Petition for Writ of Certiorari — Combined Management, Inc. v. Atchinson

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acy Supreme Court, U.S.

, FILED

94 144 JUL 21 199%

No. __QEFICE DF THE CLERK

In The

Supreme Court of the United States

October Term, 1994

COMBINED MANAGEMENT, INC.,

Petitioner,

BRIAN K. ATCHINSON, In His Representative

Capacity As Superintendent, Bureau of

Insurance of the State of Maine,

Respondent.

On Petition For Writ Of Certiorari

To The United States Circuit Court Of Appeals

For The First Circuit

PETITION FOR WRIT OF CERTIORARI

RavpH A. Dyer, Esq.

Counsel of Record

Law Offices of RatpH A. Dyer, P.A.

477 Congress Street, Suite 702

Portland, Maine 04101

(207) 773-6489

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

Assuming, arguendo, that the employee benefit plan

of the International Association of Entrepreneurs of

America (“IAEA”), through which the Petitioner Com-

bined Management, Inc. (“CMI”) allegedly provides a

variety of benefits to its employees is a so-called

Employee Retirement Income Security Act (“ERISA”)

benefit plan, whether the funding requirements of the

Maine Workers Compensation Act (39-A M.R.S.A. § 403)

are preempted by § 514(a) of ERISA (29 U.S.C. § 1144)?

CORPORATE DISCLOSURE STATEMENT

Pursuant to Rule 28.1, Petitioner hereby states that it

is a privately owned corporation in which no outside

persons have an interest, and it has no parent or subsid-

lary corporations.

ill

TABLE OF CONTENTS

Page

PUPP e EWEN. BW PRRIOUESIN FESDD, 0. eee eee c ccc eeees i

CORPORATE DISCLOSURE STATEMENT .......... ii

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Ere OO, CCAS... 5 kc ee eee nese 7

REASONS FOR GRANTING THE WRIT ........... 14

EY Sr 18

I. ERISA’s Overriding Purpose Is To Create a Uni-

form, National Program For The Provision Of

Health, Disability And Retirement Benefits To

America’s Workers Exempt From State Regula-

tion Relating To Such Benefit Plans ........... 18

Il. The Maine Workers’ Compensation Act Violates

Federal Law And Policy Because It Specifically

“Relates To” ERISA And It Purports To Regulate

The Funding Of An ERISA Plan Or, In The Alterna-

tive, To Require A Separate Benefit Plan ........ 21

Il.

IV.

TABLE OF CONTENTS —- Continued

Page

The Decision Of The First Circuit Court Of

Appeals In This Case Seems To Contradict Pre-

vious Holdings Of This Court Preempting State

Regulations Of ERISA Plan Administration

While Permitting The State To Mandate Mini-

SE NES 0s View Saw eek RAG eee wet es a

The Circuits Are Divided On The Question

Whether A State Regulation Relating To An

ERISA Plan May Avoid Preemption If It Relates

Also To Workers’ Compensation, A Matter Of

Traceetiosia! State TION 8 i gc oc ccc cds ceasvecess

The Requirements Of The Maine Workers’ Com-

pensation Act Will Raise The Employers’ Costs

And Create Redundant Benefits, There Is Dis-

agreement Among The Circuits Whether Such

Costs Cause Preemption Of The State Regulation

TABLE OF AUTHORITIES

CASES:

Aetna Life Insurance Co. v. Borges, 869 F.2d 142 (2d

Cir. 1989) cert. denied, 493 U.S. 811 (1989).....

Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504,

101 S.Ct. 1899, 68 L.Ed.2d 402 (1981) ...... 18,

Aloha Airlines, Inc. v. Auhe, 12 F.3rd 1498 (9th Cir.

Arkansas Blue Cross & Blue Shield v. St. Mary's

Hospital, Inc., 947 F.2d 1346 (8th Cir. 1991) cert.

Page

24,

Gen., Fi2 S.Ct. 2 Csi ss hens eens 26, 30

Barker v. Pick N’ Pull Auto Dismantlers, Inc., 819

Supe. ORS, (0) Cah, See acess peenees a

Combined Management, Inc. v. Superintendent of the

Bur. of Ins. of the State of Maine, 22 F.3rd 1 (1st

in, TORE) i Sc io ee ae eee Lh, Bay ae

District of Columbia v. Greater Washington Bd. of

Trade, .... US. __. 113 S.Ct. SOO, 121 Lkdze

SES: CI90Es 5 ost noah eee tea eee ee eee 12, 18, 24

Employee Staffing Services, Inc. v. Aubry, 20 F.3rd

1G38 COGN Cit. T9068). 35 «ova aan ven: $4, 22. 2a) aes aE

E-Systems, Inc. v. Pogue, 929 F.2d 1100 (5th Cir.

1991) cert. Gden., Ti2 SAE Bee Pa oe be ee twee 29

FMC Corporation v. Holliday, 498 U.S. 52, 111 S.Ct.

405, 132 LAI FOe (IPs ow as cn ev erat siavers 23

Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1,

107 S.Ct. 2241, 9% L.Bd.ga 3 CURB). 02sec: 19, 22, 28

TABLE OF AUTHORITIES — Continued

Page

In re Michigan Carpenters Council Health & Welfare

Fund, 933 F.2d 376 (6th Cir. 1990) cert. den. 112

SCE, Te Cee vac sree eee rece tees berctesessensc. 30

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111

S.Ct. 478, 112 L.Ed.2d 728 (1990)........... 12, 25, 28

McCoy v. Massachusetts Institute of Technology, 950

F.2d 13 (1st Cir. 1991) cert. denied, 112 S.Ct.

ee Ey 7 7) ae meer OM NEN a Ola Ey rag ee 12, 27

Nachman Corp. v. Pension Benefit Guaranty Corp.,

446 U.S. 359, 100 S.Ct. 1723, 64 L.Ed.2d 354

(TSGR cdc scckacwesecusencevse eee wert aeers 18

National Elevator Industries, Inc. v. Calhoon, 957

F.2d 1555 (10th Cir. 1992) cert. den. 113 S.Ct. 406

(RDO os don. 0 44k DENN aR cone ete 30

NYSA-ILA Medical and Clinical Services Fund v.

Axelrod, 1994 WL 278325 (2nd Cir. 1994)....... 14, 28

PPG Industries Pension Plan A(CIO) v. Crews, 902

wo eer Fo ke | eee ee ree 25

Rebaldo v. Cuomo, 749 F.2d 133 (2d Cir. 1984), cert.

denied, 472 U.S. 10068 (1965)... 0... ccc cece ceeeees 12

Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct.

2090, 77 UBB GO CIB G es coi evs nnnawaeens passim

Smith v. Dunham-Bush, Inc., 959 F.2d 6 (2d Cir.

4 Dae Onn a MAP N GR Hye ch eL peo Ry 5 Fee 12, 28

Travelers Insurance Co. v. Cuomo, 14 F.3rd 708 (2nd

ee) Pe EEE Tre rere rye ry Oy Pee 14, 28

Vil

TABLE OF AUTHORITIES — Continued

Page

Travitz v. Northeast Dept. ILGWU Health & Welfare

Fund, 13 F.2 DE Ce Se Be 6 ok svccce scans 14, 29

United Wire, Metal and Machine Health & Welfare

Fund v. Morristown Memorial Hospital, 995 F.2d

1179 (3rd Cir. 1993) cert. den. 114 S.Ct. 651

WN hs ee ea 13, 14, 28

Unitep States CONSTITUTION:

United States Constitution, Art. 1, sec. 8, cl. 3;

i Co foto che es swdescnaascesbeakekaates 16

FEDERAL STATUTES:

28 United States Code § 1254 (West 1993)............ 2

28 United States Code § 2201 (West 1990)............ 9

29 United States Code § 1002 (West Supp. 1993) ..3, 19

29 United States Code § 1003 (West 1990, West.

RE er erry ore rey 3, 12, 18, 23, 24

29 United States Code § 1132 (West 1990, West

NT I co een cca cee NaS a we enn Wa ees ae 20

29 United States Code § 1133 (West 1990, West

IN a5 oss ek peg euiuk bad uae ee aS Guabas conwGu 20

29 United States Code § 1144 (West 1990, West

OS rye rer rrr rrr errr rey Sait i eee

29 United States Code § 1451 (West 1990, West

S| er rr ry yp rere ert eee rrer re 2

Vill

TABLE OF AUTHORITIES - Continued

Page

MAINE STATUTES:

32 Maine Revised Statutes Annotated § 14051, et

seq. (West Supp. 1993)... ... <<. 60s cececsccnewessess 7

32 Maine Revised Statutes Annotated § 14055

CWNGRE Set, FITS) ons cece ise st ences senevetacayes 4

39-A Maine Revised Statutes Annotated § 101, et

seq. (West Supp. 1993); Maine Workers’ Com-

WORGRION ACE «oo cece cece ec ise whceusenacbnssesces 8

39-A Maine Revised Statutes Annotated § 154

CWROSE BOD: DOTS) oo vcs ene sneceseustseseaenccanns 6

39-A Maine Revised Statutes Annotated § 324

COROT. a. BG chee cee sccteccdaneruees ov 04s 23

39-A Maine Revised Statutes Annotated § 401

to 8 eS Perrrerer rere eee eee eee Go, a0

39-A Maine Revised Statutes Annotated § 403

CPE TD. Be vie a sin cence cin enters ewan passim

Matin. AbpMINISTRATIVE REGULATION:

Maine Bureau of Insurance, Rule 560 ................ 6

OTHER STATE STATUTES:

California Labor Code § 700 (1994) .............. 2%, 20

Connecticut General Statutes Annotated § 31-284(b)

Ie eh ead oo a ae ee ed yt a cha 21

Missouri Annotated Statutes § 287.280 (Vernon 1994) .... 21

Nebraska Revised Statutes § 48-106 (West 1994)..... 21

TABLE OF AUTHORITIES — Continued

OTHER AUTHORITIES:

120 Congressional Record 29, 333 (1974) .........

Application of Maine Employers’ Mutual Insurance

Company to Obtain a Certificate of Insurance in

Maine, Docket No. INS-92-199, December 23,

cg | BER ently eran OR eae lr is Ueland Se ee

BNA Occupational Safety and Health Daily, Apri

SO Re Be Gora

Federal Rules of Civil Procedure; Rule 12(c)......

Health Security Act, H.R. 3600/S. 1757)..........

In re: Workers’ Compensation 1992 “Fresh Start” Pro-

ceeding, Docket No, INS-92-116, November 18,

a Ee Oe PE Ie AE Pao a

“> “ae

In re: Workers’ Compensation 1993 “Fresh Start”

Proceeding, Docket No. INS-93-16, May 28, 1993 ....

J. Kilgour, Workers Compensation Crisis: Developing

Strategies to Address Costs, Benefits, Litigation and

Fraud, 2 ACA Journal (Winter 1993/1994)......

L. Baker and A. Krueger, Twenty-Four Hour Cover-

age in Workers’ Compensation Coverage, Health

Affairs, March 1993, pp. 271-281...............

P. Plax, Workers’ Comp Their Way, 7 Resource Exec-

re ey ows bee cadence nen,

Report of Blue Ribbon Committee to Examine Alterna-

tives to the Workers’ Compensation System and to

Make Recommendations Concerning the Replace-

ment of the Present System, August 1, 1992......

“ee

Page

ee we

56 ae

’

In The

Supreme Court of the United States

October Term, 1994

COMBINED MANAGEMENT, INC.,

Petitioner,

BRIAN K. ATCHINSON, In His Representative

Capacity As Superintendent, Bureau of

Insurance of the State of Maine,

Respondent.

On Petition For Writ Of Certiorari

To The United States Circuit Court Of Appeals

For The First Circuit

PETITION FOR WRIT OF CERTIORARI

OPINIONS BELOW

The decision of the United States Court of Appeals

for the First Circuit was rendered on April 22, 1994. That

decision is reported at 22 F.3d 1 and is reproduced at

page la of the Appendix to the Petition for Certiorari

(“Pet. App. 1a”).

The decision of the United States District Court was

rendered on August 2, 1993, affirming the recommended

decision of the United States Magistrate Judge dated June 15,

1993. A copy of the United States District Court decision is

an unreported case and is reproduced at Pet. App. 19a. The

recommended decision of the United States Magistrate Judge

is unreported and is reproduced at Pet. App. 21a.

JURISDICTION

The decision of the United States Circuit Court of

Appeals vas issued on April 22, 1994. This Court has

jurisdiction pursuant to 28 U.S.C. § 1254(1) (West 1993).

The jurisdiction of the United States District Court was

invoked pursuant to 29 U.S.C. § 1451(c) (West 1990, West

Supp. 1993).

STATUTES INVOLVED

This case involves certain provisions of ERISA,

including § 514(a)(C), 29 U.S.C. § 1144(a)(C) (West 1990,

West Supp. 1993) (Pet. App. 137a) which provides in

relevant part as follows:

(a) Supersedure; effective date

Except as provided in subsection (b) of this

section, the provisions of this subchapter and

subchapter III of this chapter shall supersede

any and all State laws insofar as they may now

or hereafter relate to any employee benefit plan

described in section 1003(a) of this title and not

exempt under section 1003(b) of this title. This

section shall take effect on January 1, 1975.

* * *

For purposes of this section:

(1) The term “State law” includes all laws,

decisions, rules, regulations, or other State

action having the effect of law, of any State. A

law of the United States applicable only to the

District of Columbia shall be treated as a State

law rather than a law of the United States.

(2) The term “State” includes a State, any

political subdivisions thereof, or any agency or

instrumentality of either, which purports to reg-

ulate, directly or indirectly, the terms and condi-

tions of employee benefits plans covered by this

subchapter.

and ERISA § 4(b)(3), 29 U.S.C. § 1003(b)(3) (West 1990)

(Pet. App. 134a-135a) which provides in relevant part as

follows:

(b) The provisions of this subchapter shall

not apply to any employee benefit plan if -

(3) such plan is maintained solely for

the purpose of complying with applicable work-

men’s compensation laws or unemployment

compensation or disability insurance laws;

ERISA defines “employee benefit plan” at ERISA § 3(1),

29 US.C. § 1002(1) (West Supp. 1993) as follows:

§ 1002. Definitions

For purposes of this subchapter:

(1) The terms “employee welfare benefit

plan” and “welfare plan” mean any plan, fund,

or program which was heretofore or is hereafter

established or maintained by an employer or by

an employee organization, or by both, to the

extent that such plan, fund, or program was

established or is maintained for the purpose of

providing for its participants or their benefici-

aries, through the purchase of insurance or oth-

erwise, (A) medical, surgical, or hospital care or

benefits, or benefits in the event sickness, acci-

dent, disability, death or unemployment, or

vacation benefits, apprenticeship or other train-

ing programs, or day care centers, scholarship

funds, or prepaid legal services, or (B) any bene-

fit described in section 186(c) of this title (other

than pensions on retirement or death, and insur-

ance to provide such pensions).

In addition, this case involves certain provisions of the

laws of the State of Maine, including 32 M.R.S.A.

§ 14055(1)(B) (West Supp. 1993) (Pet. App. 151a) which

provides in relevant part as follows:

§ 14055. Insurance; unemployment insurance;

benefit plans

1. Benefits. The following provisions gov-

ern the provision of benefits by employee leas-

ing companies to their employees .

B. The superintendent shall adopt rules gov-

erning the provision of workers’ compensation

insurance as required by Title 39-A, chapter 9

for workers provided by an employee leasing

company to any client company. These rules

must be consistent with subsection 2 and reflect

consideration of the needs and operational effi-

ciencies of employee leasing companies and the

costs to the workers’ compensation system.

and certain provisions of the Maine Workers’ Compensa-

tion Act, 39-A M.R.S.A. §§ 401, 403 (West Supp. 1993)

(Pet. App. 156a, 163a) which provide in relevant part as

follows:

§ 401. Liability of employer

1. Private employers. Every private

employer is subject to this Act and shall secure

the payment of compensation in conformity

with this section and sections 402 and 407 with

respect to all employees, subject to the provi-

sions of this section.

§ 403. Insurance by assenting employer;

requirements as to self-insurers.

An employer subject to this Act shall

secure compensation and other benefits to the

employer’s employees in one or more of the

ways described in this section.

1. Insuring under workers’ compen-

sation insurance policy. The employer may

comply with this section by insuring and keep-

ing insured the payment of such compensation

and other benefits under a workers’ compensa-

tion insurance policy.

2. Pilot projects. Workers’ compensa-

tion health benefits pilot projects are authorized

under the following provisions.

A. The Superintendent of Insurance

shall adopt rules to enable employers

and employees to enter into agreements

to provide the employees with health

care benefits covering workplace injury

and illness and nonworkplace injury

and illness and other health care bene-

fits in comprehensive pilot projects. The

health care benefits may be provided

by: organizations authorized to do busi-

ness under Title 24; insurers or health

maintenance organizations authorized

to do business under Title 24-A;

employee benefit plans; and benefit

plans of employers who self-insure

under this section. The superintendent

shall review all pilot project proposals

and may approve a proposal only if it

confers medical benefits upon injured

employees substantially similar to ben-

efits available under this Title. The

superintendent shall revoke approval if

the pilot project fails to deliver the

intended benefits to the injured

employees.

Maine Administrative Regulation: Maine Bureau of

Insurance, Rule 560 promulgated by the Maine Bureau of

Insurance states the duty of employee leasing businesses

to provide workers’ compensation benefits, and Rule 560

states in relevant part as follows:

§ 560

Section 4. Eligibility for Policy Issuance and

Continuance

A. Basic Rule.

Except as provided in Subsection B,

lessee, not authorized to self-insure

pursuant to 39 M.R.S.A. §23 [39-A

M.R.S.A. § 403], shall fulfill its statutory

responsibility to secure benefits under

the Workers’ Compensation Act by pur-

chasing and maintaining a standard

workers’ compensation policy

approved by the Superintendent of

Insurance. The exposure and experi-

ence of the lessee shall be used in deter-

mining the premium for policy.

B. Exceptions

A lessor which obtains coverage in the

voluntary workers’ compensation mar-

ket and is registered with the Superin-

tendent of Insurance, pursuant to 32

M.R.S.A. §14052, may, with the volun-

tary market insurer’s knowledge and

consent, elect to secure the coverage on

leased employees through a standard

workers’ compensation policy issued to

the lessor. The insurer of the lessor may

take all reasonable steps to ascertain

exposure under the policy and collect

the appropriate premium .. .

See, Pet. App. 198a.

