Massachusetts Health & Accident Insurance Practice Exam

Which feature is common to a Multiple Employer Welfare Arrangement (MEWA)?

1. It is not tax-exempt

2. It requires a common bond among employers

3. It is not related to employee benefits

4. It is limited to federal employees

The correct answer is: It requires a common bond among employers

A Multiple Employer Welfare Arrangement (MEWA) is a type of employee benefit plan that allows multiple employers to come together to provide health and welfare benefits to their employees. One of the key features of a MEWA is that it requires a common bond among the participating employers. This common bond is often established through proximity (such as being in the same industry or geographical location) or through a shared trade association. This requirement ensures that the employers share a connection or purpose, which is essential in forming a MEWA. The incorrect options highlight different aspects that do not align with the defining characteristics of a MEWA. For instance, it is not accurate to say that MEWAs are limited to federal employees, as they are generally open to various private-sector employers. Additionally, while tax implications can vary, the statement regarding tax exemption does not universally apply, as some MEWAs may have tax-exempt status under certain circumstances. Moreover, stating that MEWAs are not related to employee benefits misrepresents their primary purpose, which is indeed to provide employee benefits. Thus, the requirement for a common bond is the defining characteristic that establishes the framework for a MEWA's operation.