ERISA stands for the federal Employee Retirement and Income Security Act, was enacted in 1974, largely to regulate employee pension funds. Although the law was originally enacted to protect employee pension funds, it also affects employer-sponsored health plans and employee welfare benefits.
Employers may choose to purchase a traditional health insurance product in the open market, or they may choose to self-fund in the context of a Multiple Employer Welfare Arrangement (MEWA), meaning that an alliance of many employers creates a group market that pools their contributions in the self-funded benefits plan for their employees’ welfare. By pooling their contributions together, employers of all sizes are better positioned to offer the best benefit packages from insurance companies. Nationally, about half of all insured employees are covered by these self-funded health and welfare benefit plans.