STATEMENT OF THE CASE

This case challenges the right of the State of Maine to

require a private employer to establish and maintain a

separately funded employee benefit plan solely for the

purpose of complying with the Maine Workers’ Compen-

sation Act or, alternatively, to submit the private

employers’ fully integrated, multi-benefit plan to State

regulatory control. The employer contends that such State

requirements and prohibitions are preempted by ERISA,

29 U.S.C. § 1144(a) (West 1990, Supp. 1993).

The Petitioner Combined Management, Inc. (“CMI”),

is a Maine corporation which has been engaged since

January 10, 1992, in the business of employee leasing

pursuant to 32 M.R.S.A. § 14051, et seq. (West Supp.

1993). See, Affidavit of Richard Spugnardi,{2-3 (“Spugn-

ardi Aff.”), at Pet. App. 33a. Employee leasing business or

their client businesses are required to provide the

workers’ compensation benefits mandated by the Maine

Workers’ Compensation Act, 39-A M.R.S.A. § 101, et seq.

(West Supp. 1993).

Since January, 1993, CMI has provided such benefits

by membership in the International Association of Entre-

preneurs of America (“IAEA”) and participation in the

IAEA Employee Welfare Benefit Plan and Trust offered by

the IAEA (respectively, the “IAEA Plan” and the “IAEA

Trust”). See, Spugnardi Aff. 74-9 at Pet. App. 33a-35a.

The IAEA Plan provides, inter alia, that the employees of

participating Employers shall receive “occupational

injury and illness benefits at levels commensurate with

the workers’ compensation laws” of the State of Maine.

See, IAEA Plan, Article 18, Pet. App. 93a; Spugnardi Aff.

T19 and 16 at Pet. App. 34a, 36a.

The IAEA Plan is self-funded and self-adjusting. That

is to say, the participating employers operate the IAEA

Plan and are assessed currently for the cost of the opera-

tion of the IAEA Plan as well as for the funding of the

IAEA Trust which provides the benefits. Funding is based

upon actuarial assumptions and formulae. The IAEA Plan

and the IAEA Trust are reinsured pursuant to an insur-

ance treaty with an independent insurance company.

IAEA takes the position that the IAEA Plan and IAEA

Trust provide only reimbursement of expenses incurred

by employees through an ERISA Plan. Therefore, [AEA is

not an insurer and has not applied to do business in

Maine as an insurance company.

On January 29, 1993, the Maine Bureau of Insurance

notified CMI that subscription to the IAEA Plan and

IAEA Trust does not satisfy CMI's obligation to provide

workers’ compensation benefits. See, Spugnardi Aff. 410

at Pet. App. 35a. The Bureau takes the position that the

employer’s obligation may be satisfied only by purchase

of a workers’ compensation and employee liability insur-

ance policy from a carrier authorized to do business in

Maine or by obtaining authorization to sclf-insure from

the Bureau of Insurance. The Bureau rejected any notion

that the IAEA Plan and IAEA Trust were preempted from

State supervision by ERISA § 514(a), 29 U.S.C. § 1144

(West 1990, West Supp. 1993).

CMI commenced this case as an action seeking a

declaratory judgment pursuant to 28 U.S.C. § 2201 (West

1990) and injunctive relief restraining the Bureau of

Insurance from attempting to regulate or in any way

interfering with the administration of the IAEA Plan and

IAEA Trust on the grounds that the State’s regulatory

effort is preempted by ERISA. The Bureau of Insurance

answered and objected to both CMI's proposed declara-

tory judgment and the grant of injunctive relief. The basic

issue before the Court was joined. CMI then moved for a

preliminary injunction.

Following a scheduling conference, the Magistrate

Judge issued the following scheduling order which

framed the controversy to be decided as a threshold issue

as the first step in deciding the case:

3/29/92 |Plaintiff’s motion to file memorandum

in reply to the Bureau’s objection to Plaintiff’s

motion for preliminary injunction is] [g]ranted

in part as follows. During a telephone confer-

ence with counsel this date, it was agreed that

the following threshold issue presented by this

case should be decided first: Assuming, arguendo,

that the plan of the International Association of

Entrepreneurs of America (“IAEA”), through which

the plaintiff allegedly provides a variety of benefits to

its employees is a so-called ERISA employees benefit

plan, is Maine’s workers’ compensation law pre-

empted by ERISA? Plaintiff shall have to and

including 4/12/93 within which to file a reply

memorandum of not more than 15 pages

addressing this issue only. The parties agree that

no additional evidentiary materials need be pre-

sented on the issue. The threshold issue as

framed shall be decided on the papers filed to

date and the piaintiff’s reply memorandum to

be filed. If the question is answered in the affir-

mative, the court will confer with counsel con-

cerning additional filings to be made to

complete the evidentiary record and briefing on

remaining issues relating to qualification of the

[AEA plan for ERISA protection. /s/ David M.

Cohen, USMJ.” (Emphasis added.)

See, Pet. App. 3la-32a.

After consideration of the motion for preliminary

injunction, the Magistrate Judge recommended that

CMI's motion for preliminary injunction be denied and,

acting sua sponte, recommended that the action be dis-

missed pursuant to Rule 12(c) of the F.R.Civ.P. The Magis-

trate Judge found in his Recommended Decision that the

provisions of 39-A M.R.S.A. § 403 requiring the employer

to obtain workers’ compensation benefits by the purchase

of insurance or by means of an authorized self-insurance

plan, do not “relate to” an employee benefit plan within

the meaning of 29 U.S.C. § 1144 (West 1990, West Supp.

1993) and are not preempted. The Court stated in relevant

part as follows:

4é

.... It is apparent from the language of [39-A

M.R.S.A.] section 403 that its purpose is to guar-

antee the solvency of workers’ compensation

plans. The statute applies to all private

employers, not just those who have adopted

employee benefit plans covered by ERISA. It is

not directed toward changing the rights or

expectations of employee benefit plan partici-

pants. The plaintiff may comply with state law

without altering its employee benefit plan

although, admittedly, there may be duplication

or increased cost. However, many state laws

indirectly affect the cost of administering

ERISA-covered plans but in doing so do not

trigger ERISA preemption. See, Aetna Life, 869

F.2d at 146! (where state statute does not affect

structure, administration or the type of benefits

provided by the ERISA plan, mere fact statute

has some economic impact on plan does not

require it to be invalidated). As the Second Cir-

cuit has stated ‘[I]f ERISA is held to invalidate

every State action that may increase the cost of

operating employee benefit plans, these plans

will be permitted a charmed existence that

never was contemplated by Congress.’ Rebaldo v.

Cuomo, 749 F.2d 133, 138-39 (2d Cir. 1984), cert.

denied, 472 U.S. 1008 (1985).”

See, Pet. App. 28a-29a.

CMI asked for de novo review of the Recommended

Decision on the grounds that Aetna Life Insurance Co. v.

| The full citation is Aetna Life Insurance Co. v. Borges, 869

F.2d 142 (2d. Cir. 1989) cert. denied, 493 U.S. 811 (1989).

Borges, supra, and Rebaldo v. Cuomo, supra, had been

abrogated by a more recent decision of the Second Circuit

in Smith v. Dunham-Bush, Inc., 959 F.2d 6, 8 (2d Cir. 1992)

in reliance upon Ingersoll-Rand Co. v. McClendon, 498 U.S.

133, 139, 111 S. Ct. 478, 483, 112 L.Ed.2d 728 (1990) and

Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct.

2890, 2900, 77 L.Ed.2d 490 (1983). The U.S. District Court

(Hornby, J.) construed McCoy v. Massachusetts Institute of

Technology, 950 F.2d 13, 17 (1st Cir. 1991} cert. denied, 112

S.Ct. 1939 (1992) as affirming Aetna Life Insurance Co v.

Borges, supra, and Rebaldo v. Cuomo, supra. The District

Court affirmed and accepted the Recommended Decision

of the Magistrate Judge. See.Pet. App. 19a-20a.

On appeal, the Court of Appeals for the First Circuit

(Tortuella, J.) upheld and affirmed the Decision of the

District Court. The First Circuit determined that a State

does have authority to compel an employer to establish a

separate plan for the provision of occupational disability

benefits, and once established, those separate plans fall

within the exception from preemption created by Con-

gress at ERISA § 4(b)(3), 29 U.S.C. § 1003(b)(3) (West 1990,

West Supp. 1993) for plans created solely to provide

workers’ compensation benefits. The Court relied primar-

ily upon Shaw v. Delta Air Lines, Inc., 463 U.S. at 106-109

and District of Columbia v. Greater Washington Bd. of Trade,

__ US. __, 113 S.Ct. 580, 584-585, 121 L.Ed.2d 513

(1992). The provision of occupational disability benefits

was found to be a matter of traditional State supervision

and interest that Congress did not intend to preempt.

Even if there were no authority to require an

employer to create a separately administered plan for the

provision of occupational disability benefits, the First

Circuit found that the funding of such plans is a matter of

critical State interest and at least equal in importance to

the provision of the benefits in the first instance. There-

fore, the First Circuit rationalized that Shaw v. Delta Air

Lines, Inc., 463 U.S. at 108 provides sufficient authority for

the State to compel an employer to establish a separate

plan “if the State is not satisfied that the ERISA comports

with the requirements of its disability insurance law.” Id.

It was determined on appeal that the State has a

direct interest in assuring the payment of future benefits

by regulating the funding of occupational disability bene-

fits. Both the District Court and the Court of Appeals

seem to assume that it is only the State that has this

concern and has established a funding responsibility.

The Court of Appeals declined to address the question

whether Maine’s funding requirements have such an eco-

nomic impact upon the IAEA Plan as to trigger preemption

because the State’s ability to require a separate plan was

controlling. However, the Court did acknowledge that the

question of the impact of increased costs is “far from set-

tled”. See, Pet. App. 15a, n. 5. Apparently by way of dicta the

Court of Appeals did indicate that costs incurred as a result

of State regulation must relate directly to the ERISA Plan and

not simply add to employer’s over-all cost of doing business.

Therefore, 39-A M.R.S.A. § 403 does not “relate to” an ERISA

plan and is not preempted. The Court cited United Wire,

Metal and Machine Health & Welfare Fund v. Morristown Memo-

rial Hospital, 995 F.2d 1179, 1181, 1193 (3rd Cir. 1993) cert den.

114 S.Ct. 651 (1993) as authority for the proposition that the

incremental cost must directly effect the cost of providing

benefits or administration before ERISA will preempt the

regulation. The cost to set-up and administer a second,

separate plan was found, as a matter of law, to have too

tenuous a relationship to the IAEA Plan as to be preempted.

The Decision of the District Court was affirmed.

REASONS FOR GRANTING THE WRIT

[his case presents questions upon which the various

Circuit Courts of Appeals are divided. The First and

Ninth Circuits’ clearly differ with the Second Circuit and,

possibly other Circuits on the question whether taxation

of employee benefits or funding requirements that

increase a private employer’s costs trigger preemption.

lravelers Insurance v. Cuomo, 14 F.3rd 708 (2nd Cir. 1993)

NYSA-ILA Medical and Clinical Services Fund v. Axelrod,

1994 WL 278325 (2nd Cir. 1994); and Travitz v. Northeast

Dept. ILGWU Health & Welfare Fund, 13 F.2d 704 (3rd Cir.

1993) (distinguishing United Wire) conflicts with United

Wire, Metal and Machine Health Welfare Fund v. Morristown

Memorial Hospital, 995 F.2d 1179 (3rd Cir. 1993) and

Employee Staffing Services, Inc. v. Aubry, 20 F.3rd 1038 (9th

Cir. 1994) which were relied upon by the First Circuit as a

controlling authority.

Also, the decision of the First Circuit in this case and

the Ninth Circuit in Employee Staffing Services, Inc. v.

Aubry, supra, appears to be in conflict with the decision

of this Court in Shaw v. Delta Air Lines, Inc., 463 U.S. 85,

103 S.Ct. 2890, 77 L.Ed.2d 490 (i983) by extending the

power of the State to mandate minimum employee occu-

pational disability benefits to regulation of the funding

and administrative aspects of empioyee welfare benefit

plans.

rhe cost of workers’ compensation benefits are a

national concern. The cost of workers’ compensation ben-

efits in the United States is estimated to be $60 billion per

year. See, J. Kilgour, Workers Compensation Crisis; Develop

ing Strategies to Address Costs, Benefits, Litigation and

Fraud, 2 ACA Journal (Winter 1993/1994). One analysis

estimates that the cost to provide medical services for a

work related injury is approximately double the cost t

provide the same medical treatment for a non-work

related injury. See, L. Baker and A. Krueger, Twenty-Four

Hour Coverage in Workers’ Compensation Coverage, Health

Affairs, March 1993, pp. 271-281. As a result, employers

are searching for a means to reduce such costs. These

alternatives frequently include the provision of benefits

through a fully integrated, self-insured plan providing a

comprehensive benefit package. A recent survey indicates

75% of employers find state regulation of workers’ com-

pensation benefits to be unsatisfactory or difficult but

manageable, and that 57% of employers now self-insure

workers’ compensation benefits. See, P. Plax, Workers’

Comp Their Way, 7 Resource Executive (Nov. 1993).

The interest of other persons and entities in this case

evidence the importance of the recent trend to provide

occupational disability benefits through self-funded

ERISA plans. Fourteen States, the U.S. Department of

Labor, the AFL-CIO and Maine Employers Mutual Insur-

ance Company all filed amicus curiae briefs in the First

Circuit Court of Appeals in support of the Maine Bureau

of Insurance.

os 16

Congress exercised its powers under the Commerce

Clause of the United States Constitution, Art. 1, sec. 8, cl.

3, to authorize a federal benefit program. Congress speci-

fically intended to promote uniform benefit programs

exempt from crazy-quilt or patch-work regulation by the

various states. The purpose was to make it possible for an

employer to provide the most comprehensive package

that it could afford and to avoid the cost and inefficiency

of satisfying parochial regulation from each state in

which the employer does business. It was recognized by

Congress when it passed ERISA that each state has an

interest in the well-being of its employee-citizens, but this

local interest must yield to national interests.

President Clinton has proposed national health care

legislation (Health Security Act, H.R. 3600/S. 1757). At

least 6 other plans are before Congress. Only President

Clinton has considered the role of state workers’ compen-

sation plans in the national health care plan. The Admin-

istration proposes only a special commission to consider

the integration of State mandated workers’ compensation

benefits and national health care. There is no proposal in

any plan that workers’ compensation benefits be reserved

to the States as a matter of traditional responsibility and

interest. See, BNA Occupational Safety and Health Daily,

April 23, 1993; April 25, 1994.

The Maine Workers’ Compensation Act contradicts

national policy stated in ERISA and the proposed health

care legislation by requiring each private employer to

submit his self-funded ERISA plan to funding regulations

imposed by the Bureau of Insurance or to purchase a

workers’ compensation and liability policy from an

insurer authorized to do business in Maine. It is not

possible to provide comprehensive health and disability

benefits through an ERISA plan in Maine unless the

employer agrees to State regulation of the plan adminis-

tration. Interstate health benefit programs are subjected

to patchwork regulation.

The First Circuit Court of Appeals found two bases

for State regulation; namely workers’ compensation bene-

fits are a matter of traditional regulation as to both the

benefits provided and the employer’s ability to pay those

benefits, and, secondly, such funding requirements have a

tenuous or no relationship to the operation of the ERISA

plan because the cost to provide workers’ compensation

benefits has no bearing, as a matter of law, on the cost to

provide other benefits provided via an ERISA plan.

Both this Court and other Circuits have found that a

State’s regulation of the funding of an ERISA plan is

preempted. Both this Court and other Circuits have found

that State regulations resulting in an increase in the cost

of operation of a multi-benefit, comprehensive ERISA

plan “relate to” the plan and its preemption.

The First Circuit has attempted to find a judicial

solution to a conflict between state and federal interests

in the provision of employee benefits by reserving

workers’ compensation benefit plans to State regulation

and excluding such plans from ERISA preemption. This

conflict is a matter of legislative interest which should be

resolved by Congress, and not by the courts. Congress

acting pursuant to the Commerce Clause has exercised its

ultimate authority by leaving the regulation of workers’

compensation plan funding and administration to the

states only if the plan is addressed solely to the meeting

of state obligations. See, ERISA § 4(b)(3), 29 U.S.C.

§ 1003(b)(3). The Maine Workers’ Compensation Act

attacks the basic purpose of ERISA by requiring separate

plans or by controlling the funding of multi-benefits plans.

In sum, the diversity of opinion among the Circuits as

to the authority of an employer to include workers’ com-

pensation benefits as a part of a multi-benefit ERISA plan

needs clarification as private employers form alliances by

means of employee leasing in an attempt to reduce benefit

costs by amalgamating benefits into a single plan intended

to provide a coordinated, single payor benefit package for

employees on a national or regional basis.

ARGUMENT

I. ERISA’s Overriding Purpose Is To Create a Uniform,

National Program For The Provision Of Health, Dis-

ability And Retirement Benefits To America’s

Workers Exempt From State Regulation Relating To

Such Benefit Plans.

It is well established that ERISA is a “comprehensive

and reticulated statute”. See, Alessi v. Raybestos-Manhat-

tan, Inc. 451 U.S. 504, 510, 101 S.Ct. 1899, 68 L.Ed.2d 402

(1981), citing Nachman Corp. v. Pension Benefit Guaranty

Corp., 446 U.S. 359, 361, 100 S.Ct. 1723, 1726, 64 L.Ed.2d

354 (1980). The preemption provisions of ERISA were

stated in the most broad terms to take exclusive federal

jurisdiction over all benefit plans when the plans are

formed solely to comply with state law. See, District of

Columbia v. Greater Washington Board of Trade, ___ U.S. __,

113 S.Ct. 580, 583, 121 L.-Ed.2d 513 (1992); Shaw v. Delta

Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2900, 77

L.Ed.2d 490 (1983). ERISA specifically includes “disabil-

ity” benefit plans within the scope of national interest

and preemption. See, ERISA § 3(1), 29 U.S.C. § 1002(1).

One of the principal congressional proponents of

ERISA observed that ERISA’s preemption clause was

expanded from a relatively narrow concept to the most

broad proportions. Senator Williams stated that ERISA,

with final form, was “intended to apply in its broadest

sense to all actions of State or local governments, or any

instrumentality thereof, which have the force or effect of

law”. See, 120 Cong. Record 29, 333 (1974).

If an employer decides to adopt a multi-benefit

ERISA plan, it becomes a matter of federal interest to

facilitate the provision of benefits at the least cost. “The

most efficient way to meet these [administrative] respon-

sibilities is to establish a uniform administrative scheme,

which provides a set of standard procedures to guide

processing of claims and disbursement of benefits.” See,

Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 9, 107

S.Ct. 2211, 2216, 96 L.Ed.2d 1 (1987) (one time payment of

severance benefits not preempted). The federal goal is to

reduce costs and burdens so that the employer is moti-

vated to increase benefits.

