Multiple Employer Welfare Arrangement
A benefits arrangement where multiple unrelated employers join together to provide health, disability, or other welfare benefits to their employees. These arrangements, known as MEWAs, allow smaller employers to pool resources and potentially access better rates and coverage options typically available only to larger companies.
Example
“The local chamber of commerce helped five small manufacturing companies form a Multiple Employer Welfare Arrangement to provide affordable health insurance for their combined 200 employees.”
Memory Tip
Remember MEWA as 'Many Employers Working As-one' to recall how multiple companies unite for better employee benefits.
Why It Matters
MEWAs enable small businesses to compete for talent by offering comprehensive benefits packages similar to those of large corporations. Without these arrangements, many small employers couldn't afford quality health insurance or other benefits, making it harder to attract and retain good employees.
Common Misconception
Some employers believe joining a MEWA automatically guarantees lower costs and better benefits, but these arrangements can be risky if not properly managed or regulated. Poorly run MEWAs have sometimes failed, leaving employers and employees without coverage and facing unexpected bills.
In Practice
Five small companies with 15-40 employees each might individually face health insurance premiums of $650 per employee monthly. By forming a MEWA with their combined 150 employees, they could negotiate rates of $520 per employee monthly, saving each company $1,950-$5,200 annually while offering better coverage options like dental and vision benefits.
Etymology
This term emerged from the Employee Retirement Income Security Act (ERISA) of 1974, which formally defined and regulated these cooperative benefit arrangements among multiple employers.
Common Misspellings
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