especially if self-funded, while buying co-ops typically do not assume risk but rather arrange for the purchase of insurance from third-party carriers
The course states that MEWAs may bear the insurance risk, especially if they are self-funded, while buying co-ops typically do not assume risk but rather arrange for the purchase of insurance from third-party carriers.
- 34
The course notes a membership difference between buying co-ops and MEWAs. What is it?
- •Buying co-ops are limited to employers within a single industry, while MEWAs can include employers from any industry
- •Buying co-ops might serve individuals or other entities in addition to employers, whereas MEWAs are specifically for employer groups
- •MEWA membership is mandatory for all employers in a covered geographic area, while co-op membership is always voluntary
- •MEWAs require a minimum of ten participating employers, while buying co-ops have no minimum
Show answer
Buying co-ops might serve individuals or other entities in addition to employers, whereas MEWAs are specifically for employer groups
The course states that membership in a buying co-op is typically voluntary for employers, and in some cases co-ops might also serve individuals or other entities, whereas MEWAs are specifically for employer groups.
- 35
According to the course, a leased employee company (PEO) qualifies as a MEWA when it meets which fundamental condition?
- •It employs more than 500 leased workers across all client companies combined
- •It obtains a federal MEWA license from the DOL and files Form M-1 at inception
- •It offers health and welfare benefits to the employees of multiple client employers under a collective arrangement
- •It self-funds all claims rather than purchasing group insurance from a licensed carrier
Show answer
It offers health and welfare benefits to the employees of multiple client employers under a collective arrangement
The course states that a leased employee company or PEO qualifies as a MEWA when it offers health and welfare benefits to the employees of multiple client employers under a collective arrangement.
- 36
The course lists several factors that determine when a PEO arrangement constitutes a MEWA. Which factor relates to the commonality among client employers?
- •If all client employers operate in the same SIC code, the PEO is automatically classified as a MEWA regardless of benefit plan structure
- •If client employers share a common geographic location, the arrangement qualifies as an association health plan rather than a MEWA
- •If fewer than half the client employers are related, the DOL presumes a Taft-Hartley trust rather than a MEWA
- •If the client employers are unrelated and the PEO exercises control over the benefit plan, it is more likely to be classified as a MEWA
Show answer
If the client employers are unrelated and the PEO exercises control over the benefit plan, it is more likely to be classified as a MEWA
The course states that a critical factor in classifying a PEO as a MEWA is the level of control and commonality among the client employers. If the client employers are unrelated and the PEO exercises control over the benefit plan, it is more likely to be classified as a MEWA.
- 37
According to the course, what risk do PEOs face if they claim not to be MEWAs but are found to meet MEWA criteria?
- •They are reclassified as Taft-Hartley Trusts and must add union representation to their board of trustees
- •They automatically lose their state business license and must dissolve within 90 days
- •They become subject to PBGC insurance premiums and mandatory federal bonding at 150% of plan assets
- •They may be scrutinized by regulatory authorities and face legal and regulatory challenges for misclassification
Show answer
They may be scrutinized by regulatory authorities and face legal and regulatory challenges for misclassification
The course states that PEOs claiming not to be MEWAs may be scrutinized by regulatory authorities to ensure compliance with applicable laws, and misclassification can lead to legal and regulatory challenges.
- 38
According to the course, which of the following is a requirement for a MEWA to qualify as a welfare benefit fund?
- •The MEWA must be fully insured through a state-licensed insurance carrier
- •The MEWA must have at least 50 participating employers to achieve minimum credibility
- •The MEWA must maintain plan assets separately from the employers' assets, such as through a trust or separate account
- •The MEWA must receive a formal determination letter from the IRS recognizing its welfare benefit fund status
Show answer
The MEWA must maintain plan assets separately from the employers' assets, such as through a trust or separate account
The course states that to qualify as a welfare benefit fund, a MEWA must maintain plan assets separately from the employers' assets, involving the setup of a trust or separate account where contributions are held and managed solely for the benefit of participants.
- 39
The course lists eight criteria for a MEWA to qualify as a welfare benefit fund. Which criterion addresses the MEWA's obligations regarding state licensing, reserves, and solvency?
- •Control and association — the MEWA must be licensed separately in each state where participating employers are located
- •ERISA compliance — the MEWA must hold a valid ERISA determination letter confirming its status as a welfare benefit fund
- •Funding mechanism — the MEWA must maintain reserves equal to at least 150% of projected annual claims
- •Legal and regulatory compliance — the MEWA must comply with relevant state insurance laws and regulations, particularly if not fully insured, including state requirements for licensing, reserves, and solvency
Show answer
Legal and regulatory compliance — the MEWA must comply with relevant state insurance laws and regulations, particularly if not fully insured, including state requirements for licensing, reserves, and solvency
The course identifies 'legal and regulatory compliance' as one of eight criteria, specifying that the MEWA must comply with relevant state insurance laws and regulations, particularly if it is not fully insured, including adhering to state requirements for licensing, reserves, and solvency.