It is undisputed that Maine’s cost of workers’ com-

pensation and employee liability insurance is near the

highest in the United States. See, Report of Blue Ribbon

Committee to Examine Alternatives to the Workers’ Compen-

sation System and to Make Recommendations Concerning the

Replacement of the Present System, August 1, 1992. The high

cost is a result, at least in part, of an 8.5% surcharge

imposed on Maine employers to fund a $250 million

deficit in the residual market, an assessment to create the

Workers’ Compensation Board Administrative Fund, and

a 15% assessment for funding the capital of Maine

Employers’ Mutual Insurance Company, the fall-back

insurance provider created by the Maine Legislature. See,

Maine Bureau of Insurance Decision and Order, In re:

Workers’ Compensation 1992 “Fresh Start” Proceeding,

Docket No. INS-92-116, November 18, 1992; Maine

Bureau of Insurance Decision and Order, In re: Workers’

Compensation 1993 “Fresh Start” Proceeding, Docket No.

INS-93-16, May 28, 1993; Maine Bureau of Insurance Deci-

sion and Order, Application of Maine Employers’ Mutual

Insurance Company to Obtain a Certificate of Insurance in

Maine, Docket No. INS-92-199, December 23, 1992; and

39-A M.R.S.A. § 154 (West Supp. 1993) (Board funding

assessment).

The Bureau’s funding requirements frustrate CMI's

purpose to provide workers’ compensation and disability

benefits to its employees at a lesser cost by amalgamating

the benefits into an ERISA plan providing a greater range

of benefits. See Spugnardi Aff. | 15 at Pet. App. 35a. CMI

may also avoid administrative costs by utilizing the less

expensive claims procedures available to an ERISA plan.

See, 29 U.S.C. §§ 1132, 1133 (West 1990, West Supp. 1993).

Compliance with the Bureau’s order will threaten CMI's

business. See, Spugnardi Aff. J 15 at Pet. App. 35a.

The relevant language applicable in this or any other

ERISA preemption case is as follows:

“Except as provided in sub-section (b) of this

section, the provisions of this chapter shall

supersede any and all State laws insofar as they

may now or hereafter relate to any employee

benefit plan described in section 1003(b) of this

title and not exempt under section 1003(b) of

this title. (Emphasis added.) ERISA 514(a), 29

U.S.C. § 1144(a).”

If the Maine Workers’ Compensation Act “relates to” an

employee benefit plan, any attempt by Maine to regulate

the administration and funding of the plan is preempted.

Ii. The Maine Workers’ Compensation Act Violates

Federal Law And Policy Because It Specifically

“Relates To” ERISA And it Purports To Regulate

The Funding Of An ERISA Plan Or, In The Alterna-

tive, To Require A Separate Benefit Plan.

39-A M.R.S.A. §§ 401, 403 gives Maine employers two

choices for the provision of workers’ compensation bene-

fits; i.e. the employer may purchase insurance or submit

its self-funded benefit plan to the Maine Bureau of Insur-

ance for review and approval as to all elements of

workers’ compensation benefits, including funding.

The Bureau’s regulations are completely unique to

Maine. No other state has the same qualification, admin-

istrative or funding provisions for self-insured plans pro-

viding occupational disability benefits. Three other states

do have statutes purportedly to regulate self-insured

employee benefit plans, but these laws vary from Maine.

See, Conn. Gen. Stat. Ann. § 31-284(b) (West 1994), Neb.

Rev. Stat. § 48-106 (West 1994); Mo. Ann. Stat. § 287.280

(Vernon 1994). California requires separate administra-

tion of workers’ compensation benefit plans; Maine does

not. See, Cal. Lab. § 700 (West 1994). Each employee

benefit plan providing comprehensive benefits, including

occupational death, disability benefits, to Maine

employees must submit to state regulation. This case

suggests that, every state may impose its own set of

regulations affecting workers’ compensation; thus render-

ing it nearly impossible to provide coordinated benefits

through a single plan on a multi-state basis. This theory is

contrary to the principles established in Fort Halifax Pack-

ing Co., Inc. v. Coyne, 482 U.S. 1, 10-11, 107 S.Ct. 2211,

2216-2217, 96 L.Ed.2d 1 (1987). See also Aloha Airlines, Inc.

v. Auhe, 12 F.3rd 1498, 1504-1505 (9th Cir. 1993) which

found that a state may not require an employer to modify

an existing plan or establish a new separate plan even in

an area of traditional state regulation.

By specific reference in 39-A M.R.S.A. § 403(2) (West

1993), the Marine Workers’ Compensation Act “relates to”

ERISA plans, and Maine’s regulatory effort exceeds the

bounds established by prior decision of this Court. See, for

example, Slaw v. Delta Air Lines, Inc., 463 U.S. at 108-110.

III. The Decision Of the First Circuit Court Of Appeals In

This Case Seems To Contradict Previous Holdings Of

This Court Preempting State Regulations Of ERISA

Plan Administration While Permitting The State To

Mandate Minimum Benefits.

At 22 E3rd 6, the First Circuit found that funding of

benefits is as important as the establishment of minimum

benefits. The case law from this Court seems, by analogy, to

create a hypothetical ERISA factory which produces benefits

for employers. The State is allowed to direct the type of

benefits to be produced for its citizens, but this Court has not

permitted a State to go inside the factory to control the

manufacturing process. It is only when the State is dissat-

isfied with the benefits that it is allowed to create its own

factory and manage the funding and administration pro-

cesses. See Shaw, 463 U.S. at 107-108, 103 S.Ct. at 2905.

Recognizing ERISA plans as administrative units, they

should not be subject to “the administrative impracticality of

permitting mutually exclusive pockets of federal and state

jurisdictions within a plan. . .

The language in Shaw v. Delta Air Lines, Inc., 463 U.S. at

108, refers only to “benefits”. The Maine law focuses on

payment of benefits. See, 39-A M.R.S.A. § 324 (West Supp.

1993). As Shaw found, it is the payment of the benefits to

disabled workers that is of first interest. Shaw specifically

allowed the benefits to be offered via a multi-benefit plan.

The State may require that certain benefits be provided, but

there is no case from this Court suggesting that the state may

require separate or special funding of those benefits which

are, in fact, being provided by the employer through its

ERISA plan.

Petitioner argues that no decision of this Court has

allowed a State to take regulatory action as authorized by the

First Circuit in this case. The Ninth Circuit in Employee

Staffing Services, Inc v. Aubry, 20 F.3rd at 1042 found that

areas of traditional state responsibility which are reserved to _

that State and exempt from preemption are specifically iden-

tified in ERISA § 4, 29 U.S.C. § 1003. These exemptions in

ERISA § 4, 29 U.S.C. § 1003 include plans created solely to

meet state obligations and matters deemed to relate solely to

insurance. See also, FMC Corporation v. Holiday, 498 U.S. 52,

60, 111 S.Ct. 403, 409, 112 L.Ed.2d 356 (1990) which similarly

restricts the exemption from preemption. Therefore, preemp-

tions are limited to specifically enumerated situations. See

also, District of Columbia v. Greater Board of Washington Board

of Trade, __ U.S. __, 113 S.Ct. 580, 584, 121 L.Ed.2d 513

(1992) limiting exemption from preemption to those items

described in ERISA § 4, 29 U.S.C. § 1003.

Alessi v. Raybestos-Manhattan, Inc., 451 U.S. at 524, con-

sidered New Jersey’s effort to ban pro-rated reduction of

pension benefits payable to retired employees drawing

workers’ compensation benefits. The employer was allowed

to decide how to pay and how much to pay through his

ERISA plan without interference from New Jersey as long as

the minimum workers’ compensation benefits were paid.

The First and Ninth Circuits’ extension of state regula-

tions beyond those items designated in ERISA § 4, 29 U.S.C.

§ 1003(b) represents a new development in ERISA law that

seems to contradict previous decisions of this Court.

IV. The Circuits Are Divided On The Question Whether

A State Regulation Relating To An ERISA Plan May

Avoid Preemption If It Relates Also To Workers’ Com-

pensation, A Matter Of Traditional State Interest.

The First Circuit Court of Appeals looked primarily to

Shaw v. Delta Air Lines, Inc. 463 U.S. at 108, as authority that

Maine can require an employer to meet both State mandated

benefit and funding requirements relating to workers’ com-

pensation benefits.

“In other words, while the State may not require an

employer to alter its ERISA plan, it may force the

employer to choose when providing disability ben-

efits in a separately administered plan and includ-

ing the State mandated benefits in its ERISA plan.

If the State is not satisfied that the plan comports

with the requirements or its disability insurance

law, it may compel the employer to initiate a sepa-

rate plan that does comply.” Shaw, 463 U.S. at 108.

California’s workers’ compensation law differs from

Maine law because California requires separate administra-

tion. The California employer may not provide such benefits

through a comprehensive ERISA plan. See, Cal. Lab. § 700;

Employee Staffing Services, Inc. v. Aubry, 20 F.3rd at 104; Barker

v. Pick N’ Pull Auto Dismantlers, Inc., 819 F.Supp. 889, 892

(E.D. Cal. 1993). Maine specifically permits the use of broad

based plans; therefore, there is a critical difference in the

iegal ramifications of the laws of the two States. Based upon

Employee Staffing, the Ninth Circuit apparently will find pre-

emption if the State provides a choice between providing

benefits through a separate unit and an ERISA plan. Once

the choice is available to the employer, the State law “relates

to” an ERISA plan and is preempted. Presumably, Maine’s

law would be preempted in the Ninth Circuit. See also, Aloha

Airlines, Inc. v. Auhe, 12 F.2d at 1505.

Other jurisdictions have focused on benefits as a matter

of State interest and have left the funding and administration

aspects to ERISA. Those jurisdictions have followed a troika

of cases. See, i.e., Shaw v. Delta Air Lines, Inc., supra; Alessi v.

Raybestos-Manhattan, Inc., supra; and Ingersoll-Rand v. McLen-

don, 498 U.S. 133, 11 S.Ct. 478, 118 L-Ed.2d 474 (1990).

The Fourth Circuit, in PPG Industries Pension Plan

A(CIO) v. Crews, 902 F.2d 1148, 1150-1151 (4th Cir. 1990),

found a West Virginia law to be preempted by ERISA

because it required separate administration of workers’ com-

pensation benefits payable from a multi-benefit ERISA plan.

The Fourth Circuit found that a principal purpose of ERISA

was to allow an employer to combine funds in a separate

pool exempt from State regulation to pay benefits whether or

not such benefits are mandated by the State. The Fourth

Circuit would find both Maine and California laws relating

to funding of benefits to frustrate the employer's effort to

integrate benefits and, therefore, to be preempted by ERISA.

The Fourth Circuit looked to Shaw v. Delta Air Lines, Inc., 463

U.S. at 108 as the source of authority for its decision.

The fact that a State regulation of an ERISA plan falls in

an area of traditional state interest was a controlling factor in

this case and in Employee Staffing. In considering a non-

workers’ compensation issue, the Eighth Circuit found that

the question of traditional state interest is not controlling and

found that question to be a policy issue applicable only in

borderline cases. See, Arkansas Blue Cross & Blue Shield v. St.

Mary’s Hospital, Inc., 947 F.2d 1346, 1350 (8th Cir. 1991) cert.

den. 112 S.Ct. 2305 (1992).

Therefore, there is disagreement among the Circuits

whether any benefits are saved from preemption on that

reason alone. Some Circuits find the State interest to be

important only in borderline cases in which other factors are

neutral. The economic impact of the Maine law upon the cost

of benefits takes the analysis out of the borderline situation.

V. The Requirements Of The Maine Workers’ Compensa-

tion Act Will Raise The Employers’ Costs And Create

Redundant Benefits. There Is Disagreement Among

The Circuits Whether Such Costs Cause Preemption Of

The State Regulation.

The District Court found that Petitioner’s compliance

with the Maine Workers’ Compensation Act may result in

“duplication [of benefits] or increased cost”. See, Recom-

mended Decision at p. 8, Pet. App. 28a-29a. The District

Court found further that the economic impact of State regu-

lation does not result in preemption unless the regulation

effects the structure, administration or type of benefits pro-

vided by the ERISA plan. The First Circuit Court of Appeals

acknowledges that “the question of whether increased costs

alone can trigger preemption is far from settled”. See, 22

F.3rd at 7, n.5. (Pet. App. 15a)

The First Circuit seems to follow its decision in McCoy v.

Massachusetts Inst. of Technology, 950 F.2d 13, 17 (1st Cir. 1991)

in which it found that preemption is not triggered unless the

increased cost from regulations applies specifically and

uniquely to the ERISA plan as opposed to an overall increase

in the employer’s cost of doing business.

Similarly, findings of the Ninth Circuit in Employee Staff-

ing Services, Inc. v. Aubry, 20 F.3rd at 1042 seem to be in

accord with the First Circuit. The Ninth Circuit stated “Iwle

venture no opinion on the economic desirability of such a

scheme [required compensation insurance in a separate

plan], or of enabling forms to avoid burdensome state

workers’ compensation requirements, or of the practical

sense of a state requiring firms to duplicate workers’ com-

pensation benefits already provided in ERISA plans. We

decide only that the State of California has power, not how it

should exercise it. The practical policy decision about how to

exercise that power, balancing the breadth and security of

benefits against the loss of jobs as payroll costs increase,

must be left to the democratic process of California.”

Plainly and simply, the judicial policy decisions of the

First and Ninth Circuits contradict the base policy of ERISA.

It is the principal purpose of ERISA to streamline the provi-

sion of benefits and to reduce costs in order to increase the

benefits that the employer can afford to provide. See, Fort

Halifax Packing Co., Inc. v. Coyne, 482 U.S. At 10-11, 107 S.Ct.

at 2216-2217.

The Second Circuit has taken the position that regula-

tion creating redundant benefits and the increased costs to

provide benefits are the stuff that Congress intended to

preempt. See, Smith v. Dunham-Bush, Inc., 959 F.2d 6, 9 (2nd

Cir. 1992) in which the Second Circuit stated that an indirect

effect on the ERISA plan triggered preemption and further

found that a state law of general application effecting the

amount or costs of benefits was preempted.

Also in the Second Circuit, New York imposed a sur-

charge on services provided to HMOs and insurers in order

to force employers to switch benefits programs to Blue

Cross/Shield. The Second Circuit found that Smith v. Dun-

ham-Bush, Inc., 955 F.2d at 9 and Ingersoll-Rand, Co. v. McLen-

don, 498 US at 139, 11 S.Ct. at 483, dictated that such

surcharges are preempted by ERISA because they were

intended to and did have a substantial effect, albeit indirect,

on the New York ERISA plans. See Travelers Insurance Co. v.

Cuomo, 14 F3rd at 719-720 (2nd Cir. 1993). The Second

Circuit would find preempted those provisions in the Maine

Workers’ Compensation Act that cause redundant benefits

and increased benefit costs. See also, NYSA-ILA Medical and

Clinical Services Fund v. Axelrod, 1994 WL 278325 (2nd. Cir.

1994).

It is arguable that the Maine Workers’ Compensation

Act would be preempted in the Third Circuit. In United Wire,

Metal and Machine Health and Welfare Fund v. Morristown Mem.

Hospital, 995 F.2d at 1194-1195, the Third Circuit found no

nexus to an ERISA plan in a unique way as the result of

generally applicable legislation attempting to control hospital

costs. Maine, however, specifically requires employee benefit

plans to buy insurance or subject the fund to State regula-

tion. It has been found by the District Court in this case that

the Maine law does have a resulting increase in costs. There-

fore, the nexus is established to effect an ERISA plan differ-

ently than employers who do not self-insure. In Travitz v.

Northeast Dept. ILGWU Health & Welfare Fund, 13 F.2d 704,

709-710 n. 5 (3rd Cir. 1993) the Court distinguishes United

Wire and found that a Pennsylvania statue making ERISA

plans primarily liable for injuries suffered in auto accidents

increased the ERISA plan’s potential for liability and increas-

ing costs could lead to reduced benefits and was preempted.

The developing law in the Third Circuit indicates that the

effect of the Maine regulation would cause preemption.

The Fifth Circuit considered indirect effect on ERISA

plans in E-Systems, Inc. v. Pogue, 929 F.2d 1100, 1103 (5th Cir.

1991) cert. den., 112 S.Ct. 585 (1991). Texas attempted to

impose a tax upon all persons providing services to

employee benefit plans. Obviously E-Systems does present a

situation in which a state attempted to tax ERISA plans in a

unique manner. Maine requires that ERISA plans must pur-

chase insurance or receive authorization to self-insure. In the

first instance, the ERISA plan is subject to surcharges and

assessments to fund shortcomings in the Maine workers’

compensation system. In the second instance, the ERISA plan

must pay into the self-insurance guarantee fund. Again, it is

noteworthy that the Maine statute specifically includes

employee benefit plans within its scope. It is arguable that

the Fifth Circuit would preempt the Maine funding require-

ments on the basis that the legislation increases costs of

operation and benefit costs in a direct, material way. Recent

Decisions in other Circuits also tend to confirm that regula-

tions increasing costs are preempted even if the regulation is

in an area of traditional state interest. See, Arkansas Blue Cross

& Blue Shield v. St. Mary’s Hospital, Inc., 947 F.2d at 1348; In re

Michigan Carpenters Council Health & Welfare Fund, 933 F.2d

376, 382-383 (6th Cir. 1990) cert. den. 112 S.Ct. 585 (1991);

National Elevator Industries, Inc. v. Calhoon, 957 F.2d 1555, 1561

(10th Cir. 1992) cert. den. 113 S.Ct. 406 (1992).

The law relating to the preemption of regulations affect-

ing an economic impact upon ERISA plans is unclear and

unsettled. The requirement that an ERISA plan subject itself

to redundant funding and benefits at an incremental costs

would, in all likelihood, be preempted in the Second, Third

and Fifth circuits; and perhaps in the Ninth Circuit, but not

in the First Circuit.

CONCLUSION

For the reasons set forth above, this Petition for Writ of

Certiorari should be granted.

Respectfully submitted,

RatpH A. Dyer, Esa.

Counsel of Record for

the Petitioner

477 Congress Street, Suite 702

Portland, Maine 04101

(207) 773-6489

COMBINED MANAGEMENT,

INC., Plaintiff, Appellant,

SUPERINTENDENT OF THE BUREAU

OF INSURANCE OF THE STATE OF

MAINE, Defendant, Appellee.

No. 93-1874

United States Court of Appeals,

First Circuit.

Heard Jan. 6, 1994.

Decided April 22, 1994.

