Wisconsin Educ. Ass'n Ins. Trust v. Iowa State Bd. of Public Instruction

• Decision Date: 07 November 1986
• Docket Number: No. 85-2220,85-2220
• Parties: , 35 Ed. Law Rep. 987, 7 Employee Benefits Ca 2353 WISCONSIN EDUCATION ASSOCIATION INSURANCE TRUST; James Blank; Steve Balda; George Bauder; William Buckler; Mary Pat David; George Duvall; Bill Hjort; Dennis Hortum; Nelda Newell; Kenneth Oudenhoven; Jetty Pyle; and Janie Virlee, Appellees, v. IOWA STATE BOARD OF PUBLIC INSTRUCTION; Robert D. Benton; and Robert D. Bartlett Iowa Insurance Department; Bruce W. Foudree; Thomas Alberts; and Tony Schrader, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1059

804 F.2d 1059

55 USLW 2281, 35 Ed. Law Rep. 987,

7 Employee Benefits Ca 2353

WISCONSIN EDUCATION ASSOCIATION INSURANCE TRUST; James Blank; Steve Balda; George Bauder; William Buckler; Mary Pat David; George Duvall; Bill Hjort; Dennis Hortum Nelda Newell; Kenneth Oudenhoven; Jetty Pyle; and Janie Virlee, Appellees, v. IOWA STATE BOARD OF PUBLIC INSTRUCTION; Robert D. Benton and Robert D. Bartlett Iowa Insurance Department; Bruce W. Foudree; Thomas Alberts; and Tony Schrader, Appellants.

No. 85-2220.

United States Court of Appeals Eighth Circuit.

Submitted May 12, 1986.

Decided Nov. 7, 1986.

Fred M. Haskins, Des Moines, Iowa, for appellants.

James S. Ray, Washington, D.C., for appellees.

Karen L. Handorf, Washington, D.C., for amicus curiae.

Before McMILLIAN, JOHN R. GIBSON and BOWMAN, Circuit Judges.

JOHN R. GIBSON, Circuit Judge.

The issue before us is whether the Wisconsin Education Association Insurance Trust (WEAIT) is an "employee welfare benefit plan" as defined in section 3(1) of the Employee Retirement Income Security Act, 29 U.S.C. Sec. 1002(1) (1982), even though WEAIT provides benefits to individuals who are not members of any labor union affiliated with WEAIT. If WEAIT is not an employee welfare benefit plan, ERISA does not preclude the Iowa Insurance Department from regulating WEAIT. The district court held that WEAIT is an employee welfare benefit plan, thus exempt from regulation by the Iowa Insurance Department. We reverse the judgment of the district court.

WEAIT is a non-profit, tax exempt trust maintained for the purpose of providing health, life, and disability benefits to employees of school districts in Iowa and several other states. WEAIT is maintained by several labor unions affiliated with the National Education Association, including the Iowa State Education Association. Participation in WEAIT is limited to employees of school districts that have collective bargaining agreements with a union sponsor of WEAIT that provide for participation. However, WEAIT does not limit participation to members of unions that sponsor WEAIT. Instead, WEAIT provides benefits to all employees of a participating school district, including employees who are not members of any labor union and employees who are members of a labor union unaffiliated with WEAIT. WEAIT provides benefits to these employees because it claims that school districts will not participate in WEAIT unless it extends coverage to all school district employees. WEAIT provides benefits to employees of six school districts in Iowa. Approximately thirty percent of those employees are not members of a union that sponsors WEAIT. ¹ This thirty percent is comprised largely of persons in administrative, clerical, janitorial, and maintenance positions.

The State of Iowa sought to regulate WEAIT under Iowa's insurance laws as a result of WEAIT's contract with the Sioux City Community School District. Benefits had previously been provided to employees of that district by Washington National Insurance Company. As low bidder in 1983, WEAIT was awarded an eighteen month contract in which it would provide benefits to all Sioux City School District employees.

Administrative proceedings were instituted against WEAIT by the Iowa Insurance Department to determine whether WEAIT was operating an unauthorized and unlicensed insurance business in Iowa and whether, as an insurer, it had failed to pay premium taxes, all in violation of Iowa insurance law. During the course of the proceedings, an advisory opinion was requested from the Department of Labor concerning whether WEAIT qualified as an employee welfare benefit plan under ERISA. An initial opinion was issued based on the incorrect assumption that WEAIT limited the provision of benefits to members of WEAIT-sponsoring unions. U.S. Dept. of Labor Adv. Op. to Mr. Robert C. Kelly (July 5, 1983). The Department of Labor later issued an opinion based on the assumption that WEAIT provides benefits to both members and non-members of unions affiliated with WEAIT. U.S. Dept. of Labor Adv. Op. to Mr. Tony Schrader (Jan. 15, 1985). In revoking its earlier opinion, this opinion concluded that WEAIT is not an ERISA-covered employee welfare benefit plan and is thus subject to regulation by the Iowa Insurance Department. Id. at 2; see also U.S. Dept. of Labor Adv. Op. to Mr. James S. Ray (Jan. 15, 1985).

