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Definition of “Employer”-Association Health Plans rule (2024)
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The Definition of “Employer”-Association Health Plans rule is a significant rule issued by the U.S. Department of Labor (DOL) effective July 1, 2024, that rescinded DOL's definition of the term employer as it is used in Employee Retirement Income Security Act's section entitled Association Health Plans. DOL issued this rule pursuant to its authority under the Employee Retirement Income Security Act of 1974 (ERISA). DOL rescinded the definition of "employer" to remain in alignment with the ERISA's text and policies.[1]
Timeline
The following timeline details key rulemaking activity:
- July 1, 2024: The final rule took effect.[1]
- April 30, 2024: DOL issued the final rule.[1]
- February 2, 2024: The comment period closed.[1]
- December 20, 2023: DOL issued the Definition of “Employer”-Association Health Plans proposed rule and opened the comment period.[1]
- July 2018: Eleven states and the District of Colombia sued DOL over the 2018 final rule.[1][2]
- June 21, 2018: DOL issued the Definition of “Employer” Under Section 3(5) of ERISA-Association Health Plans final rule.[1]
Background
The Employee Retirement Income Security Act of 1974 (ERISA) regulated employee benefit plans, and the U.S. Department of Labor promulgated rules to enforce the regulations, such as defining the term employer as it relates to section 3(5) of ERISA, which regulate associated health plans.[1]
In 2018, DOL issued a new definition of employer that, according to DOL in the text of the 2024 final rule, was a significant departure from the previous definition and understanding of the term as it related to associated health plans. Eleven states and the District of Colombia sued DOL over the new definition in July 2018, arguing that it violated the Administrative Procedures Act by exceeding the Department's statutory authority. The district court ruled against DOL, finding that the rule was contrary to ERISA's purpose when regulating employment-based relationships. In 2019, DOL appealed the district court's decision, and the U.S. Court of Appeals for the District of Columbia stayed the appeal, which remained stayed as of the time the Definition of “Employer”-Association Health Plans final rule was published. DOL issued the 2024 final rule to align their regulations with the statutory authority granted them by ERISA.[1]
Summary of the rule
The following is a summary of the rule from the rule's entry in the Federal Register:[1]
| “ | This document rescinds the Department of Labor's (Department or DOL) 2018 rule entitled 'Definition of Employer Under Section 3(5) of ERISA—Association Health Plans' (2018 AHP Rule). The 2018 AHP Rule established an alternative set of criteria from those set forth in the Department's pre-2018 AHP Rule (pre-rule) guidance for determining when a group or association of employers is acting 'indirectly in the interest of an employer' under section 3(5) of the Employee Retirement Income Security Act of 1974 (ERISA) for purposes of establishing an association health plan (AHP) as a multiple employer group health plan. The 2018 AHP Rule was a significant departure from the Department's longstanding pre-rule guidance on the definition of 'employer' under ERISA. This departure substantially weakened the Department's traditional criteria in a manner that would have enabled the creation of commercial AHPs functioning effectively as health insurance issuers. The Department now believes that the core provisions of the 2018 AHP Rule are, at a minimum, not consistent with the best reading of ERISA's statutory requirements governing group health plans.[3] | ” |
Summary of provisions
The following is a summary of the provisions from the rule's entry in the Federal Register:[1]
| “ | This document rescinds the Department's 2018 rule entitled 'Definition of Employer Under Section 3(5) of ERISA—Association Health Plans.' The 2018 AHP Rule established an alternative set of criteria from those set forth in the Department's pre-rule guidance for determining when a group or association of employers is acting 'indirectly in the interest of an employer' under section 3(5) of ERISA for purposes of establishing an AHP as a multiple employer group health plan. The 2018 AHP Rule was a significant departure from the Department's longstanding pre-rule guidance on the definition of 'employer' under ERISA. This departure substantially weakened the Department's traditional criteria in a manner that would have enabled the creation of commercial AHPs functioning effectively as health insurance issuers. The 2018 AHP Rule's alternative criteria were, in large part, held invalid by the U.S. District Court for the District of Columbia in New York v. United States Department of Labor. The district court found the bona fide association and working owner provisions in the 2018 AHP Rule were based on an unreasonable interpretation of ERISA that was inconsistent with congressional intent that ERISA applies to employment-based benefit relationships. The Department, after further review of the relevant statutory language, judicial decisions, and longstanding pre-rule guidance, and further consideration of ERISA's statutory purposes and related policy goals, as well as the public comments received on the Department's proposed rule, now rescinds in full the 2018 AHP Rule in order to resolve and mitigate any uncertainty regarding the status of the criteria that were set under the 2018 AHP Rule, allow for a reexamination of the criteria for a group or association of employers to be able to sponsor an AHP, and ensure that guidance being provided to the regulated community is in alignment with ERISA's text, purposes, and policies. The Department now believes that the provisions of the 2018 AHP Rule that the district court held invalid are, at a minimum, not consistent with the best reading of ERISA's statutory requirements governing group health plans.[3] | ” |
Significant impact
- See also: Significant regulatory action
Executive Order 12866, issued by President Bill Clinton (D) in 1993, directed the Office of Management and Budget (OMB) to determine which agency rules qualify as significant rules and thus are subject to OMB review.
Significant rules have had or might have a large impact on the economy, environment, public health, or state or local governments. These actions may also conflict with other rules or presidential priorities. Executive Order 12866 further defined an economically significant rule as a significant rule with an associated economic impact of $100 million or more. Executive Order 14094, issued by President Joe Biden (D) on April 6, 2023, made changes to Executive Order 12866, including referring to economically significant rules as section 3(f)(1) significant rules and raising the monetary threshold for economic significance to $200 million or more.[1]
The text of the Definition of “Employer”-Association Health Plans rule states that OMB deemed this rule a section 3(f)(1) rule under E.O. 12866, as amended by E.O. 14094:
| “ | OMB has designated this action a 'significant regulatory action' within the meaning of section 3(f)(1) of E.O. 12866, as amended, and reviewed the final rule in accordance with E.O. 12866. Key to this designation is that the Department is rescinding a rule that was itself significant under section 3(f)(1).[3] | ” |
Text of the rule
The full text of the rule is available below:[1]
See also
External links
Footnotes
- ↑ 1.00 1.01 1.02 1.03 1.04 1.05 1.06 1.07 1.08 1.09 1.10 1.11 1.12 Federal Register, "Definition of 'Employer'-Association Health Plans," May 13, 2024
- ↑ Note: The text of the rule did not specify the day the lawsuit was filed.
- ↑ 3.0 3.1 3.2 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