- 40
ERISA Title I requires plans to establish a grievance and appeals process. According to the course, what specific right does ERISA give participants in connection with this requirement?
- •The right to appeal directly to the state insurance commissioner before filing suit
- •The right to binding arbitration administered by the DOL's Employee Benefits Security Administration
- •The right to recover attorney fees only if the plan is found to have acted in bad faith
- •The right to sue for benefits and breaches of fiduciary duty
Show answer
The right to sue for benefits and breaches of fiduciary duty
The course states that ERISA requires plans to establish a grievance and appeals process for participants to get benefits from their plans and gives participants the right to sue for benefits and breaches of fiduciary duty.
- 41
According to the course, ERISA Title I's reporting and disclosure requirements include which set of documents?
- •Form 5500, IRS Form 1041, and quarterly funding status reports
- •Form M-1, Form 990, and the summary plan description (SPD)
- •The summary annual report (SAR), state insurance filings, and actuarial certifications
- •The summary plan description (SPD), annual reports (Form 5500 series), and summary annual reports (SARs)
Show answer
The summary plan description (SPD), annual reports (Form 5500 series), and summary annual reports (SARs)
The course states that ERISA Title I requires plan administrators to provide participants and beneficiaries with information about plan features and funding, including the summary plan description (SPD), annual reports (Form 5500 series), and summary annual reports (SARs).
- 42
The course describes ERISA Title I's prohibition on certain transactions. Which specific types of prohibited conduct does the course identify?
- •Employer contributions exceeding 110% of actuarially determined costs, underfunding below 80%, and benefit increases during a funding shortfall
- •Investing more than 10% of plan assets in a single security, loans to plan participants, and transfers between related plans
- •Self-dealing, conflicts of interest, and kickbacks involving plan assets
- •Using plan assets to pay for employer administrative overhead, compensating service providers above market rates, and cross-subsidizing among employer groups
Show answer
Self-dealing, conflicts of interest, and kickbacks involving plan assets
The course states that ERISA prohibits the use of plan assets for certain transactions deemed potentially harmful to the plan or its participants, specifically listing self-dealing, conflicts of interest, and kickbacks.
- 43
Under ERISA Section 404(a), how must fiduciaries of an ERISA-covered MEWA discharge their duties?
- •In accordance with the specific investment and benefit instructions provided by the plan sponsor, regardless of the fiduciary's own judgment
- •In the balanced interest of both the sponsoring employers and the plan participants, using generally accepted insurance principles
- •Solely in the interest of participants and beneficiaries, with care, skill, prudence, and diligence that a prudent person familiar with such matters would use
- •With the primary objective of minimizing costs for the sponsoring employers while maintaining adequate coverage levels
Show answer
Solely in the interest of participants and beneficiaries, with care, skill, prudence, and diligence that a prudent person familiar with such matters would use
The course states that under ERISA Section 404(a), fiduciaries must discharge their duties with respect to a plan solely in the interest of participants and beneficiaries, for the exclusive purpose of providing benefits and defraying reasonable administrative expenses. They must act with care, skill, prudence, and diligence under the circumstances that a prudent person familiar with such matters would use.
- 44
According to the course, what personal liability can a MEWA fiduciary face for breaching fiduciary responsibilities under ERISA?
- •Criminal liability limited to fines up to $10,000 per violation, but no obligation to restore plan losses
- •Joint and several liability shared equally among all plan trustees, regardless of which fiduciary committed the breach
- •Liability capped at the fiduciary's annual compensation from the MEWA, with no disgorgement of profits
- •Personal liability to restore any losses to the plan or to restore any profits made through improper use of plan assets due to their actions
Show answer
Personal liability to restore any losses to the plan or to restore any profits made through improper use of plan assets due to their actions
The course states that fiduciaries who breach their responsibilities, obligations, or duties may be personally liable to restore any losses to the plan or to restore any profits made through improper use of plan assets due to their actions.
- 45
The course identifies a specific ERISA provision requiring that MEWA fiduciaries be bonded. What is the stated purpose of this bonding requirement?
- •To ensure the MEWA meets state minimum reserve requirements for insurance licensure
- •To guarantee that participants receive benefits even if the MEWA becomes insolvent
- •To protect the plan from risk of loss due to fraud or dishonesty
- •To secure the DOL's enforcement costs in the event of a fiduciary investigation
Show answer
To protect the plan from risk of loss due to fraud or dishonesty
The course states that ERISA requires that fiduciaries of an employee benefit plan be bonded to protect the plan from risk of loss due to fraud or dishonesty.
