Multiple Employer Welfare Arrangement (MEWA)

Multiple Employer Welfare Arrangement (MEWA)

Key takeaways
* A MEWA lets two or more employers pool contributions to provide health and other welfare benefits to their employees.
* MEWAs help smaller employers access group-rate benefits and share administrative costs and risk.
* They are regulated by federal ERISA rules and often by state insurance authorities; funding, reporting, and oversight vary by jurisdiction.
* Participants commonly buy stop-loss and other insurance to limit financial exposure.

What is a MEWA?

A Multiple Employer Welfare Arrangement (MEWA) is a pooled benefits arrangement in which two or more employers combine resources to offer welfare benefits—most commonly health insurance—to their employees. By aggregating employees across participating organizations, MEWAs can secure better rates and broader plan options than many small employers could obtain on their own.

How MEWAs work

Under ERISA (the Employee Retirement Income Security Act), a MEWA is any arrangement established to provide medical, disability, death, unemployment, training, daycare, scholarship, prepaid legal services, or similar welfare benefits to employees of two or more employers (including self-employed individuals) or their beneficiaries.

Typical features:
* Employers contribute to a common fund, usually based on employee counts and estimated per-employee costs.
* The pooled fund pays claims or purchases coverage from insurers.
* Participating employers often have some governance input, enabling plan design changes that reflect members’ needs.
* Economies of scale can lower per-employee costs and reduce administrative burden for small employers.

Benefits

• Lower per-employee premiums through pooled purchasing power.
• Access to broader or more flexible benefit options than small employers can negotiate alone.
• Shared administrative responsibilities and potentially reduced overhead.
• Member employers may influence plan design and provider selection.

Risks and special considerations

• Funding shortfalls: Inadequate reserves, poor underwriting, or mismanagement can leave a MEWA unable to pay claims.
• Fraud and mismanagement: Some MEWAs have failed due to embezzlement or misconduct by administrators.
• Regulatory complexity: MEWAs are subject to ERISA and may also face state insurance rules that differ widely across jurisdictions.
• Liability: Employers participating in some MEWAs may face direct liability for plan obligations.

Risk mitigation commonly used:
* Stop-loss insurance to cap claim exposure.
* Errors & omissions, fidelity bonds, directors & officers, crime, and cyber liability coverage.
* Careful vetting of administrators, strong governance, and transparent financial reporting.

Regulation and compliance

• Federal: ERISA governs MEWAs’ fiduciary duties, reporting, and some funding obligations.
• State: Many states regulate MEWAs as insurance entities and impose additional registration, solvency, and consumer-protection requirements. States vary in how permissive or strict they are.
• Administrators and sponsors must follow federal and applicable state filing, reporting, and funding rules.

MEWA vs. multiple employer plan

A multiple employer plan typically refers to a pooled retirement plan (e.g., 401(k)) shared by unrelated employers. The primary difference is the type of benefit: MEWAs provide welfare benefits (health and related coverages), while multiple employer plans cover retirement benefits.

Conclusion

MEWAs can be an effective way for small and mid-sized employers to offer competitive health and welfare benefits by sharing risk and administrative capacity. However, they carry regulatory and financial risks that require careful due diligence, robust governance, appropriate insurance protections, and compliance with federal and state rules.

Sources

• U.S. Department of Labor — Multiple Employer Welfare Arrangements (MEWAs) and related guidance
• New Jersey Department of Banking and Insurance — MEWA information and state requirements