Employer brought action to enjoin Maine’s Superin-

tendent of the Bureau of Insurance from enforcing statu-

tory requirement that separate workers’ compensation

plan be maintained. The United States District Court for

the District of Maine, D. Brock Hornby, J., dismissed, and

empioyer appealed. The Court of Appeals, Torruella, Cir-

cuit Judge, held that Maine law requiring separately

administered workers’ compensation plan was not pre-

empted by Employee Retirement Income Security Act

(ERISA).

Affirmed.

Richard G. Moon with whom Ralph A. Dyer, Port-

land, ME, was on brief for appellant.

James M. Bowie, Asst. Atty. Gen., Dept. of the Atty.

Gen., with whom Michael E. Carpenter, Atty. Gen., Linda

M. Pistner, Director, Regulatory Agency Unit, Dept. of the

Atty. Gen., and Thomas D. Warren, Director, Litigation

Unit, Dept. of the Atty. Gen., Augusta, ME, were on brief

for appellee.

Robert Abrams, Atty. Gen., of the State of New York,

Jerry Boone, Sol. Gen., Jane Lauer Barker, Asst. Atty. Gen.

in Charge of Labor Bureau, and Jennifer 5S. Brand, Asst.

Atty. Gen., New York City, on brief for State of NY, et al.,

amici curiae.

John M. Rea, Chief Counsel, Vanessa L. Holton, Sr.

Counsel, James D. Fisher, Staff Counsel, Gary J. O’Mara,

Staff Counsel, Dept. of Industrial Relations, and Lloyd

Aubry, Jr., Director, Dept. of Industrial Relations, State of

CA, San Francisco, CA, on brief for State of CA, amicus

curiae.

Marsha S. Berzon, Michael Rubin, Indira Talwani,

Altshuler, Berzon, Nussbaum, Berzon & Rubin on brief,

San Francisco, CA, for the American Federation of Labor

and Congress of Industrial Organizations and the Inter-

national Ladies’ Garment Workers’ Union, AFL-CIO,

amici curiae.

Thomas S. Williamson, Jr., Sol. Of Labor, Marc I.

Machiz, Associate Sol., Plan Benefits Sec. Div., Karen L.

Handorf, Counsel for Special Litigation, Plan Benefits

Sec. Div., and Elizabeth A. Goodman, Trial Atty., Plan

Benefits Sec. Div., U.S. Dept. of Labor, on brief, Washing-

ton, DC, for the Secretary of Labor, amicus curiae.

Allan M. Muir and Pierce, Atwood, Scribner, Allen,

Smith & Lancaster, Portland, ME, on brief for Maine

Employers’ Mut. Ins. Co., amicus curiae.

Michael M. Sykes, General Counsel, Oklahoma Dept.

of Labor, and Kayla A. Bower, Attorney, Oklahoma Dept.

of Labor, on brief, Oklahoma City, OK, for State of Okla-

homa ex rel. Dave Renfro, Commissioner of Labor, Okla-

homa Dept. of Labor, amicus curiae.

Before TORRUELLA, ALDRICH and CYR, Circuit

Judges.

TORRUELLA, Circuit Judge.

Plaintiff-Appellant, Combined Management, Inc.

(“CMI”), brought an action to enjoin Brian K. Atchinson,

in his representative capacity as Superintendent of the

Bureau of Insurance for the State of Maine (the “Superin-

tendent”), from enforcing certain provisions of Maine’s

workers’ compensation statute. 39-A M.R.S.A. § 101 et seq.

CMI claimed that because CMI provides workers’ com-

pensation benefits through a welfare benefit plan that is

covered by the Employee Retirement Income Security Act

(“ERISA”), the Superintendent's efforts to apply the

workers’ compensation law to CMI are preempted by

ERISA § 514(a) of ERISA, 29 U.S.C. § 1144(a). The district

court dismissed CMI's complaint, finding that ERISA did

not preempt Maine law. We affirm.

I. BACKGROUND

CMI is an employee leasing company that leases the

services of its workers’ [sic] to a variety of businesses on a

long-term basis. CMI provides employee benefits including

occupational injury and disability benefits, to the leased

employees through a subscription to the international Asso-

ciation of Entrepreneurs of America Welfare Benefit Plan (the

“IAEA Plan”). The workers’ compensation portion of the

IAEA Plan is not separately insured or administered.

Maine state law, 32 M.R.S.A. § 14055(1)(B), mandates

that employee leasing companies or their client busi-

nesses must arrange for, the payment of workers’ com-

pensation benefits in accordance with the requirements of

the Maine Workers’ Compensation Act, 39-A M.R.S.A.

§ 101 et seq. The Workers’ Compensation Act requires that

all employers provide workers’ compensation either

through an insurance carrier authorized by the state or

through a self-insurance plan that meets the state’s

qualifications. 39-A M.R.S.A. § 403.2.! Maine requires

authorized insurance carriers and self-insurers to provide

1 39-A M.R.S.A. § 403 provides in part:

An employer subject to [the Workers’ Compensation}

Act shall secure compensation and other benefits to

the employer's employees in one or more of the ways_

described in this section. ...

1. INSURING UNDER WORKERS’ COMPENSA-

TION INSURANCE POLICY. The employer may com-

ply with this section by insuring and keeping insured

the payment of such compensation and other benefits

under a workers’ compensation insurance policy... .

2. PILOT PROJECTS. [The emplover may participate

in an authorized pilot project.] . .

3. PROOF OF SOLVENCY AND FINANCIAL ABIL-

ITY TO PAY; TRUST. The employer may comply with

this section by furnishing satisfactory proof to the

Superintendent of Insurance of solvency and finan-

cial ability to pay the compensation and benefits, and

depositing cash, satisfactory securities, irrevocable

standby letters of credit issued by a qualified finan-

cial institution or a surety bond with the board, in

such sum as the superintendent may determine. .. .

4. GROUP SELF-INSURERS; APPLICATION.

Except for the provision relating to individual public

employer self-insurers, subsection 3 is equally appli-

cable in all respects to group self-insurers.

evidence of their financial solvency and meet certain

funding requirements. See, e.g., 24-A M.R.S.A. §§ 221-A,

410, 4431-4452; 39-A M.R.S.A. §§ 403, 404.

On January 29, 1993, the Maine Bureau of Insurance

sent a letter to CMI stating that CMI’s subscription to the

[AEA Plan did not satisfy its obligation under state law to

provide workers’ compensation benefits through one of

the methods authorized by 39-A M.R.S.A. § 403. The

letter did not “constitute a formal order or action of the

Superintendent” but it did warn that-failure of CMI to

comply with the law could prompt some action in the

future.

One month later, CMI filed suit to enjoin the Superin-

tendent from requiring, CMI to obtain separate workers’

compensation insurance or to establish a qualified pro-

gram of self-insurance pursuant to 39-A M.R.S.A. § 403.

CMI also sought a declaratory judgment stating that any

enforcement of 39-A M.R.S.A. § 403 against CMI is pre-

empted by ERISA.

In response to CMI's request for a preliminary

injunction, the magistrate judge suggested that he first

address the issue of whether ERISA preempted Maine's

workers’ compensation laws. Although CMI would have

to establish that its benefit plan, the IAEA Plan, was an

ERISA covered plan under 29 U.S.C. §§ 1002(3) and

1002(37)(A) before it could invoke the protections of

ERISA’s preemption provision, the magistrate noted that

determining the status of the IAEA Plan would involve a

fact intensive inquiry requiring additional discovery.

Instead, with the agreement of the parties, the magistrate

ordered that the preemption issue be addressed first on

the understanding that if he found ERISA did not pre-

empt Maine law, he would then dismiss the case. Thus,

for purposes of this threshold question only, the IAEA

Plan is assumed to be a valid ERISA benefit plan.

On June 15, 1993, the magistrate recommended a

denial of the requested preliminary injunction and a dis-

missal of the case on the grounds that ERISA did not

preempt Maine’s workers’ compensation law. The magis-

trate found that the workers’ compensation law did not

“relate to” the IAEA Plan offered by CMI because the law

is a matter of general application affecting all private

employers, whether or not they have adopted ERISA

plans, and because the law does not affect the structure,

administration, or type of benefits provided by any

ERISA plan. On August 2, 1993, the district court

affirmed and adopted the magistrate’s recommended

decision. CMI now appeals this decision.

Il. ERISA PREEMPTION

ERISA preempts state laws that “relate to” an ERISA

covered welfare benefit plan. ERISA § 514(a), 29 U.S.C.

§ 1144(a).2 A state law “relates to” an ERISA covered plan

“ 4€ it has a connection with or reference to such a plan.’ ”

District of Columbia v. Greater Washington Bd. of Trade, ___

U.S. __, __, 113 S.Ct. 580, 583, 121 L.Ed.2d 513 (1992)

2 Section 514(a) provides that the provisions of ERISA:

shall supersede any and all State laws insofar as they

may now or hereafter relate to any employee benefit

plan described in section 1003(a) of this title and not

exempt under section 1003(b) of this title.

29 U.S.C. § 1144(a).

(quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97,

103 S.Ct. 2890, 2899-2900, 77 L.Ed.2d 490 (1983)); see also

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111

S.Ct. 478, 483, 112 L.Ed.2d 474 (1990). A state law may

“relate to” a benefit plan “even if the law is not speci-

fically designed to affect such plans, or the effect is only

indirect.” Greater Washington Bd. of Trade, Vo. ee...

113 S.Ct. at 583 (quoting Ingersoll-Rand, 498 U.S. at 139,

111 S.Ct. at 483). However, preemption will not occur

where the state law has only a “tenuous, remote, or

peripheral” connection with covered plans, “as is the case

with many laws of general applicability.” Id. ___ U.S. at

__n. 1, 113 S.Ct. at 583 n. 1 (citing Shaw, 463 U.S. at 100

n. 21, 103 S.Ct. at 2901 n. 21); see also Mackey v. Lanier

Collection Agency & Serv., Inc., 486 U.S. 825, 830-38, 108

S.Ct. 2182, 2185-90, 100 L.Ed.2d 836, 1988).

State laws that do not “relate to” an ERISA covered

plan but instead “relate to” a benefit plan established

solely to comply with state workers’ compensation laws

are not preempted by ERISA. Section 514(a); ERISA

§ 4(b)(3), 29 U.S.C. § 1003(b)(3).* As Maine’s workers’

compensation law falls within this special exemption, we

affirm the district court’s determination that ERISA does

not preempt any efforts by the Superintendent to require

CMI to provide workers’ compensation benefits through

3 Section 4(b)(3) provides that ERISA shall not apply to any

employee benefit plan if:

such plan is maintained solely for the purpose of

complying with applicable workmen’s compensation

laws or unemployment compensation or disability

insurance laws.

29 U.S.C. § 1003(b)(3).

an authorized insurance provider or qualified self-insur-

ance. See Employee Staffing Servs., Inc. v. Aubry, 20 F.3d

1038 (9th Cir.1994) (holding that California’s workers’

compensation law, which is quite similar to Maine's, is

not preempted by ERISA).

A. The Worker’s Compensation Exemption

Congress explicitly exempted state workers’ compen-

sation schemes from ERISA’s purview, see. H.R.Rep. No.

93-1280, 93d Cong., 2d Sess. 383 (1974), reprinted in 1974

U.S.Code Cong. & Admin. News 4639, 5038, 5162, leaving

intact the states’ traditional regulation and oversight of

this specialized system of insurance. See also 28 U.S.C.

§ 1445(c) (forbidding removal of workers’ compensation

benefits claims to federal court). In the statute, § 4(b)(3)

excludes benefit plans created solely to comply with state

workers’ compensation statutes from coverage under

ERISA, and § 514(a) excludes from preemption state laws

that relate to those plans described in § 4(b). 29 U.S.C.

§§ 1003(b) and 1144(a). Some state workers’ compensa-

tion laws might “relate to” ERISA covered benefit plans,

instead of, or in addition to, plans exempt under § 4(b)(3),

and thus fall under the broad sweep of ERISA’s preemp-

tion clause. Greater Washington Bd. of Trade, __ a?

113 S.Ct. at 584-85. Laws which relate only to welfare

benefit plans exempt from ERISA’s coverage, however, fit

safely under the umbrella of § 4(b)’s exemption. Id.

In Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 106-09, 103

S.Ct. 2890, 2905-06, 77 L.Ed.2d 490 (1983), the Supreme

‘Court held in part that a New York law mandating the

provision of certain disability benefits to employees was

exempt from preemption under ERISA pursuant to

§ 4(b)(3), even though employers could provide the

required benefits through their ERISA covered plans.

Because disability benefit laws are exempted from

ERISA’s coverage by the same provision exempting

workers’ compensation laws, § 4(b)(3), 29 U.S.C.

§ 1003(b)(3), the Shaw decision applies directly to this

case. The Supreme Court found in Shaw that:

A State may require an employer to maintain a

disability plan complying with state law as a

separate administrative unit. Such a plan would

be exempt under § 4(b)(3). . . . [WJhile the State

may not require an employer to alter its ERISA

plan, it may force the employer to choose

between providing disability benefits in a sep-

arately administered plan and including the

state-mandated benefits in its ERISA plan. If the

State is not satisfied that the ERISA plan com-

ports with the requirements of its disability

insurance law, it may compel the employer to

maintain a separate plan that does comply.

Id. at 108, 103 S.Ct. at 2905-06. See also Greater Washington

Bd. of Trade, ___ U.S. at , 113 S.Ct. at 584-85 (reaffirm-

ing the holding in Shaw).

The Supreme Court also noted that although the

exemption in § 4(b)(3) applies only to separately adminis-

tered disability plans maintained solely to comply with

state law, and does not include ERISA covered benefit

plans that provide a combination of exempt and non-

exempt benefits, employers are not:

completely free to circumvent the Disability

Benefits Law by adopting plans that combine

disability benefits inferior to those required by

10a

that law with other types of benefits. Congress

surely did not intend, at the same time it pre-

served the role of state disability laws, to make

enforcement of those laws impossible.

Shaw, 463 U.S. at 108, 103 S.Ct. at 2905.

Maine’s workers’ compensation law falls squarely

within the dictates of Shaw. 39-A M.R.S.A. § 403 mandates

that employers provide workers’ compensation by pur-

chasing approved insurance or by establishing an

approved self-insurance plan. This is precisely what the

Supreme Court contemplated when it found that states

“may require an employer to maintain a [§ 4(b)(3)

exempt] plan as a separate administrative unit.” Id.;

accord Greater Washington Bd. of Trade, ___ U.S. at ___, 113

S.Ct. at 584-85. In the present case, the Superintendent

expressed an opinion that CMI’s subscription to the IAEA

Plan does not satisfy the requirements of Maine’s law.

Further efforts to ensure CMI’s compliance with the law

would clearly constitute an act to “compel the employer

to maintain a separate plan that does comply” with the

workers’ compensation law, an act which is explicitly

approved of by Shaw. Shaw, 463 U.S. at 108, 103 S.Ct. at

2906.

Even though CMI provides workers’ compensation

benefits through the IAEA Plan, which we assumed is an

ERISA covered plan, Maine’s law does not require, and

the Superintendent does not request, that CMI alter the

IAEA Plan in any way or provide or not provide certain

benefits through the IAEA Plan. In fact, the Maine law

imposes no limitations or requirements, regulatory or

otherwise, on the IAEA Plan or on any ERISA covered

plan. Consequently, it does not “relate to” an ERISA plan

lla

such that preemption is triggered. In such a situation,

CMI cannot don the mantle of ERISA preemption simply

by including workers’ compensation benefits in its wel-

fare benefit plan and thereby escape the requirements of

Maine’s law. See Shaw, 463 U.S. at 108, 103 S.Ct. at

2905-06; Foust v. City Ins. Co., 704 F.Supp. 752, 754

(W.D.Tex.1989).

CMI misinterprets Shaw to hold that states can only

require employers to provide a specified level or package

of workers’ compensation benefits and cannot otherwise

interfere with plan administration through provisions

like the funding and solvency requirements established in

39-A M.R.S.A. § 403. CMI would thus limit the ERISA

exemption under § 4(b)(3) to laws mandating benefit

outputs instead of laws establishing separate benefit

plans. As a corollary to this claim, CMI contends that

Shaw requires states to give employers a choice of provid-

ing the specified benefits in its own ERISA plan or in a

state mandated benefits plan. CMI maintains that because

ERISA allows welfare benefit plans to provide workers’

compensation benefits, refusing to give CMI the option of

providing such benefits through the IAEA Plan would

effectively bar what ERISA permits. See Alessi v.

Raybestos-Manhattan, Inc., 451 U.S. 504, 524, 101 S.Ct.

1895, 1906-07, 68 L.Ed.2d 402 (1981) (finding state law

that barred one method of calculating benefits permitted

by ERISA to be preempted).

CMI cites several cases for the proposition that states

may not force employers to separate workers’ compensa-

tion benefits from their fully integrated ERISA plans. Id.

at 521-26, 101 S.Ct. at 1905-08; PPG Industries Pension Plan

A v. Crews, 902 F.2d 1148, 1150-51 (4th Cir.1990). CMI

| 12a

extends this proposition to argue that states are also

prohibited from forcing employers to set up separate

workers’ compensation plans.

Although ERISA preempts state laws that prohibit an

ERISA covered plan from providing certain benefits or

from calculating benefits in a certain way (including laws

that would force a plan to separate out a portion of its

existing coverage), we find no support in Shaw, or any

other case, for CMI's proposition that ERISA preempts

state laws that force employers to adopt a separately

administered workers’ compensation benefits plan. On

the contrary, § 4(b)(3) and Shaw itself expressly permit

states to do just that. Shaw, 463 U.S. at 108, 103 S.Ct. at

2905-06. Shaw does not require states to give employers

the option of complying with state law by providing

workers’ compensation benefits in their ERISA covered

plans. Instead, Shaw merely states that the existence of

such an option does not automatically result in preemp-

tion, id. at 108, 103 S.Ct. at 2905-06; it certainly does not

suggest the converse proposition, that an option is

required for the § 4(b)(3) exemption to apply. See Barker v.

Pick N Pull Auto Dismantlers, Inc., 819 F.Supp. 889, 891-96

(E.D.Cal. 1993) (rejecting the identical argument that

Shaw requires states to offer employers the option of

providing workers’ compensation through their ERISA

plans).4

+ We note that this case differs from our recent decision in

Simas v. Quaker Fabric Corp., 6 F.3d 849 (1st Cir.1993), where we

held that states cannot mandate the establishment of an ERISA

covered plan. Id. That holding does not apply to state workers’

compensation laws such as Maine’s which mandate the estab-

lishment of exempt, non-ERISA covered plans.

