“Cease and Desist” and “Summary Seizure” Orders

The Affordable Care Act amended ERISA to authorize the Secretary of Labor to issue “cease and desist” and “summary seizure” orders for certain conduct.  For example, the Secretary may issue cease and desist orders to a MEWA for its fraudulent or deceptive advertising of low premiums.  The Secretary may also seize the assets of a MEWA that appears to be in a financially hazardous condition to ensure the financial protection of its enrollees.

The newly proposed regulation (pdf) is designed to “facilitate implementation” of the Secretary’s new authority. 

The proposed regulation establishes the procedures and prerequisites for the Secretary to issue “cease and desist” orders and “summary seizure” orders.  First, the regulation defines the grounds for issuing a cease and desist order to a MEWA.  Such grounds are limited to (1) fraudulent conduct; (2) conduct that “creates an immediate danger to the public safety or welfare”; or (3) “conduct that causes or can be reasonably expected to cause significant, immediate, and irreparable injury.”  29 CFR § 2560.521(b)(2)-(4); § 2560.521-1. 

Second, the regulation also addresses (newly created) section 521 of ERISA, which authorizes a “summary seizure” of plan assets by the Secretary.  Previously, the Secretary was authorized to seize assets of a MEWA only by seeking a temporary restraining order or preliminary injunction in federal court.  Under the proposed regulation, the Secretary may issue a summary seizure order if it has “probable cause” that a MEWA (1) is (or is in danger of becoming) unable to pay benefit claims as they become due, or (2) has sustained (or is in danger of sustaining), a “significant loss of assets.”

Finally, the proposed regulation establishes the procedures applicable to administrative law judges and the Secretary when a cease and desist order is challenged. 

Interested employers are invited to submit comments until March 5, 2012.  Comments may be submitted electronically through the federal eRulemaking portal, by email to  E-OHPSCA521Orders.EBSA@dol.gov, and by regular mail to: Office of Health Plan Standards and Compliance Assistance, Employee Benefits Security Administration, Room N-5653, U.S. Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210, Attention: RIN 1210—AB48; Section 521 Orders Proposed Regulations. 

New Reporting Requirements Applicable to MEWAs

The DOL also issued a proposed new rule (pdf) addressing the reporting requirements applicable to MEWAs.  This rule follows the Affordable Care Act’s amendment of section 101(g) to ERISA, which requires certain MEWAs to register with the Secretary prior to their initiation of operations.  Like the proposed regulation discussed above, this rule is also designed to assist the Secretary of Labor in the regulation of fraudulent activity by MEWAs, and the prevention of insolvency in MEWAs.

Under the proposed rule, MEWAs that provide medical care benefits (but are not group health plans) are now required to register with the Secretary of Labor prior to operating in any state in the United States.  The rule defines what constitutes “operating” in a state; addresses how a MEWA may register (generally, by electronically filing the Form M-1 with the DOL); describes what information must be included; and addresses the penalties for noncompliance (which include criminal penalties for intentional misrepresentation).

Again, interested employers are invited to submit comments until March 5, 2012.  Comments may be submitted electronically through the federal eRulemaking portal, by email to  E-OHPSCAMEWARegistration.EBSA@dol.gov, and by regular mail to: Office of Health Plan Standards and Compliance Assistance, Employee Benefits Security Administration, Room N-5653, U.S. Department of Labor, 200 Constitution Avenue NW, Washington, DC 20210, Attention: RIN 1210—AB51; MEWA Registration Proposed Regulation.