By SPBA Past President Fred Hunt
Note: Since self-funded employee benefit plans & services of TPAs are very personalized, consider this a generalized description for laymen. It is provided for TPAs who may be approached by a potential Taft-Hartley (T-H) plan, and/or for anyone to avoid name (and thus legal) confusion.
Multiple names for the concept: The plans described below are sometimes called Taft Hartley plans, because of the 1947 law enacting their status. Some use the term Multi-Employer. However, that is very different from the similar-sounding type of plans called “Multiple”-Employer. Important: The most common difference is that “Multi” refers to unionized employees in collectively-bargained plans. Jointly-Administered is another term sometimes used (mainly among insiders) to describe the unique format that the all-important Trustees who run the plan are made up of members from both union + employer management. (Multiple- employer, by contrast refers to a group of employers who happen to want to form a joint health plan, such as members of a trade association. This concept is sometimes called MEWA…Multiple Employer Welfare Arrangement…and is subject to very different legal regulation, often with varying state authority.) At SPBA, we tend to use Taft-Hartley (T-H) because it is a clearly unique term.
Taft-Hartley was the original market of self-funding and TPAs, pre-ERISA. T-H plans are when a plan is created for the union members who work for a group of employers. It is not uncommon for workers (such as construction) to work X days for one contractor, Y days for another, back to X, and then some time with Z during the year. T-H allows them to have a stable coverage plan, for which they would never have continuity of time to qualify if X, Y & Z had their own separate plans. Therefore, TH plans were probably the biggest boost in providing employee benefits coverage to American workers! When I started with SPBA in 1980, unionized was about 1/3 of the US workforce! Also, this kind of arrangement (and the flexibility of ERISA not to be restrained by state mandated benefits and 50 different sets of state operating laws) allowed plans to be customized to the wants & needs of specific types of workers. So, it is a fantastic concept.
The Trustees, who are in charge of the plan, decide the plan's benefits & financing, etc. are usually evenly coming from management & labor. So, the plans are ultimate democracy.
Where did TPAs come in?? Obviously, there is a built-in wariness between labor & management, and ERISA imposed some VERY strict reporting & fiduciary rules on the finances & operation of the plans. So, it was natural to hire an independent third party administrator, which became the TPA industry. Starting about 1980, the idea of single-employer self-funded ERISA plans began to boom, and the TPA concept boomed for those plans as well. Today, single-employer that is the biggest segment of the TPA client market, but the T-H clients are alive & well.
Over the years, the % of collectively-bargained workers in the workforce has shrunk tremendously for an assortment of reasons unrelated to employee benefits. (I assume the % of unionized workforce can be searched on-line.) So, some locals shrank and the high costs & headaches of running a plan led to consolidation of many T-H plans, often at the urging of the national union.
So, that's the story of TH plans. TPAs often short-hand describe themselves in terms of their prime types of client, it is simply the way tax lawyers, real estate lawyers, estate lawyers, etc. are all lawyers, but tend to think of themselves in their specialty area. Most TPAs have several types of client plans. Interestingly, and a good thing, unlike doctors, lawyers, and other groups which have created separate specialty associations, TPAs are very happy with the commonality & cross-fertilization of insights within SPBA of TPAs whose clients come from T-H, single employers, state/local govt. entities (such as state employees, school districts, etc.) and Church/Religious plans (employee benefit plans covering such as employees of a diocese).
Serving your purpose in reading this: You may be a TPA who’s been approached to take on a T-H client. You may be thinking of buying/investing in a T-H TPA. You may be trying to understand who is what, and the “Multiple” vs “Multi” confusion. Important: Every type of clientele has its own characteristics, so always keep that in mind. T-H has a unique mindset: The TPA has to keep in mind that he has TWO bosses.... the employer Trustees + the union worker Trustees (both sides of which often have their own lawyers or consultants. So, T-H TPAs have to have that sensitivity in mind and a high degree of diplomacy.
Again, this is designed to be a generalized overview for laymen. At SPBA we always say that TPAs give such personalized service that “when you’ve seen one TPA, you’ve seen one TPA”. The same applies to the types of clients.