13a

Likewise, Shaw does not limit the exemption under

§ 4(b)(3) to state laws mandating a specific level or pack-

age of benefits as opposed to laws mandating solvency

and funding requirements. There is no basis for this

distinction in § 4(b)(3) or in Shaw. Additionally, the lan-

guage of those two authorities indicates that the case for

exemption of solvency requirements is even stronger than

the case for exemption of benefit requirements. See

§ 4(b)(3), 29 U.S.C. § 1003(b)(3) (stating that the provi-

sions of ERISA shall not apply to any employee benefit

plan if “such plan is maintained solely for the purpose of

complying with applicable workmen’s compensation

laws”) (emphasis added); Shaw, 463 U.S. at 108, 103 S.Ct.

at 2905 (stating that states can require employers to com-

ply with the “requirements” of its law by setting up “a

separate administrative unit”); see also Barker, 819 F.Supp.

at 895 (finding that “Shaw does not address ‘benefits’ but

yon

speaks only of ‘requirements,’ ” and that a state’s concern

about the solvency of a workers’ compensation plan is “of

equal stature as any concern as to the level of benefits.”).

If anything, state laws mandating specific benefits from

an ERISA covered plan are more likely to “relate to” that

ERISA plan than laws which merely require the creation

of an ERISA-exempt plan and which make no demands

on the ERISA covered plan itself. Thus, the instant case

presents an even clearer application of § 4(b)(3)’s exemp-

tion than does Shaw.

Maine’s law does not bar what ERISA permits. CMI

remains free to provide the existing workers’ compensa-

tion benefits to its employees and to integrate such bene-

fits with the rest of its ERISA plan benefits. We are not

presented in this case with a state workers’ compensation

l4a

law that prohibits ERISA covered plans from calculating

pension benefits in a certain way, see Alessi, 451 U.S. at

521-26, 101 S.Ct. at 1905-08 (finding that ERISA pre-

empted New Jersey law that prohibited ERISA plans from

offsetting pension benefits by amounts awarded for

workers’ compensation); PPG Industries, 902 F.2d at

1150-51 (finding preemption of West Virginia law that

prohibited an employer from deducting the amount of

pension benefits previously paid to a retiree from the

retiree’s subsequent workers’ compensation award), or a

law that specifically refers to ERISA covered benefit plans

in order to determine workers’ compensation benefits, see

Greater Washington Bd. of Trade, ___ U.S. at ___, 113 S.Ct. at

“583-85 (holding that ERISA preempted District of Colum-

bia law requiring that employers who provide health

insurance coverage for their employees under an ERISA

plan must provide equivalent health insurance coverage

for injured employees eligible for workers’ compensa-

tion). These cases cited by CMI in support of its mis-

guided interpretation of Shaw found preemption for

reasons that do not apply to this case. We therefore find

that a state law that requires employers to operate a

separately administered workers’ compensation benefit

plan is not preempted by ERISA.

B. Does Maine’s Law Nevertheless “Relate To” the

IAEA Plan?

CMI further argues that Maine’s workers’ compensa-

tion law relates to an ERISA plan, and thus is preempted,

because the law affects the cost of providing ERISA bene-

fits to its employees. Specifically, CMI alleges that if it is

15a

forced to adopt a separate workers’ compensation plan,

the burdens of duplicate administration and the higher

cost of separate workers’ compensation benefits provided

outside of the integrated IAEA Plan will have a signifi-

cant economic impact on CMI and render CMI unable to

afford the existing level of benefits now offered through

the IAEA Plan. According to CMI, a state law that creates

a significant economic impact on an ERISA plan, without

more, sufficiently “relates to” the plan and is therefore

preempted. E-Systems, Inc. v. Pogue, 929 F.2d 1100, 1103

(5th Cir.), cert. denied, __ U.S. __, 112 S.Ct. 585, 116

L.Ed.2d 610 (1991); Travelers Ins. Co. v. Cuomo, 813 F.Supp.

996, 1002-06 (S.D.N.Y.1993).5

To begin with, we decline to address whether a sig-

nificant economic impact on an ERISA covered plan may

be sufficient by itself to trigger preemption because

CMI's argument fails regardless of how that issue is

resolved. The argument fails for two reasons. First, CMI's

claim is at odds with Shaw and Greater Washington Bd. of

Trade, in which the Supreme Court explicitly contem-

plated state laws requiring the separate administration of

° As CMI points out, Travelers cites FMC Corp. v. Holliday,

498 U.S. 52, 58-60, 111 S.Ct. 403, 407-09, 112 L.Ed.2d 356 (1990),

for the proposition that state laws that increase plan costs are

preempted. Travelers, 813 F.Supp. at 1006. FMC Corp. v. Holliday

makes no mention of state laws that merely impose additional

costs. Instead, the Supreme Court found that state laws interfer-

ing with an ERISA plan’s calculation of benefits, in that case

through a state antisubrogation law, was preempted. FMC Corp.,

498 U.S. at 58-60, 111 S.Ct. at 407-09. Although we need not

decide the issue in this case, the question of whether increased

costs alone can trigger preemption is far from settled.

| 6a

workers’ compensation plans without “relating to” exis-

ting ERISA plans. Greater Washington Bd. of Trade, —— U.S.

at, 113. S.Ct. at 584-85; Shaw, 463 U.S. at 108, 103 S.Ct.

at 2905-06. -

Second, Maine’s law, while having an economic

impact on CMI, does not have an economic impact on the

IAEA Plan itself. Clearly, any law that increases a com-

pany’s cost of doing business can be said to affect that

business’s ability to provide benefits under its welfare

benefit plan. This is not the same, however, as imposing

burdens on the welfare benefit plan itself. The increased

cost or administrative burdens imposed by the state law

must have some connection to the covered ERISA plan

before the preemption analysis can come into play. See

United Wire, Metal and Machine Health & Welfare Fund v.

Morristown Mem. Hosp., 995 F.2d 1179, 1193 (3d Cir.1993)

(“Where there is no direct nexus between a state statute

and ERISA plans, no effect on the manner of such plans’

conducting business or their ability to operate in inter-

state commerce, statutes have been upheld despite the

fact that they may have the indirect ultimate effect of

increasing plan costs.”).

In requiring CMI to provide separate coverage for

workers’ compensation, Maine does not increase the

operational expenses or input costs of the IAEA Plan,°

® In contrast, two cases that defendant relies upon, E-Sys-

tems and Travelers, involve laws that increase the costs of plan

operation. See E-Systems, 929 F.2d at 1103 (finding that because

the state tax in that case was collected from an ERISA covered

plan, the “cost of the plan must therefore increase”); Travelers,

813 F.Supp. at 1003 (finding “little doubt that the Surcharges at

17a

nor does it impose any additional administrative bur-

dens, benetit requirements, or other obligations on the

IAEA Plan. Maine’s law may increase CMI's cost of doing

business, but it does not affect the IAEA Plan’s cost of

providing benefits or costs of administration. Should CMI

choose voluntarily to change its coverage under the [AEA

Plan in response to Maine’s law, we consider such a

decision to constitute, at most, an effect of the law that is

too “tenuous” and “remote” to warrant preemption. See

Employee Staffing Servs., Inc. v. Aubry, No. C-92-4096, 1993

WL 83310 (N.D.Cal.1993), aff'd, 20 F.3d 1038 (9th

Cir.1994); cf. Mackey v. Lanier Collection Agency & Serv.,

Inc., 486 U.S. 825, 831-32, 108 S.Ct. 2182, 2986-87, 100

L.Ed.2d 836 (1988) (finding generally applicable state gar-

nishment law did not “relate to” ERISA covered plans

even though the law might burden the administration oi

such plans); Aetna Life Ins. Co. v. Borges, 869 F.2d 142,

145-46 (2d Cir.), cert. dented, 493 U.S. 811, 110 S.Ct. 57, 107

L.Ed.2d 25 (1989) (finding state escheat law did not

“relate to” ERISA plans and noting that ERISA does not

preempt many laws that have a minimal, indirect impact

on plan administration); Martort Bros. Distributors v.

James-Massengale, 781 F.2d 1349, 1358-59 (9th Cir.), cert.

denied, 479 U.S. 1018, 107 S.Ct. 670, 93 L.Ed.2d 722 (1986)

(finding state unfair labor practices statute that required

employers to pay damages based in part on fringe bene-

fits employees would have received if employers had

bargained in good faith did not “relate to” an ERISA

issue will have a significant effect on the commercial insurers

and HMOs which do or could provide coverage for ERISA plans

and thus lead, at least indirectly, to an increase in plan costs”)

(footnote omitted).

not “relate

preempted

1Ya

UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

COMBINED MANAGEMENT,

INc.,

: Civir No.

PLAINTIFE

93-39-P-H

(Fitm Auc. 2, 1993)

Brian K. ArCHINSON,

SUPERINTENDENT, BUREAU ©}

INSURANCE, STATE OF

MAINE,

tl i i i

DrereENDANT

Orver APrEIRMING RECOMMENDED Decision

OF THE MAGISTRATE JUDG!

The United States Magistrate Judge filed with the

court on June 15, 1993, with copies to counsel, his:‘Recom- |

mended Decision on Motion for Preliminary Injunction.

(he plaintiff filed its objection to the Magistrate Judge's

Recommended Decision on June 25, 1993. | have

reviewed and considered the Magistrate Judge’s Recom-

mended Decision, together with the entire record; I have

made a de novo determination of all matters adjudicated

by the Magistrate Judge’s Recommended Decision; and |

concur with the recommendations of the United States

Magistrate Judge for the reasons set forth in his Recom-

mended Decision, and determine that no further proceed-

ing is necessary.

| am satisfied that the portions of Aetna Life Ins. Co. v.

Borges, 869 F.2d 142 (2d Cir.), cert. denied, 493 U.S. 811

(1989), and Rebaldo v. Cuomo, 749 F.2d 133 (2d Cir. 1984),

20a

cert. denied, 472 U.S. 1008 (1985), relied upon by the

United States Magistrate Judge remain good law. See, e.g.,

McCoy v. Massachusetts Inst. of Technology, 950 F.2d 13, 17

(1st Cir. 1991) (referring to Rebaldo), cert. denied, 112 S.

Ct 19359 (1992).

It is therefore Orperep that the plaintiff’s motion for

preliminary injunction is Deniep and the action is Dis-

MISSED.

So ORDERED.

Dated at Portland, Maine this 2nd day of August,

1993.

/s/ D. Brock Hornby

D. Brock Hornby

United States

District Judge

2la

UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

COMBINED

MANAGEMENT, INC.,

ee Civil No.

P fy

laintiff 93-39-P-H

. (Filed June 15, 1993)

)

BRIAN K. ATCHINSON, | ?

SUPERINTENDENT, 4

BUREAU OF :

)

INSURANCE, STATE

OF MAINE,

Defendant

RECOMMENDED DECISION ON MOTION

FOR PRELIMINARY INJUNCTION

[his matter is before the court on the plaintiff's

motion for a preliminary injunction to prohibit the defen-

dant, Superintendent of the Maine Bureau of Insurance,

from enforcing its compliance with Maine’s workers’

compensation law. The plaintiff claims that because it

provides occupational disability insurance benefits

through its subscription to a multi-employer welfare ben-

efit plan covered by the Employee Retirement Income

security Act (“ERISA”), 29 U.S.C. §§ 1001-1461, the

Superintendent’s authority to regulate its workers’ com-

pensation plan is preempted by ERISA.

BACKGROUND

The plaintiff, Combined Management, Inc. (“CMI”),

is an employee leasing company located and duly

pio' g ; :

oS? .

te €

registered in Maine. It pays the wages of the employees it

leases to client companies, withholds and remits applica-

ble tederal and state taxes and provides its leased

employees with a variety of employee welfare benetits,

including medical and surgical coverage, dental cover-

age, Vision care coverage and accidental death and dis-

memberment coverage. These benefits are provided

through a subscription to the International Association of

Entrepreneurs of America Welfare Benefit Plan (“Plan”),

which the plaintiff assets is a multi-employer welfare

benefit plan as defined by 29 U.S.C. § 1002(3) and (37)(A).

The Plan is established and maintained by the Interna-

tional Association of Entrepreneurs of America Trust

(“Trust”) tor the benefit of the employees and dependents

of members of the International Association of Entrepre-

neurs of America (“IAEA”). Among the benefits provided

to the plaintiff's employees through the Plan are occupa-

tional injury and illness benefits like those mandated by

the Maine workers’ compensation laws currently in

effect. CMI pays the entire premium for work-related

in*ury and illness coverage. These benefits are neither

separately insured nor separately administered.

In January 1993 the Maine Bureau of Insurance noti-

tied CMI that under Maine’s workers’ compensation law

employers may satisfy their workers’ compensation bene-

fit obligations either by purchasing liability insurance

from an insurer authorized to do business in Maine or by

securing authorization from the Bureau to self-insure.!

*! 39-A M.R.S.A. § 403(1) provides, in relevant part, that

“[t]he employer may comply with this section by insuring and

keeping insured the payment of such compensation and other

ee Ce

23a

The Bureau made clear to the plaintiff that it did not

approve CMI's subscription to the Plan as a discharge of

its obligations under the workers’ compensation law. CMI

contends that the state's attempted regulation of its

workers’ compensation scheme represents an intrusion

into the administration of an employee benefit plan cov-

ered by ERISA that is preempted by federal law. Mem-

orandum of Law in Support of Plaintiff's Motion for

Preliminary Injunction (“Plaintiff's Memorandum”) at 5,

10-18 (Docket No. 4). The Superintendent asserts that the

Plan does not qualify as an ERISA-covered plan but that,

even if it does, Maine’s workers’ compensation law does

not “relate to” it and so is not preempted by ERISA.

Detendants’s [sic] Objection and Memorandum of Law in

Opposition to Plaintiff's Motion for Preliminary Injunc-

tion (“Detendant’s Memorandum”) at 7, 20 (Docket No.

11).

STANDARD OF REVIEW

In evaluating the plaintiff's entitlement to a prelimi-

nary injunction, the court must consider four factors, one

of which is the likelihood of success on the merits. Nar-

ragansett Indian Tribe v. Guilbert, 934 F.2d 4, 5 (1st Cir.

benefits under a workers’ compensation insurance policy.” Sec-

tion 403(3) provides the option of self-insurance. It states, in

part, “The employer may comply with this section by furnishing

Satisfactory proof to the Superintendent of Insurance of sol-

vency and financial ability to pay the compensation and bene-

fits, and depositing cash, satisfactory securities, irrevocable

standby letters of credit issued by a qualified financial institu-

tionora surety bond with the board, in such sum as the superin-

tendent may determine. ... ” 39-A M.R.S.A. § 403(3).

yee.te

24a

1991); see also Augusta News Co. v. News America Publish-

ing, Inc., 750 F.Supp. 28, 31 (D. Me. 1990). With the

consent of the parties, I agreed that the court would

bifurcate is consideration of the ERISA preemption ques-

tion which is at the heart of this litigation. Because the

Superintendent contends that the Plan is not one covered

by ERISA and that additional discovery would be

required before that issue could be determined, it was

agreed that the court would decide the following ques-

tion first: Assuming, arguendo, that the Plan is a so-called

ERISA employee benefit plan, is Maine’s workers’ com-

pensation law preempted by ERISA? See endorsement on

Plaintiff's Motion to File Reply Memorandum (Docket

No. 15). An affirmative answer will next require consider-

ation of the Superintendent’s assertion that the Plan is

not an ERISA plan. A negative answer will foreclose the

plaintiff from the relief it is seeking and necessarily ter-

minate this litigation. In this agreed posture, then, the

court effectively now has before it a defendant’s motion

to dismiss tor failure to state a claim upon which relief

can be granted.?

LEGAL ANALYSIS

ERISA establishes a comprehensive system for the

federal regulation of private employee benefit plans,

including both pension and welfare plans. 29 U.S.C.

§ 1002. Section 1144(a) of ERISA provides that all state

* Although both sides have submitted affidavits, it is not

nécessary to go beyond the allegations of the complaint to estab-

lish the factual framework necessary to a first-stage considera-

tion of the preemption question as agreed upon.

25a

laws shall be superseded “insofar as they now or hereaf-

ter relate to any employee benefit plan described in sec-

tion 1003(a) and not exempt under section 1003(b)3. .. . ”

a state law “relates to” an employee benefit plan “if it has

a connection with or reference to such a plan.” District of

Columbia v. Greater Washington Bd. of Trade, 113 S. Ct. 580,

583 (1992) (quoting Shaw v. Delta Air Lines, Inc., 463 U.S.

85, 97 (1983)). Courts have been particularly critical of

state laws which specifically refer to ERISA plans and

single them out for special treatment. McCoy v. Massa-

chusetts Inst. of Technology, 950 F.2d 13, 18 (1st Cir. 1991),

cert. denied, 112 S. Ct. 1939 (1992). However, ERISA pre-

empts state law which “relates to” covered plans ” ‘even

if the law is not specifically designed to affect such plans,

or the effect is only indirect’ ” Greater Washington Bd. of

Trade, 113 S. Ct. at 583 (quoting Ingersoll-Rand Co. v.

McClendon, 498 U.S. 133, 139 (1990)) and even if the law is

“ “consistent with ERISA’s substantive requirements’ ”

(quoting Metropolitan Life Ins. Co. v. Massachusetts, 471

U.S. 724, 739 (1985)).

While the Court has emphasized the expansive

nature of ERISA preemption, its reach is not unlimited.

* 42 U.S.C. § 1003(b) provides for exemption from ERISA

coverage in limited circumstances, including those in which a

plan is maintained solely for the purpose of complying with

applicable workers’ compensation laws or unemployment com-

pensation or disability insurance laws. 42 U.S.C. § 1003(b)(3).

Although the defendant suggests that there is an absence of

evidence that CMI’s workers’ compensation program is com-

bined significantly with other benefit programs, I will assume

for purposes of this motion that it does not qualify for this

exemption.

26a

“Some state actions may affect employee benefit plans in

too tenuous, remote, or peripheral a manner to warrant a

finding that the law ‘relates to’ the plan.” Shaw, 463 U.S.

at 100 n.21. The distinction between state laws that

“relate to” employee benefit plans and those that do not

is far from clear. The First Circuit has suggested that

where “gray areas” exist, the court should look to the

policy rationales behind ERISA and its preemption

clause, which include protection of the rights and expec-

tations of plan participants and assurance that plans are

subject to a uniform body of benefit law with minimal

administrative and financial burdens of compliance with

conflicting state and federal directives. McCoy, 950 F.2d at

17-18.

Other circuits have provided some guidance for eval-

uating “gray area” statutes. Comparing cases in which

ERISA preemption was found to occur with those in

which it was not, the Second Circuit concluded that pre-

empted laws “are those that provide an alternative cause

of action to employees to collect benefits protected by

ERISA, refer specifically to ERISA plans and apply solely

to them, or interfere with the calculation of benefits owed

to an employee.” Aetna Life Ins. Co. v. Borges, 869 F.2d 142,

146 (2d Cir.), cert. denied, 493 U.S. 811 (1989). Those that

are not preempted are “laws of general application —

often traditional exercises of state power or regulatory

authority — whose effect on ERISA plans is incidental.” Id.