WEAIT brought this action against the Iowa Insurance Department, the Iowa State Board of Public Instruction, and others seeking, among other things, a declaratory judgment that WEAIT is an ERISA-covered employee welfare benefit plan and is not subject to regulation by state authorities, and an injunction restraining the Insurance Department and the Board of Public Instruction from conducting certain administrative proceedings against WEAIT.

The Iowa Insurance Department moved for summary judgment. The district court denied the motion, holding that a plain reading of ERISA, its legislative history, and its purpose all support the conclusion that WEAIT is an employee welfare benefit plan. It noted that if ERISA could be evaded by providing benefits to a single non-bargaining-unit employee, an unintended loophole would be created. The district court certified and we permitted this interlocutory appeal pursuant to 28 U.S.C. Sec. 1292(b) (1982).

The Iowa Insurance Department argues that the district court erred as a matter of law in concluding that WEAIT is an employee welfare benefit plan as defined in section 3(1) of ERISA. Specifically, the Insurance Department contends that WEAIT is not "maintained by an employer or by an employee organization, or by both," nor is WEAIT "maintained for the purpose of providing [benefits] for its participants" under section 3(1) of ERISA. The Insurance Department also urges that the district court should have given greater deference to the Department of Labor's advisory opinions.

If WEAIT is an employee welfare benefit plan under section 3(1) of ERISA, the Iowa Insurance Department may not deem WEAIT to be an insurance company, an insurer, or engaged in the insurance business for purposes of state regulation. 29 U.S.C. Sec. 1144(a), (b)(2)(B) (1982). If WEAIT is not an employee welfare benefit plan, ERISA does not preempt state regulation of WEAIT. Id. Sec. 1144(a). ² Among other things, section 3(1) of ERISA requires that to be an employee welfare benefit plan WEAIT must be "maintained for the purpose of providing [benefits] for its participants." Id. Sec. 1002(1). We conclude that because thirty percent of the individuals receiving WEAIT benefits are not members of any labor union that maintains WEAIT, WEAIT does not provide benefits "for its participants" as contemplated in section 3(1) of ERISA.

Section 3(1) of ERISA first provides that an employee welfare benefit plan must be "maintained by an employer or by an employee organization, or by both." Id. WEAIT concedes that it is maintained only by an employee organization (i.e., labor unions); no employer is affiliated with WEAIT. Brief for Appellees at 9 n. 7. In addition to directing who may maintain an employee welfare benefit plan, section 3(1) requires that the benefits of a plan must be provided to the plan's "participants or their beneficiaries." Id. Section 3(7) of ERISA defines "participant" as:

any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit.

Id. Sec. 1002(7) (emphasis added).

The question is whether section 3(7) creates a dichotomy between the meaning of "participant" as it applies to employer-maintained plans and as it applies to employee organization-maintained plans. As with any case of federal statutory interpretation, we "must begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose." Park 'N Fly, Inc. v. Dollar Park & Fly, Inc., 469 U.S. 189, 194, 105 S.Ct. 658, 662, 83 L.Ed.2d 582 (1985). We believe the language of section 3(7) provides for separate tests to determine who is a "participant," depending on whether the plan is maintained by an employer or maintained by an employee organization. The first two clauses in section 3(7) are mutually exclusive; each becomes applicable only when the subject of its prepositional phrase maintains the benefit plan in question. The words "employee or former employee" act only upon the phrase "of an employer," while the words "member or former member" apply only to the phrase "of an employee organization." Each clause stands alone; commas serve as a bastion. Congress has provided absolutely no indication, express or implicit, that the term "participant" includes both the employees of an employer and the members of an employee organization, regardless of what type entity maintains the plan. ³

Section 3(1)'s framework would be destroyed if we accepted WEAIT's contention that a labor union satisfies the section 3(1) participant requirement by providing benefits either to its members or to the non-member employees of an employer unaffiliated with the plan. ⁴ The definition of an employee welfare benefit plan is grounded on the premise that the entity that maintains the plan and the individuals that benefit from the plan are tied by a common economic or representation interest, unrelated to the provision of benefits. An employee depends on his employer; a union member relies on his union. This nexus is non-existent under WEAIT's reading of section 3(1) and section 3(7). An employee unaffiliated with a labor union that sponsors WEAIT has no economic interest in that union and does not rely on that union to represent his interests. The only relationship between the...