- 46
According to the course, why are self-funded MEWAs more likely than fully insured MEWAs to be required to file financial statements with state insurance departments?
- •Self-funded MEWAs are not covered by ERISA preemption, while fully insured MEWAs are entirely preempted from state regulation
- •Self-funded MEWAs bear the risk of providing benefits directly, so states impose filing requirements to ensure financial solvency and ability to pay claims
- •Self-funded MEWAs must demonstrate to states that their stop-loss carrier has sufficient surplus
- •Self-funded MEWAs receive tax-exempt status that requires state-level financial accountability
Show answer
Self-funded MEWAs bear the risk of providing benefits directly, so states impose filing requirements to ensure financial solvency and ability to pay claims
The course states that self-funded MEWAs bear the risk of providing benefits directly and are more likely to be required to file financial statements with state insurance departments. States impose these requirements as part of their regulatory oversight to ensure financial solvency and the ability to pay claims.
- 47
The course explains that non-MEWA ERISA plans (such as single-employer plans) have different financial reporting obligations than MEWAs. To which entities do non-MEWA ERISA plans primarily report?
- •Both the DOL and the state insurance department through Form 5500 and state-mandated financial statements
- •The DOL and the IRS through Form 5500 and other federal tax forms, not to state insurance departments
- •The IRS exclusively through Form 990 and Form 1041, with no filing obligations to the DOL
- •The state insurance department and the PBGC through annual solvency reports and premium filings
Show answer
The DOL and the IRS through Form 5500 and other federal tax forms, not to state insurance departments
The course states that standard ERISA plans such as those sponsored by a single employer are not subject to state insurance department filing requirements. Their primary reporting obligations are to the DOL and the IRS through Form 5500 and other federal tax forms.
- 48
Which of the following is NOT listed by the course as a statutory exclusion from ERISA?
- •Church plans established and maintained for employees by a church or convention of churches exempt from tax
- •Governmental plans established for employees of the United States or any state or political subdivision
- •Plans maintained solely to comply with applicable workers' compensation, unemployment, or disability laws
- •Plans sponsored by tax-exempt 501(c)(3) nonprofit organizations
Show answer
Plans sponsored by tax-exempt 501(c)(3) nonprofit organizations
The course lists governmental plans, church plans, plans solely for workers' compensation/unemployment/disability compliance, plans for nonresident aliens outside the U.S., excess benefit plans, and certain voluntary plans as statutory exclusions. Plans of 501(c)(3) organizations are not listed as a statutory exclusion from ERISA.
- 49
The course distinguishes between statutory exclusions and regulatory exclusions from ERISA. What is the fundamental difference?
- •Statutory exclusions apply only to pension plans, while regulatory exclusions apply only to welfare benefit plans
- •Statutory exclusions are permanent, while regulatory exclusions expire after five years unless renewed by the DOL
- •Statutory exclusions are written into the ERISA statute itself, while regulatory exclusions result from rules, regulations, or interpretations by the DOL
- •Statutory exclusions require Congressional approval, while regulatory exclusions require approval by both the DOL and the IRS jointly
Show answer
Statutory exclusions are written into the ERISA statute itself, while regulatory exclusions result from rules, regulations, or interpretations by the DOL
The course states that regulatory exclusions are not written into the statute itself but are the result of rules, regulations, or interpretations by the DOL. This contrasts with statutory exclusions, which are specific categories of plans excluded from ERISA's coverage by the statute itself.
- 50
The course describes regulatory exclusions from ERISA for certain employer-related insurance programs. What rationale does the DOL use for excluding these programs?
- •If the employer merely allows employees to pay for their own insurance without endorsing the plan or contributing to it, the DOL does not consider these employer-established plans subject to ERISA
- •If the insurance carrier is state-licensed, the DOL defers entirely to the state and excludes the program from ERISA
- •If the insurance program covers fewer than 20 employees, the DOL considers it too small to warrant ERISA oversight
- •If the insurance program provides only supplemental coverage rather than primary health benefits, the DOL treats it as outside ERISA's scope
Show answer
If the employer merely allows employees to pay for their own insurance without endorsing the plan or contributing to it, the DOL does not consider these employer-established plans subject to ERISA
The course states that the rationale for regulatory exclusions generally rests on the limited involvement of the employer in the plan. If an employer is merely allowing employees to pay for their own insurance products or other benefits, without endorsing the plan or contributing to it, the DOL does not consider these arrangements to be employer-established plans subject to ERISA.
CSFS is the Certified Self-Funding Specialist designation. These are my own practice questions, written while studying for the exam. This site is not affiliated with, endorsed by, or connected to the organisation that administers the CSFS designation, and nothing here is official exam content or a substitute for the course material.
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