“What triggers ERISA preemption is not just any indirect

effect on administrative procedures but rather an effect

on the primary administrative functions of benefit plans,

such as determining an employee's eligibility for a bene-

fit and the amount of that benefit.” Id. at 146-47.

d/a

~—

Similarly, the Ninth Circuit has grouped state statutes

held preempted because they “relate to” ERISA plans into

four categories: 1) laws that regulate the type of benefits

or terms of ERISA plans; 2) laws that create reporting,

disclosure, funding or vesting requirements for ERISA

plans; 3) laws that provide rules for the calculation of the

amount of benefits to be paid under ERISA plans; and 4)

laws and common-law rules that provide remedies for

misconduct resulting from the administration of ERISA

plans. Martori Bros. Distrib. v. James-Massengale, 781 F.2d

1349, 1356-58 (9th Cir.), cert. denied, 479 U.S. 949 (1986).

The court noted that the principle underlying all of the

decisions finding preemption is that the state law regu-

lates matters controlled by ERISA: disclosure, funding,

reporting, vesting and enforcement of benefit plans. Id.

A recent application of the Aetna Life and Martori

Bros. framework appears in Employee Staffing Servs., Inc. v.

\ubry, No. C-92-4096 SAW, 1993 U.S. Dist. LEXIS 3948

(N.D. Cal. Mar. 17, 1993), a case strikingly similar to the

one here before the court inasmuch as it too involved the

question whether a state workers’ compensation statute is

preempted by ERISA.‘ In reviewing California’s workers’

4 Section 3700 of California’s Labor Code is similar to 39-A

M.R.S.A. § 403 in that it provides that every private employer must

secure the payment of workers’ compensation by either obtaining

insurance with an approved insurer or by receiving approval from

the Director of Industrial Relations to self-insure. Approval is con-

tingent upon the employer’s furnishing proof of the ability to self-

insure and to pay any compensation that may become due to its

employees. Cal. Lab. Code § 3700(a), (b). In Employee Staffing Ser-

vices, the plaintiffs claimed that because they provided their

employees with workers’ compensation benefits though an ERISA-

covered plan, ERISA preempted state regulation.

28a

compensation statute against the Martori Bros. standard,

the court stated:

The law is one [of] general application, and

involves a traditional exercise of state power. It

does not: provide for alternative causes of action

tor employees to collect benefits protected by

ERISA; refer to ERISA plans; apply solely to

ERISA plans; nor interfere with the calculation

of benefits owed to employees. Further, it does

not: regulate the benefits or terms of ERISA

plans; create any reporting, disclosure, funding,

or vesting requirements; provide rules for the

calculation of benefits; nor provide remedies for

misconduct arising from the administration of

ERISA plans. Rather, the California Workers’

Compensation law only requires that California

employers purchase workers’ compensation

insurance or meet the state’s requirements for

self-insurance. Plaintiffs may comply with the

state law without altering the [employee bene-

fit] plan.

Id. at *11-*12. The court concluded that the law thus does

not “relate to” an ERISA-covered employee benefit plan

and therefore is not preempted. Id. at *12.

Exposing Maine’s workers’ compensation law to sim-

ilar scrutiny compels the same conclusion. It is apparent

from the language of section 403 that its purpose is to

guarantee the solvency of workers’ compensation plans.

The statute applies to all private employers, not just those

who have adopted employee benefit plans covered by

ERISA. It is not directed toward changing the rights or

expectations of employee benefit plan participants. The

plaintiff may comply with state law without altering its

employee benefit plan although, admittedly, there may be

29a

duplication or increased cost. However, many state laws

indirectly affect the cost of administering ERISA-covered

plans but in doing so do not trigger ERISA preemption.

See Aetna Life, 869 F.2d at 146 (where state statute does

not affect structure, administration or type of benefits

provided by ERISA plan, mere fact statute has some

economic impact on plan does not require it be invali-

dated). As the Second Circuit has stated, “{I]f ERISA is

held to invalidate every State action that may increase the

cost of operating employee benefit plans, these plans will

be permitted a charmed existence that never was contem-

plated by Congress.” Rebaldo v. Cuomo, 749 F.2d io,

138-39 (2d Cir. 1984), cert. denied, 472 U.S. 1008 (1985).

CONCLUSION

For the foregoing reasons, I recommend that the

plaintiff’s motion for preliminary injunction be DENIED

and that the action be DISMISSED.

NOTICE

A party may file objections to those specified por-

tions of a magistrate judge's report or proposed findings

or recommended decisions entered pursuant to 28 U.S.C.

§ 636(b)(1)(B) for which de novo review by the district

court ts sought, together with a supporting memorandum,

within ten (10) days after being served with a copy

thereof. A responsive memorandum shall be filed within

fen (10) days after the filing of the objection.

a a ee ee

30a

Failure to file a timely objection shall constitute a

waiver of the right to de novo review by the district court

and to appeal the district court’s order.

Dated at Portland, Maine this 15th day of June, 1993.

/s/ David M. Cohen

David M. Cohen

United States

Magistrate Judge

3la

OFFICE OF THE CLERK

United States District Court

DISTRICT OF MAINE

WILLIAMS S. BROWNELL

CLERK Edward T. Gignoux U.S. Courthouse

156 Federal Street, Rm. 102

Portland, Maine 04101

Tel. (207) 780-3356

March 29, 1993

lo: All Counsel of Record

Re: Combined Management v. Insurance, ME Supt.

Civil No. 93-39-P-H

Dear Counsel:

Kindly be advised that plaintiff’s motion to file reply

memorandum was endorsed as follows:

3/29/93 Granted in part as follows. During a

telephone conference with counsel this date, it

was agreed that the following threshold issue

presented by this case should be decided first:

Assuming, arguendo, that the plan of the Inter-

national Association of Entrepreneurs of Amer-

ica (“IAEA”), through which the plaintiff

allegedly provides a variety of benefits to its

employees, is a so-called ERISA employee bene-

fit plan, is Maine’s workers’ compensation law

preempted by ERISA? Plaintiff shall have to an

[sic] including 4/12/93 within which to file a

reply memorandum of not more than 15 pages

addressing this issue only. The parties agree that

no additional evidentiary materials need be pre-

sented on the issue. The threshold issue as

framed shall be decided on the papers filed to

dete and the plaintiff’s reply memorandum to

ce.

32a

be filed. if [sic] the question presented is

answered in the affirmative, the court will con-

fer with counsel concerning additional filings to

be made to complete the evidentiary record and

briefing on remaining issues relating to quali-

fication of the IAEA plan for ERISA protection.

/s/ David M. Cohen, USM].

Sincerely,

/s/ Kimberly A. Diamond,

Kimberly A. Diamond,

Deputy Clerk

Ralph Dyer, Esq.

lames Bowie, Esq.

33a

UNITED STATES DISTRICT COURT

DISTRICT OF MAINE

COMBINED MANAGEMENT,

INC.,

Plaintiff,

-versuSs-

BRIAN K. ATCHISON,

Defendant.

AFFIDAVIT OF RICHARD SPUGNARDI

Now comes Richard Spugnardi, who being duly

sworn, hereby deposes and says as follows:

1. Affiant is a principal of Combined Management,

Inc. (“CMI”) and is responsible for the business opera-

tions of the corporation, including the provision of medi-

cal and other benefits to its employees.

2. CMI is engaged in the business of employee leas-

ing and is duly registered in the State of Maine pursuant

to 32 M.R.S.A. Sec. 14052, et seq.

3. CMI is an “employer” as defined by 29 U.S.C.

Sec. 10025. CMI employs individuals and leases their

services on a long-term basis to persons, associations,

partnerships, corporations or other entities pursuant to

written contracts.

4. CMI pays the wages of its employees leased to

client companies, withholds and remits State and Federal

taxes as required by applicable law and provides its

leased employees with a variety of employee welfare

benefits, including medical and surgical coverage, dental

34a

coverage, vision care coverage and accidental death and

dismemberment coverage.

5. These benefits are provided through a subscrip-

tion by CMI to the International Association of Entrepre-

neurs of America Welfare Benefit Plan (the “Plan”). This

is a multi-employer welfare benefit plan as defined by 29

U.S.C. Sec.s 1002(3) and 1002(37)(A). A summary of the

Plan was filed with the Department of Labor pursuant to

the ERISA requirements in December, 1992.

6. The Plan is established and maintained by the

International Association of Entrepreneurs of America

Trust (the “Trust”) for the benefit of the employees and

dependents of members of the International Association

of Entrepreneurs of America (the “IAEA Association”).

7. Among the benefits provided to the employees of

CMI are occupational injury and illness benefits manda-

ted by the Maine Workers’ Compensation Act of 1992.

Such benefits are described in Articles 18 and 19 of the

Plan.

8. CMI pays a portion of the Plan’s required pre-

mium for coverages for the employees and each respec-

tive employee can make a contribution to obtain various

optional benefits. CMI pays the entire premium for any

work related injury and illness coverages as well as the

basic medical coverage. Employees pay for elected,

optional benefits.

9. The benefits provided by the Plan are adminis-

tered as a coordinated, integrated package. Occupational

injury and disability are neither separately insured nor

35a

separately administered. All claims for benefits are sub-

ject to the approval of the Plan administrator. Claims are

submitted to the administrator for review and _ for

approval or denial. All benefit portions of the Plan,

including Workmen’s Compensation, are fully re-insured

in a single re-insurance package.

10. Affiant has had various communications with

representatives of the Bureau of Insurance of the State of

Maine. CMI has received notification from the Bureau of

Insurance that it does not approve of the program for

providing benefits to CMI’s employees. It is Affiant’s

understanding that the Bureau of Insurance now requires

CMI to obtain workers’ compensation and employers’

liability insurance from an insurer authorized te do busi-

ness in Maine, and that it cease and desist from seeking

to provide Workers’ Compensation benefits by means of

the Plan.

ll. A copy of the notification received from the

Bureau of Insurance is attached hereto as Exhibit A.

12. A copy of the Plan is attached hereto as Exhibit

13. A copy of the Participation Agreement is

attached hereto as Exhibit C.

14. CMI presently employs approximately 50 per-

sons who are leased to 11 client companies located in

Maine.

15. If the Bureau of Insurance is successful in

requiring a separately administered Workmen’s Compen-

sation and Employers’ Liability program by CMI for the

benefit of its employees, CMI will suffer irreparable

36a

injury. The cost of obtaining such Workmen’s Compensa-

tion insurance is substantially in excess of the cost of

similar benefits provided under the IAEA Plan. In addi-

tion, this would seriously disrupt the ability of CMI to

provide medical and other benefits to its employees. The

Plan is an integrated and coordinated package and if CMI

is required to provide separate Workmen’s Compensation

and Employers’ Liability insurance it will necessarily

result in redundant benefits at an-excessive cost to CMI.

In addition, the Maine Workmen’s Compensation Act of

1992 provides that a failure to secure insurance as

deemed necessary by the Bureau of Insurance constitutes

a Class D crime and liability for a civil penalty of up to

$10,000 as well as revocation of CMI's authorization to do

business in the State of Maine.

16. The Plan meets all of the requirements for occu-

pational health and disability benefits as mandated by the

Workmen’s Compensation Act of 1992.

17. This Plan is in full force and effect. The Plan

now covers more than 3,000 employees throughout the

United States and has more than 40 employer subscribers.

18. There is no indication that any employee of CMI

located in the State of Maine will suffer any disadvan-

tage, harm or prejudice by reason of the continuation of

the benefits through and by means of the IAEA Plan.

Dated: February 10, 1993

/s/ Richard Spugnardi

Richard Spugnardi

neers

Isa

VERIFICATION

February 10, 1993

STATE OF MAINE

Cumberland, ss.

On this date, there appeared before me the above

named Richard Spugnardi, to me personally known, who,

being duly sworn, did state under oath the foregoing

Affidavit to be true and correct.

/s/ Barbara Ann Willicka

Notary Public/

Attorney At Law

BARBARA ANN WILLICKA

NOTARY PUBLIC, MAINE

MY COMMISSION EXPIRES

AUGUST 27, 1999

38a

EXHIBIT

John R. McKernan, Jr. Brian K. Atchinson

Governor Superintendent

(Seal)

DEPARTMENT OF PROFESSIONAL

AND FINANCIAL REGULATION

BUREAU OF INSURANCE

(207) 582-8707

Telecopier (207) 582-8716

January 29, 1993

Michael Peterson

Combined Management, Inc.

15 Lincoln St.

Lewiston, Maine 04240

RE: Independent Association of Entrepreneurs of Amer-

ica (IAEA)

Dear Mr. Peterson:

This letter is in confirmation of and to follow-up on

our telephone conversation of January 25. As I under-

stand it, you acknowledge soliciting a benefit program

which is in some way associated with the referenced

association. You portrayed the program as an alternative

to workers’ compensation for employers as well as pro-

viding further health care benefits. You represented that

your belief is that the program is federally approved.

| want to make sure that you are absolutely clear that

our conversation leaves me with serious and substantial

concerns regarding your program. Under the Maine

Workers’ Compensation Act, Maine’s employers have

ey,

39a

two methods of securing their obligations; they may pur-

chase a workers’ compensation and employers liability

insurance policy from an authorized insurer or they may

secure authorization to self-insure from the Bureau of

Insurance. No other alternatives to secure obligations are

permissible. Workers Compensation is a system which is

based entirely on laws enacted by the States, and the

federal government does not approve or authorize

insurers to transact workers’ compensation coverage or

employers to self-insure in the States. As it appears that

your program contemplates neither of the above

methods, I have no option other than to conclude that a

substantial issue exists. Furthermore I am told that, based

upon your representations, various employers are can-

celling valid workers’ compensation coverage otherwise

in force.

You compared your program to those of Bath Iron

Works and The Ceres Corporation. | would again note to

you that this is not a valid comparison. Bath Iron Works

is an authorized self-insurer. The Ceres Corporation

caused policies of workers compensation insurance to be

issued with respect to its’ [sic] clients.

I have further concerns concerning the health benefit

portion of the program you are offering. Your explana-

tions give rise to the question as to whether the program

is an uninsured multiple employer welfare arrangement

(MEWA) which would be deemed to be acting as an

unauthorized insurer under Maine law.

Upon your referral, I spoke with John Geismar, Esq.,

of Isaacson & Raymond. He was neither able to satisfy

any of my concerns nor to clarify for me the nature of the

40a

underlying IAEA program. It is my understanding that

you have not received a favorable opinion regarding its’

[sic] legality from him. If you are of a contrary view, |

would suggest that your further consultation with him

may be in your interest. If any such consultation should

lead to Mr. Geismar’s comfort level with the program and

your actions being enhanced, I would ask that he contact

this office so that any concerns we may have may be

addressed.

This letter does not constitute a formal Order or

action of the Superintendent of Insurance. I want you to

be perfectly clear, however, that at this time you should

not consider the program you are soliciting to enjoy

either the explicit or implicit approval of this office and

that any actions you engage in in furtherance of the

program are done so at your own risk of adverse action

by this office.

You will be contacted further by an investigator from

this office in the near future.

Sincerely,

/s/ Thomas M. Record

THOMAS M. RECORD, Esq.

Staff Attorney

cc John Geismar, Esq.

4la

EXHIBIT

INTERNATIONAL ASSOCIATION OF

ENTREPRENEURS OF AMERICA BENEFIT TRUST

EMPLOYEE WELFARE BENEFIT PLAN

PLAN DOCUMENT

AND SUMMARY PLAN DESCRIPTION

PLAN NO. 501

THE INTERNATIONAL ASSOCIATION OF

ENTREPRENEURS OF AMERICA BENEFIT TRUST

EMPLOYEE WELFARE BENEFIT PLAN

TABLE OF CONTENTS

ARTICLE PAGE NUMBER

eee OEE ox ote Carr cuen svete Oe eewhecaceras

GENERAL CONTRIBUTION PROVISIONS ......... 5

SCHEDULE OF MAJOR MEDICAL BENEFITS

+0 4 8 9D | Tore arrearage are Aes os

SCHEDULE OF MAJOR MEDICAL BENEFITS

2 oe |, Sara nara trae eerie aye ee

COVERED MAJOR MEDICAL EXPENSES.......... 11

DESCRIPTION OF MAJOR MEDICAL BENEFITS... 12

MAJOR MEDICAL EXCLUSIONS. .................. 17

PRE-ADMISSION CERTIFICATION (PAC) AND

CONTINUED STAY REVIEW (CSR) REQUIRE-

I oF id oe ae RRO hassel es eee 2]

5 8 8: SE rer re aero ene ee wien Mee erne s 2]

TERMINATION OF BENEFITS.............-.. AY 23

MEDICARE PROVISIONS............ ere ee (cv ae

GENERAL PLAN EXCLUSIONS ................-. 23

CLAIOE PROC BUUIREO. 6 cc cece cece as eneseswnes 24

42a

COORDINATION OF BENEFITS .....-------+5++++: 29

CLIBROGATION oo. cece cas cccccsensscde mean eee rere 30

RIGHT TO RECOVERY ..... 6500 cescccccsercewetees 30)

CONTINUATION OF COVERAGE (COBRA) .....-. 31

ooh pap ev eae eek’ eee ew eee 6 eee one 34

EMPLOYMENT-RELATED ACCIDENTAL DEATH

AND DISMEMBERMENT BENEFITS...------ + +>: 37

OPREIONAL DENTAL CARE BENEFITS ...--------- 39

OPTIONAL VISION CARE BENEFITS........------ 48

GENERAL PLAN PROVISIONS......------++5++++" 51

STATEMENT OF ERISA RIGHTS.....----+++0255++> 56

THE INTERNATIONAL ASSOCIATION OF

ENTREPRENEURS OF AMERICA BENEFIT TRUST

EMPLOYEE WELFARE BENEFIT PLAN

[his constitutes the Plan Document and Summary

Plan Description for the International Association of

Entrepreneurs of America Employee Welfare Benefit

Plan (the “Plan”). The Plan was established and is main-

tained by the International Association of Entrepreneurs

of America Benefit Trust, for the benefit of the employees

and dependents of members of the International Asso-

ciation of Entrepreneurs of America (the “ Association’),

which has elected to provide benefits under the Plan. The

Plan conforms to and is governed by the Employee

Retirement Income Security Act of 1974, as amended

(“ERISA”). The Plan is not a policy of insurance. Neither

the Association, nor the Trust, is an insurance company.

