“Employer” Definition within an Association Health Plan

An association health plan is based on a group of employers collaborating together on health insurance that they can offer to their employees. Consequently, the operational definition of “employer” is a matter of great significance within association health coverage. Under The Employee Retirement Income Security Act of 1974 (ERISA), an employer is “any person acting directly as an employer, or any person acting indirectly in the interest of an employer in relation to an employee benefit plan.” Thus, a business that joins an association in order to provide health benefits to its employees is an employer under ERISA.

Employers belonging to the same association still operate independently of one another and their participation in the association does not make them “joint employers.” Since businesses within an association are not joint employers, this insulates them from various legal liability complications associated with joint employment arrangements.

The recent regulatory change to association health plans expanded the definition of employers to include not only traditional businesses with multiple employees but also individuals who are one of the following:

• The self-employed
• Freelancers
• Contractors
• Part-time workers
• “Gig economy” workers

How such individuals can qualify to participate with traditional employers within an association health plan is explained in “What is a working owner?”