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24 J. Contemp. Health L. & Pol'y 118 (2007-2008)
Unintended Consequences: Resolving the Dilemma of the Inadvertent Creation of Multiple Employer Welfare Arrangements during Business Transfers

handle is hein.journals/jchlp24 and id is 122 raw text is: UNINTENDED CONSEQUENCES: RESOLVING THE DILEMMA OF THE INADVERTENT CREATION OF MULTIPLE EMPLOYER WELFARE ARRANGEMENTS DURING BUSINESS TRANSFERS Eric Eller* INTRODUCTION A Business Transfer is a common corporate transaction-one company (the Buyer) purchases assets of a second company (the Seller).' This transaction often brings with it the employees who work with those assets. For example, if an asset is a factory, the Buyer normally becomes the employer of the employees at the factory. A Multiple Employer Welfare Arrangement (a MEWA) is a welfare plan that provides health insurance, or other welfare benefits to the employees of multiple employers, excluding such plans established by a collective bargaining agreement.2 When employees come with the purchased assets, there is a risk that a MEWA will be inadvertently created. This can happen if the Seller maintains a self-insured welfare plan (such as a health benefit plan, which is the most important type of welfare plan) that includes the employees who cease employment with the Seller and begin employment with the Buyer as of the date the Business Transfer is effective (the Closing Date). This risk can create costs for both the Buyer and the * J.D. Candidate, The Catholic University of America Columbus School of Law, May 2008; M.A., College of Notre Dame of Maryland, 2001; B.S., University of Maryland, 1992. The author wishes to thank John Forgach for his suggestions and advice, and his wife, Beth, without whose support this paper couldn't have been completed. 1. Asset Purchase vs. Stock Purchase: Advantages and Disadvantages, http://smallbusiness.findlaw.com/starting-business/starting-business-more-topics/starting- business-buying-asset-stock.html (last visited Oct. 6, 2006) (explaining that an asset purchase (i.e., a Business Transfer) occurs when one company enters an agreement to purchase facilities, vehicles, equipment, and stock or inventory from another company, distinguished from a stock purchase agreement, where one company buys stock in another company). 2. 29 U.S.C. § 1002(40) (2000).

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