The Plan makes available two (2) alternative sched-

ules of Major Medical Benefits, designated herein as

Schedule Il and Schedule II. Plan Participants may

choose to be covered under either schedule. Plan Partici-

pants are eligible for benefits under only one of the

schedules, however.

The Plan makes available to all employees occupa-

tional injury and illness benefits as described herein.

The Plan further makes dental care benefits and

vision benefits available, on an optional basis, to those

Participants who have chosen to be covered under Sched-

ule IIL. Participants who wish to choose the dental care

benefits and vision benefits must make application for

such and pay all required contributions to the Plan

Administrator.

Plan Administrator:

International Associatien of Entrepreneurs of

America

1520 W. Airport Freeway, Suite 102

Irving, Texas 75062

(214) 259-1944

Employer Identification Number 75-2456927

ARTICLE 1.

DEFINITIONS

The following terms as ised in this Plan Document

shall have the meanings as described herein.

1.1 Accident. An unforeseen and unavoidable event

resulting in an injury which 's not due to any fault of the

covered person.

——————————————— tti‘séSCS

44a

1.2 Association. The term “Association” means The

International Association of Entrepreneurs of America.

1.3 Benefit Year. The term “Benefit Year” means a

period of twelve consecutive months beginning each Jan-

uary and running through the following December. The

terms Benefit Year and Year are used interchangeably in

this Plan.

1.4 Claims Adjuster. The term “Claims Adjuster”

means any person or entity dest mated, appointed and

employed by the Committee or the Plan Administrator to

verify eligibility, administer the payment of claims for

reimbursement, and who engages in other routine and

non-discretionary administrative functions in accordance

with the terms of the Trust and this Plan.

1.5 Benefit Review Committee. The term “Benefit

Review Committee” or “BRC” means the governing body

that oversees the operation of the Plan, according to the

Agreement and Declaration of Trust. Its members are

appointed by the Association.

amended, which provides for continuation coverage for

qualified beneficiaries.

1.7 Employer. The term “Employer” means each

employer which is a member of the Association and

which has, or may hereafter, adopt the Plan with respect

to its employees.

1.8 ERISA. The term “ERISA” refers to the Employee

Retirement Income Security Act of 1974, as amended.

45a

1.9 Home Health Care Agency. The term “Home

Health Care Agency” means a public or private agency or

organization that specializes in providing medical care

and treatment in the home. Such a provider must meet all

of the following conditions:

(A) It is primarily engaged in and duly

licensed, if such licensing is required, by the

appropriate licensing authority to provided [sic]

skilled nursing services and other therapeutic

services;

(B) It has policies established by a professional

group associated with the agency or organiza-

tion. This professional group must include at

least one physician and at least one registered

nurse (R.N.) to govern the services provided

and it must provide for full-time supervision of

such services by a physician or R.N.;

each individual; and

(D) It has a full-time administrator.

1.10 Hospital. The term “Hospital” means a licensed

accredited general hospital, which has full diagnostic,

surgical and therapeutic facilities under the supervision

of a staff of physicians, and regularly provides 24 hour

nursing service by registered nurses or licensed practical

nurses. Institutions maintained for care of the aged, rest

or nursing homes, or other extended care facilities are not

considered Hospitals within the meaning of the Plan.

1.11 Illness. The term “Illness” means a bodily disor-

der, disease, physical sickness, mental infirmity, or func-

tional disorder of covered person, which does not arise,

and which is not caused or contributed to by, or as a

46a

consequence of, any employment or occupation for com-

pensation or profit. A recurrent illness will be considered

an illness unless the concurrent illnesses are totally unre-

lated. All such disorders existing simultaneously which

are due to the same or related causes shall be considered

an illness.

1.12 Injury. The term “Injury” means a condition

caused by accidental means which results in damage to

the covered person’s body from an external force, but

which does not arise, and which is not caused or contrib-

uted to by, or as a consequence of, any employment or

occupation for compensation or profit.

1.13 Medically Necessary. The term “Medically Neces-

sary” means health care services, supplies or treatment

which, in the judgment of the attending physician, 1s

appropriate and consistent with the diagnosis and which,

in accordance with generally accepted medical standards,

could not have been omitted without adversely affecting

the patient’s condition or the quality of medical care

rendered.

1.14. Participant. The term “Participant” means each

person who is or may be entitled to receive benefits

under this Plan and who is in the employ of an Employer

which has adopted the Plan with respect to its

employees.

1.15 Occupational Illness or Injury. The term “Occupa-

tional Illness or injury” means an on-the-job illness or

injury which occurs in the course and scope of employ-

ment, in furtherance of the business of the employer, or is

caused or aggravated thereby. Benefits for Occupational

47a

Illness or Injury are sometimes referred to herein as

workers’ compensation benefits.

1.16 Outpatient Facility. A medical facility outside of a

hospital setting, or at a hospital if room and board

charges are not incurred.

1.17 Physician. A person acting within the scope of

his/her license and holding the degree of Doctor of Medi-

cine (M.D.), Doctor of Osteopathy (D.O.), Doctor of Den-

tal Surgery (D.D.S.), Doctor of Dental Medicine (D.M.D.),

or Doctor of Podiatry Medicine (D.P.M.), or Doctor of

Chiropractic (D.C.), and who is legally entitled to practice

medicine in all its branches under the laws of the state

where the services are rendered.

1.18 Physiotherapy. The treatment of disease, injury,

etc. by physical means rather than with drugs, such as by

exercises, massage, infrared or ultraviolet light, electro-

therapy, hydrotherapy, or heat.

1.19 Plan. The term “Plan” means The IAEA

Employee Welfare Benefit Plan as set forth in this docu-

ment, together with all amendments or modifications

made to it.

1.20 Plan Administrator. The term “Plan Administra-

tor” means the Committee of the Plan or, alternatively,

where designated, appointed and employed the by the

Committee, in writing, an agent, whether a legal entity or

a person, who shall, prior to said designation, appoint-

ment and employment, acknowledge in writing such

agent’s fiduciary status with respect to the Plan and shall

accept the position of Plan Administrator.

48a

1.21 Recognized Charges. The term “Recognized

Charges” refers to usual, customary and reasonable

health care expenses which result from an Illness or

Injury not related to employment. Such charges must be

for services and supplies which are Medically Necessary.

The Plan uses certain guidelines to determine Recog-

nized Charges. For all expenses (such as Hospital

expenses, doctors, laboratory, supplies, etc.), the Recog-

nized Charge allowed under the Plan is based on the

reasonable and customary allowance, which may be

adjusted periodically by the Board of Trustees.

Whenever possible, Participants should discuss

charges with their doctor or other service provider in

advance so that they are aware of any portion of the

charges that will not be reimbursed to them by the Plan.

1.22 Rehabilitation. Constructive activity by mechani-

cal and/or physical (not psychological) therapy to restore

a normal state of health.

1.23 Trust. The term “Trust” means the trust estab-

lished by the Association pursuant to the Plan, and any

other trust or fund established hereunder, as well as any

modification, amendment, extension or renewal thereof.

1.24 Workers’ Compensation Law. The term “Workers’

Compensation Law” means the benefits applicable under

the workers’ compensation law and occupational disease

law of the state or territory, including the District of

Columbia, in which your Employer’s work place or work

places are located.

49a

The term “Workers’ Compensation Law” includes

amendments to that law in effect on the date the Occupa-

tional Illness or Injury occurs. It does not include the

provisions of any law that provides non-occupational

disability benefits. It also does not include the Longshore

and Harbor Workers Compensation Act (33 U.S.C.

§§ 901-950) or any amendment thereto.

ARTICLE 2.

GENERAL CONTRIBUTION PROVISIONS

2.1 Employee Contribution:

Coverage is provided in return for payment of the

required contribution for the various benefits available

hereunder. Contribution rates are determined from time

to time by the Plan Administrator. Employees are thereaf-

ter responsible for the payment of all contributions when

due. Coverage for all benefits will terminate if the

" required contribution is not paid to the Plan Administra-

tor.

2.2 Contribution Computation:

Each Contribution will be determined by applying

the appropriate rate shown in the applicable table of

contribution rates. Contributions for benefits are based

on area classification, actual age, Deductible amount, any

optional benefits chosen, and whether the coverage is for

the Employee only or for Dependents also.

2.3 Contribution Payments:

Contributions are due and payable in advance. Con-

tributions are payable to the Administrator or to its des-

ignated representative for the collection of contributions.

—————

50a

Ail contributions are due on or before the first day of the

Contribution Month for which payment has not been

made.

The Employee is liable for all unpaid contributions. If

the required contribution is not paid on or before the

expiration of thirty-one (31) days after the contribution

due date, coverage for Covered Persons for whom the

Contribution has not been paid will end.

2.4 Change in Contribution:

The Plan reserves the right to change the contribu-

tion rates on any contribution due date on or after three

(3) months following the date the Plan is adopted. The

Plan will notify the Employees in writing of any change

in their Contribution rate 30 days in advance of such

change.

2.5 Misstatement of Age:

If the age of a Covered Person is misstated, the

contribution rate will be adjusted to the correct age. If the

age is misstated and the Covered Person was not eligible

for coverage under this Plan, the Plan liability will be

limited to a return of the contribution paid on behalf of

such Covered Person, without interest.

ARTICLE 3.

SCHEDULE OF MAJOR MEDICAL BENEFITS -

SCHEDULE II

IMPORTANT - PLEASE NOTE: This Schedule of

Benefits is for Participants who choose benefits under

Schedule Il, and who make the appropriate contributions

for such coverage. Benefits described herein, whether

5la

expressed in dollars or as a percentage amount, are pay-

able only for Recognized Charges for Medically Neces-

sary services and supplies. Charges in excess of

Recognized Charges are for services and supplies which

are not Medically Necessary are not covered by this Plan.

CAUTION: Covered persons must comply with the

pre-admission certification requirements for any Hospital

stay. Before any Hospital confinement, read the Pre-

Admission Certification (PAC) and Continued Stay

Review (CSR) requirements of this Plan Document. Fail-

ure to follow these pre-admission certification require-

ments may result in a 50% reduction in payable benefits.

Specific limitations and conditions may apply,

depending on the service supplied or procedure per-

formed. These limitations and conditions are described

elsewhere in this Plan Document.

3.1 Deductible:

Per Individual $250 per Accident or Sickness

Per Family $750 per Accident or Sickness

Lifetime Maximum for Major Medical Benefits:

Per Individual $1,000,000

3.3. Reimbursement Percentage:

Per Individual 50% of First $2000;

100% thereafter for each

Accident or Sickness,

up to any Plan maximums

3.4 Maximum Out-Of-Pocket Expense:

Per Individual $1,000 (plus deductible)

Per Family $3,000 (plus deductible)

82a

)

3.5 Hospital Benetits:

(A) Room and Board:

Daily Limit The hospital's standard

semi-private room rate

Nilaximum 120 days per person

36 Various limitations and Maximums:

Failure to pre-certify may reduce benetits up to 50%

with a maximum out-of-pocket penalty of $7,500. See the

Pre-Admission Certification and Continued Stay Review

procedures elsewhere in this Plan Document.

Maximum chronic illness benefit is 50 days lifetime,

but no more than $15,000 of recognized charges in any 12

month period, $25,000 litetime, per person.

Maximum communicable disease benefit is 50 days

lifetime, but no more than $15,000 of recognized charges

in any 12 month period, $25,000 lifetime, per person.

Maximum Magnetic Resonance Imaging (MRI) bene-

fit is $750 per illness or injury, including all ancillary and

modality charges.

Maximum Mental and Nervous Conditions benefit ts

maximum of 30 days but no more than $10,000 of recog-

nized charges in any 12 month period, $10,000 litetime,

per person.

Maximum physiotherapy and rehabilitation benefits

are maximum of 30 days, inpatient, in any 12 month

period, $10,000 lifetime, per person.

Maximum Hospice Care benefit is $10,000 lifetime,

per person payable at a maximum of $100 per day.

-~ ——

53a

Charges for care of corns, bunions, (except capsular

or bone surgery), calluses, nails of the feet, flat feet, fallen

arches, weak feet, chronic foot strain or symptomatic

complaints of the feet will not pe covered unless member

has continuous coverage under this Plan for 2 years.

Maximum Newborn benefit is maximum of $20,000

lifetime, per person.

Heart Bypass Surgery will have a $50,000 maximum

lifetime benefit that is payable at 56%. Neurological Sur-

very will have a $12,500 maximum lifetime benefit paid at

50%. Chemotherapy and Radiation therapy maximum

lifetime benefit is $5,000 payable at $1,250 per calendar

vear.

Maximum Druy benefit is $1,000 per person, per

calendar vear.

Injury or accident due to motor cycle riding has a

maximum benefit of $10,000.

BENEFITS FOR ACCIDENTS ARE PAYABLE AS OF

THE EFFECTIVE DATE FOR THE PARTICIPANT. BEN-

EFITS FOR ILLNESS ARE PAYABLE AFTER THE PLAN

HAS BEEN IN EFFECT FOR 30 DAYS.

ARTICLE 4.

SCHEDULE OF MAJOR MEDICAL BENEFITS -

SCHEDULE III

IMPORTANT - PLEASE NOTE: This Schedule of

Benefits is for Participants who choose benefits under

Schedule IIL, and who make the appropriate contributions

for such coverage. Benefits described herein, whether

54a

expressed in dollars or as a percentage amount, are pay-

able only for Recognized Charges for Medically Neces-

sary services and supplies. Charges in excess of

Recognized Charges are for services and supplies which

are not Medically Necessary are not covered by this Plan.

CAUTION: Covered persons must comply with the

pre-admission certification requirements for any Hospital

stay. Before any Hospital confinement, read the Pre-

Admission Certification (PAC) and Continued Stay

Review (CSR) requirements of this Plan Document. Fail-

ure to follow these pre-admission certification require-

ments may result in a 50% reduction in payable benefits.

Specific limitations and conditions may apply,

depending on the service supplied or procedure per-

formed. These limitations and conditions are described

elsewhere in this Plan Document.

4.1 Deductible:

Per Individual $250 per Plan Year

Per Family $750 per Plan Year

4.2 Lifetime Maximum for Major Medical Benefits:

Per Individual $1,000,000

4.3. Reimbursement Percentage:

Per Individual 80% of First $5000;

100% thereafter, up to

any applicable maximums

4.4 Maximum Out-Of-Pocket Expense:

Per Individual $1,250 per Plan Year

Per Family $3,750 per Plan Year

o 3)

+e)

4.5 Hospital Benefits:

(A) Room and Board:

Daily Limit The hospital’s standard

semi-private room rate

Maximum 120 days per person

4.6 Various limitations and Maximums:

Failure to pre-certify may reduce benefits up to 50%

with a maximum out-of-pocket penalty of $7,500. See the

Pre-Admission Certification and Continued Stay Review

procedures elsewhere in this Plan Document.

Maximum chronic illness benefit is 50 days lifetime,

but no more than $15,000 of recognized charges in any 12

month period, $25,000 lifetime, per person.

Maximum communicable disease benefit is 50 days

lifetime, but no more than $15,000 of recognized charges

in any 12 month period, $25,000 lifetime, per person.

Maximum Magnetic Resonance Imaging (MRI) bene-

fit is $750 per illness or injury, including all ancillary and

modality charges.

Maximum Mental and Nervous Conditions benefit is

maximum of 30 days but no more than $15,000 of recog-

nized charges in any 12 month period, $15,000 lifetime,

per person.

Maximum physiotherapy and rehabilitation benefits

are maximum of 30 days, inpatient, in any 12 month

period, $10,000 lifetime, per person.

Maximum Hospice Care benefit is $10,000 lifetime,

per person payable at a maximum of $100 per day.

56a

Charges for care of corns, bunions, (except capsular

or bone surgery), calluses, nails of the feet, flat fleet,

fallen arches, weak feet, chronic foot strain or symptoma-

tic complaints of the feet will not be covered unless

member has continuous coverage under this Plan for 2

years.

Neurological Surgery will have a $12,500 maximum

lifetime benefit paid at 50%.

Injury or accident due to motor cycle riding has a

maximum benefit of $10,000.

BENEFITS FOR ACCIDENTS ARE PAYABLE AS OF

THE EFFECTIVE DATE FOR THE PARTICIPANT. BEN-

EFITS FOR ILLNESS ARE PAYABLE AFTER THE PLAN

HAS BEEN IN EFFECT FOR 30 DAYS.

ARTICLE 5.

COVERED MAJOR MEDICAL EXPENSES

The Plan allowances for treatment of an Illness or

Injury are for the following services and supplies:

5.1 Medical treatment by a licensed physician. Certain

visits may not be payable if the Plan pays a surgical

benefit since that allowance includes pre-operative and

post-operative care by the physician.

5.2 Specialist consultation if the covered individual is

referred to a qualified (Board Certified) medical specialist

by the physician.

5.3 Surgical treatment by a legally qualified physical

[sic] or surgeon The Plan surgical allowance includes

post-operative care by the physician.

57a

5.4 Anesthesia by a professional anesthesiologist.

5.5 X-Ray and laboratory services.

5.6 Radiation therapy, including radioactive substances,

and/or chemotherapy.

5.7 Hemodialysis.

5.8 Physiotherapy by a licensed physiotherapist.

5.9 In-hospital private duty nursing by a registered

nurse (R.N.), for up to 15 shifts (one shift equals up to 8

hours) per person per Benefit Year. Medical need for

private duty nurses must be substantiated by a physician.

5.10 Hospital clinic and other outpatient services

(except as otherwise specified for ambulatory surgery

and pre-admission testing).

5.11 Local professional ambulance transportation to or

from the Hospital, and if the Iilness or Injury requires

special and unique Hospital treatment, up the amount set

forth in the Schedule of Benefits for transportation (by

professional ambulance, railroad or commercial airline on

a regularly scheduled flight) within the United States or

Canada to the nearest Hospital equipped to furnish the

treatment.

5.12 Drugs and medicines which require a physician's

written prescription unless the Participant is entitled to

benefits from any other prescription benefit program,

then benefits are payable under that program.

5.13 Insulin and syringes for treatment of diabetes.

5.14 Blood or blood plasma and its administration.

58a

5.15 Rental (up to the purchase price) or purchase of

basic prosthetics, crutches, wheelchairs and other neces-

sary medical equipment, appliances and supplies autho-

rized by a licensed physician for a specific Illness, Injury

or loss of limb occurring while eligible for benefits under

this Plan. Benefits are not payable for air conditioners, air

purifiers, motorized transportation equipment, escalators

or elevators, swimming pools, and the like.

5.16 Dental services provided within the first six

months after accidental injury to sound natural teeth, for

treatments needed as a result of the accident, including:

one oral examination with necessary x-rays, tooth extrac-

tion, root recovery, tooth replantation, alveoloplasty, open

reduction, including splinting to stabilize teeth, care for

fractures or dislocation of the jaw, and general anesthesia;

crowns, root canal therapy and dentures; surgical exci-

sion of an impacted tooth. No other dental services are

eligible.

5.17 Charges for Magnetic Resonance Imaging (MRI), as

limited in the Schedule of Benefits.

ARTICLE 6.

DESCRIPTION OF MAJOR MEDICAL BENEFITS

6.1 General:

The Plan pays Major Medical Benefits pursuant to

either Schedule II or Schedule III herein, but only for

Recognized Charges for Medically Necessary services

and supplies; charges in excess of Recognized Charges, or

for services or supplies which are not Medically Neces-

sary, are not covered by the Plan. Specific limitations and

59a

conditions, as described elsewhere in this Document, may

apply, depending upon the type of service or benefit; and

covered persons must comply with the Pre-Admission

Certification requirements before any Hospital stay for

the Major Medical Benefits under this Plan. Failure to do

so may substantially reduce, or eliminate, benefits under

the Plan.

6.2 Major Medical — Limitation for Pre-existing Condi-

tions:

A Pre-existing Condition means a disability or illness

which manifested itself prior to the effective date of a

Participant’s coverage under this Plan. A disability or

illness shall be considered to have been in existence prior

to the effective date of coverage, if, during that time:

(A) any professional advice or treatment by a

physician or other practitioner of the healing

arts, or any medical supply (including but not

limited to prescription drugs or medicines) was

obtained for that disability or illness, or,

(B) the disability or illness was manifest or

active, or

from which one learned in medicine could with

reasonable accuracy have diagnosed the disabil-

ity or illness.

6.3. Deductible Amount:

The deductible is the amount of Recognized Charges

which you pay before you are entitled to the major medi-

cal benefits. The deductible amount under Schedule III is

$250.00 annually per each Participant and each depen-

dent.

60a

Only one deductible applies if two or more eligible

family members are injured in the same accident.

The maximum number of family deductibles is three

per family per Plan year; however, any recognized

charges which you pay in the last quarter of the Plan Year

that are applied to the deductible amount but do not

equal the deductible amount, are carried over to the next

Plan Year and will apply to the deductible amount for

that year.

6.4 Plan Payment:

Except where otherwise indicated in this section, the

Plan pays 80% of Recognized Charges in excess of the

deductible amount until you have met your out-of-pocket

maximum. See the Summary of Benefits for your out-of-

pocket maximum. Thereafter, the Plan will pay 100% of

Recognized Charges. The Participant is responsible for

the balance. All charges which are not Recognized

Charges and/or charges in excess of Plan limitations are

the responsibility of the Participant.

Whenever possible, discuss fees and charges with

doctors and other health care providers before treatment.

It is in your best interest to discuss fees and charges and

to review each bill to ensure that it complies with these

discussions.

6.5 Hospital Care:

The Plan will generally pay for up to 365 days per

covered person per Benefit Year for Medically Necessary

Hospital confinement due to Illness or Injury.

6la

Many non-emergency procedures and treatments can

now be performed using the Hospital’s outpatient facili-

ties (operating room, recovery room, cystoscopy room,

etc.) so that an overnight stay can be avoided. Claims are

reviewed and days that are determined by the designated

review organization to not be Medically Necessary will

be denied for coverage purposes.

Discuss the diagnosis with the doctor to make sure

that each day in the Hospital is necessary.

The Plan Administrator at its discretion, may limit

the number of recognized Hospital days for a given IIl-

ness based upon the diagnosis and course of treatment.

6.6 Hospital Confinement:

If you or an eligible dependent are admitted to a

Hospital, advise the admitting office of the Hospital of

your Plan coverage. The Hospital will initiate the claim

with the Plan. If there is coverage by any other health

Plan, inform the admitting office.

6.7 Private Room Accommodations:

The Plan does not pay for private room charges. If a

private room is used, the Plan will only pay the average

per diem charge for semi-private confinement at other

Hospitals in the geographic area adjacent to the confining

Hospital. The Participant will be responsible for the

entire difference between the average semi-private room

charge and the charge for the private accommodations.

6.8 Travel Outside of the U:S::

No benefits are payable for Injury occurring or IIl-

ness contracted while traveling outside of the United

62a

States except on a temporary basis, not to exceed 60

contiguous days of travel.

6.9. Newborn Children:

Under a family membership, benefits available from birth

for:

(A) The treatment of Iliness or Injury, or

(B) Nursery Care in an approved premature

unit for an infant weighing less than 2.500

grams (5.5) pounds, or

weight.

6.10 Mental and Nervous Conditions and/or Substance

Abuse:

The Plan pays limited benefits, as set forth in he [sic]

Schedule of Benefits, for treatment of mental and nervous

conditions and/or substance abuse; but please note that

substance abuse benefits are payable only for treatment at

an approved inpatient or outpatient substance abuse

facility. PAC AND CSR APPROVAL FOR THIS BENE-

FIT IS REQUIRED.

6.11 Limitation of Benefits for Chronic Illness:

Benefits for treatment of Chronic [Illness such as

asthma, allergy, sickle cell anemia, Tay-Sachs disease, or

any other chronic condition are limited as specified in the

Schedule of Benefits.

6.12 Communicable Diseases:

Benefits for treatment of communicable diseases such

as acquired immune deficiency syndrome (AIDS), herpes,

63a

poliomyelitis, venereal disease, etc. are also limited as

specified in the Schedule of Benefits.

6.13 Ad mission Services:

Services by a doctor or agency for interpretation of

tests and/or administration of tests routinely ordered by

the Hospital as part of the Hospital admitting process are

eligible under Major Medical.

6.14 Outpatient Surgery:

The Plan will pay benefits for same day surgical

facility treatment on the same basis as in-Hospital care

providing the surgical facility is equipped comparably to

an accredited Hospital facility.

6.15 Physiotherapy and Rehabilitation:

The Plan will pay for services of a licensed physi-

otherapist when such services are required as a result of

Injury or Illness resulting in Hospital confinement and

the attending physician prescribes physiotherapy or reha-

bilitation. Such services must be approved by PAC, and

the benefits for these is limited, as set forth in the Sched-

ule of Benefits.

6.16 Convalescent Care:

When recommended by PAC or CSR, the Plan will

pay for charges made by a convalescent nursing facility

for the following services and supplies furnished by the

facility during the first 120 days of convalescent confine-

ment in any one convalescent period. Only charges

incurred in connection with convalescence from the IIl-

ness or Injury for which the covered person is confined

will be eligible for benefits. These expenses include:

64a

(A) Room and board, including any charges

made by the facility as a condition of occupancy,

or on a regular daily or weekly basis such as for

general nursing services. If private room accom-

modations are used, the daily room and board

charge allowed will not exceed the facility’s

average semi-private room charge or an average

semi-private room charge for confinement at

similar institutions in the geographic area adja-

cent to the institution, whichever is less.

(B) Medical services customarily provided by

the convalescent facility with the exception of

private duty or special nursing services and

physicians’ fees.

casts, furnished for use during the convalescent

period, but no other supplies.

6.17 Home Health Care:

These benefits apply to you and your eligi-

ble dependents. The Plan will pay an allowance,

as specified in the Schedule of Benefits, under a

home health care plan when recommended by

PAC or CSR. The allowance is for charges made

by a recognized Home Healthcare Agency for

the following:

(A) Part-time or intermittent nursing care by

or under the supervision of a registered profes-

sional nurse (R.N.) or licensed professional

nurse (L.P.N.);

(B) Part-time or intermittent home health aid

services which consist primarily of caring for

the Member; or

provided by a Home Healthcare Agency.

65a

Home health care benefits are payable only if:

1. A home heaith care program was estab-

lished and approved by the attending physician

within 7 days following discharge from the Hos-

pital;

2. Home health care comme. ces during such 7

days for the same or related condition which

required hospitalization; and

3. The attending physician certified in writing

that the proper treatment of the condition would

otherwise require inpatient confinement in a

Hospital or nursing home that qualifies as a

skilled nursing facility as defined Medicare.

6.18 Hospice Care:

Benefits for Hospice Care apply only to a terminally

ill Participant (a person who has a life expectancy of 6

months or less), and are limited as specified in the Sched-

ule of Benefits.

6.19 Outpatient Psychiatric Benefit:

The eligible expenses are the charges incurred for the

services of an eligible provider are licensed Medical Doc-

tors, licensed psychologists or licensed social workers.

These services must be rendered on an outpatient basis,

and benefits for these are limited as set forth in the

Schedule of Benefits.

Your eligible provider must complete your claim(s)

with the exact date(s), including year, on which services

were rendered.

This benefit is not subject to the deductible and co-

payment provisions set forth in the Summary of Benefits

66a

and does not count for annual out-of-pocket deductibles

or co-insurance maximums.

6.20 Ambulance Benefit:

The Plan will pay for ambulance service up to the

maximum specified in the Schedule of Benefits. This ben-

efit is not subject to the deductible co-payment provisions

set forth in the Schedule of Benefits for annual out-of-

pocket deductibles or co-insurance maximums.

6.21 Chiropractic Benefits:

THIS BENEFIT IS ONLY AVAILABLE UNDER

SCHEDULE III. The Plan will pay for chiropractic ser-

vices, inclusive of all ancillary and modality charges, at

up to $20.00 per visit, for a maximum of 15 visits per year.

This benefit is not subject to the deductible and co-pay-

ment provisions set forth in the Schedule of Benefits and

does not apply to out-of-pocket maximums.

ARTICLE 7.

MAJOR MEDICAL EXCLUSIONS

Any service, charge or fee not specifically set forth in

this Plan Document is excluded from coverage under the

Pian. In addition, the following exclusions and limita-

tions apply to Major Medical expenses incurred by all

covered persons:

7.1 Hospitalization furnished under Federal, State or

other law;

7.2 Care in a veteran’s facility or Hospital operated by

the United States Government;

67a

7.3 Services and supplies for which no charge is made,

or for which the covered person is not legally obligated to

pay, or for which no charges would be made in the

absence of this coverage;

7.4 Confinement primarily for custodial care or for rest

cures or for long-term care;

7.5 Confinement for diagnostic studies, or for cosmetic

surgery;

7.6 Charges in excess of what the Plan allows as Recog-

nized Charges;

7.7 Eye refractions; eyeglasses, hearing aids and the

testing for and fitting thereof;

7.8 Emergency room treatment when services were not

necessary to be delivered in emergency room;

7.9 Dental services or confinement for dental services,

except those required as a result of an accident occurring

while the patient was eligible for benefits under the Plan,

and rendered within six months of the accident.

7.10 Cosmetic or plastic surgery, all procedures per-

formed primarily for psychological purposes or to pre-

serve or improve appearance rather than to restore the

anatomy and/or functions of the body which are lost or

impaired due to Illness or Injury, or confinement for such

surgery or procedures.

7.11 Membership in, or fees, dues or charges incurred

with regard to recreational facilities, fitness centers, diet,

nutritional or stress management centers, even though

prescribed or recommended by a physician.

68a

7.12 Air conditioners, air purifiers, motorized wheel-

chairs, motorized transportation equipment, escalators or

elevators, swimming pools and the like.

7.13. Home health nursing care or hospice or except as

otherwise provided in this Plan Document.

7.14 Well-baby care; circumcision before the thirtieth

day of life.

7.15 Charges in connection with an Injury or Illness

arising out of or in the course of employment for which

benefits are payable under workers’ compensation laws

(benefits may be denied if you or your dependent fail to

prosecute a workers’ compensation claim).

7.16 Charges for services or supplies which are not con-

sistent with the diagnosis and treatment of a condition.

7.17 Charges tor medical services, supplies and treat-

ment unless performed or prescribed as necessary by a

legally licensed physician, which for the purposes of

medical and surgical benefits under the Plan means a

Doctor of Medicine (M.D.) or a Doctor of Osteopathy

(D.O.). However, for treatment of Injury to the mount

[sic] or natural teeth due to accident, services of a Doctor

of Dental Surgery (D.D.S.) are recognized. For dental and

optical benefits, the services of the properly licensed

practitioner within the scope of the designated benefits

shall also be recognized.

7.18 Charges for which any mandatory automobile no-

fault benefits are payable.

7.19 Charges which are in excess of scheduled Plan

allowances and limitations.

a Te

69a

7.20 Charges for testing and treatment of infertility or

for artificial insemination or in-vitro fertilization.

7.21 Charges for genetic testing or counseling.

7.22 Charges in connection with dental work or treat-

ment (except as allowed under the “Covered Major Medi-

cal Expenses” section of this Plan Document).

7.23 Charges for experimental procedures or drugs.

7.24 Charges for any services rendered by the claimant

or by any person who is a relative by blood or marriage

or resides in the same household as the claimant.

7.25 Charges in connection with an Illness or Injury that

was deliberately self-inflicted, suicide or attempted sui-

cide while sane or insane, (or attempted threat) or

resulted from the person participating in an illegal act.

7.26 Charges in connection with an Illness or Injury that

incurred or is a result of a declared act of war or military

service.

7.27 Charges for drugs or vitamins that can be pur-

chased without a doctor’s prescription.

7.28 Charges in connection with experimental or obso-

lete procedures: the Plan will not pay for a Hospital stay

for any procedure if it is no longer generally regarded as

effective or if it is experimental in the sense that its

effectiveness is not generally recognized.

7.29 Charges for treatment of obesity.

7.30 Charges for treatment of a sexual dysfunction not

related to organic disease.

70a

7.31 Charges for acupuncture.

32 Charges for radial keratotomy.

33 Charges in connection with temporomandibular

joint disorders (TMjD).

NI]

7.34 Charges for care of corns, bunions (except capsular

or bone surgery), calluses, nails of the feet, flat feet, fallen

arches, weak feet, chronic foot strain or symptomatic

complaints of the feet, unless there has been continuous

coverage under this Plan for two (2) years.

7.35 Charges for services or supplies which constitute

personal comfort or beautification items, television or

telephone use, or in connection with custodial care

7.36 Additional charges for weekend admissions, when

admission on a weekend was unnecessary.

7.37 Charges for elective abortion.

7.38 Charges for contraceptives regardless of intended

use.

7.39 Charges in connection with intersex surgery (trans-

sexual operation or complications therefrom).

7.40 Charges incurred while the Member is acting as a

pilot or a member of a flight crew.

7.41 Charges for non-emergency care or treatment not

incurred within the United States.

7.42 Charges for routine physical examinations, pre-

marital examinations or routine immunizations.

7.43 Charges for organ transplants or any medical

expenses incidental to hospitalization for an organ trans-

plant.

71a

7.44 Charges for personal or home-based artificial kid-

ney equipment.

7.45 Charges for any expenses by surgery to the jaw

(Maxilla or mandible) except to the extent necessary for

the treatment of cancer or tumor, or to repair within one

year, damage caused by a covered accident, and such

repair occurs while covered under this Plan.

7.46 Charges for correction or treatment of congenital

defects, except for treatment of a congenital abnormality

in a covered Dependent born while the parent is covered

for Dependant [sic] benefits under this Plan.

7.47 Charges for services rendered prior to the covered

Person's effective date of coverage.

7.48 Charges for immunizations required for travel and

physical exams for employment, vehicle licensing, or pre-

marital purposes.

7.49 Charges for treatment of eating disorders, i.e.,

anorexia, bulimia.

ARTICLE 8.

PRE-ADMISSION CERTIFICATION (PAC) AND

CONTINUED STAY REVIEW (CSR) REQUIREMENTS

8.1 Pre-Admission Certification (“PAC”) and Continued

Stay Review (“CSR”) refer to the process used to certify

the medical necessity and length of any Hospital confine-

ment as a registered bed patient. PAC and CSR are per-

formed by a specialized utilization review organization

under contract with the Plan. PAC and CSR requirements

apply to the Major Medical Benefits available under both

Schedule II and Schedule UI herein.

72a

PAC should be requested by you or your dependent

for each inpatient Hospital admission. You or your physi-

cian or the Hospital should call the review organization

prior to each Hospital admission as a registered bed

patient. To obtain the PAC or CSR organization in your

area, contact Plan Administrator. Your physician will then

be notified by the review organization of the length of

certification for that admission. For emergency inpatient

admissions, your physician or the Hospital should call

the review organization directly for PAC.

When continued Hospital confinement past the

number of days certified is indicated, you or the physi-

cian or Hospital should request CSR for the excess days,

prior to the end of the certified length of stay.

NOTE: Failure to obtain mandatory pre-admission

certification and continued stay review will result in

reduced benefits.

All Hospital care must be certified prior to admis-

sion. Emergency admissions must be reported within 48

hours.

Benefits payable under this Plan for Hospital charges

will be reduced for any charges made during a Hospital

Confinement for which PAC is not performed.

Those expenses incurred for which payment is

excluded because of failure to obtain PAC or CSR will not

be considered as expenses incurred for the purpose of

any other part of this Plan, except for the “Coordination

of Benefits” section.

73a

ARTICLE 9.

ELIGIBILITY

9.1 Employee Eligibility:

For non-occupational illness and injury benefits, an

employee shall be eligible on the first day of the month

for which his or her Employer pays its first contribution

to the Trust and the employee is actively at work, or is

mentally and physically able to work if not scheduled for

work on such day. Eligibility for benefits is not effective

until the employee has completed the enrollment process

discussed in [sic] under “Enrollment” below.

9.2 Dependent Eligibility:

Dependents are eligible for benefits only through the

Participant. Any dependent confined to a Hospital when

that dependent would normally become eligible will first

become eligible for benefits only after discharge from the

Hospital. Newborn infant dependents are eligible if prop-

erly enrolled in the Plan and under a family membership.

Refer to “Newborn Children” below.

Your eligible dependents are:

(A) Your legal spouse; and

(B) Your unmarried dependent children under

age 19 (up to age 23) if a full-time student in an

accredited college or university), including

legally adopted children or stepchildren.

If a husband and wife are concurrently eligible under

the Plan as employees, each dependent child of such

husband and wife shall be considered a dependent of one

spouse only.

74a

No person shall be eligible for benefits as both an

employee and a dependent. For dependents to be eligible,

they must be mentally and physically able to engage in

activities considered normal for persons of like age and

Sex.

9.3. Enrollment:

Enrollment is [sic] the Plan is the first step you must

take to be able to receive benefits. For your own initial

enrollment, complete the Enrollment Card distributed to

you and return it to the Plan Administrator. To enroll new

dependents in the Plan after your initial enrollment, com-

plete and [sic] Enrollment Card and return it to the Plan

Administrator within 30 days after marriage or 60 days

prior to the birth or adoption of a child. If the Plan

Administrat

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