The Association Health Plan Rule Is Gone: What Applies Now

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The Employee Benefits Security Administration, writing for the Labor Department, published 89 FR 34106 on April 30, 2024. This rule is effective on July 1, 2024. It rescinds the 2018 “Definition of Employer Under Section 3(5) of ERISA—Association Health Plans” regulation at 29 CFR Part 2510, so the longstanding pre-2018 bona fide group-or-association test is the Department's interpretation again.

What is now permitted, and what stopped applying?

This document rescinds the Department of Labor's 2018 rule entitled “Definition of Employer Under Section 3(5) of ERISA—Association Health Plans” (2018 AHP Rule), according to the abstract in 89 FR 34106. The 2018 AHP Rule established an alternative set of criteria from those set forth in the Department's pre-2018 AHP Rule (pre-rule) guidance for determining when a group or association of employers is acting “indirectly in the interest of an employer” under section 3(5) of ERISA for purposes of establishing an association health plan as a multiple employer group health plan.

What stopped applying on July 1, 2024 is that alternative pathway. The final rule rescinds the 2018 AHP Rule in its entirety. Accordingly, the 29 CFR Part 2510 regulation established by the 2018 AHP Rule and the related amendment to the 29 CFR Part 2510 regulation made by the 2018 AHP Rule are rescinded, according to 89 FR 34106. The notice carries RIN 1210-AC16 and amends 29 CFR Part 2510.

What still applies — and what a broker or association program manager may still use — is the Department's longstanding pre-rule guidance on when a group or association is a bona fide employer group or association that may sponsor a single multiple employer plan. The Department states that the rescission leaves in place that pre-rule guidance, according to 89 FR 34106.

The pre-rule test, as the Department restates it in the background of 89 FR 34106, has consistently focused on three criteria: (1) whether the group or association has business or organizational purposes and functions unrelated to the provision of benefits (the “business purpose” standard); (2) whether the employers share a commonality of interest and genuine organizational relationship unrelated to the provision of benefits (the “commonality” standard); and (3) whether the employers that participate in a benefit program, either directly or indirectly, exercise control over the program, both in form and substance (the “control” standard).

The 2018 alternative that is gone had loosened those guardrails. Those provisions, and the 2018 regulation that housed them, are rescinded.

Existing arrangements are addressed in the rule's preamble, not by a blanket grandfather. The Department describes a temporary safe harbor from enforcement announced on a date the sealed abstract does not restate here, after a district court held core 2018 provisions invalid, and states that the temporary safe harbor from enforcement expired long ago, and that the Department is not aware of any AHPs that currently exist in reliance on the 2018 AHP Rule, according to 89 FR 34106. The notice also states that no commenter presented any claims of ongoing reliance on the 2018 rule. That is preamble treatment of existing arrangements. It is not a sentence that grandfathers every association plan formed between 2018 and 2019.

This page is scoped to a sealed set of 1086 rules from 11 federal agencies over September 1, 2023 – September 1, 2026. Later advisory opinions would sit outside this snapshot.

What cost or time does the rescission remove?

The 2018 pathway is no longer a second test a producer has to track. An agency placing small-group coverage through an association no longer has to ask whether the arrangement could still lean on geography-only commonality, a benefits-primary association, or working-owner participation under 29 CFR Part 2510, because that section as adopted in 2018 is rescinded, according to 89 FR 34106.

What the agency still has to do is the pre-rule bona fide analysis: business purpose unrelated to benefits, commonality unrelated to benefits, and employer control. That analysis is facts-and-circumstances. The Department lists factors from its longstanding advisory opinions, including how members are solicited, who participates, how the group was formed, preexisting relationships, and who actually controls the benefit program, according to 89 FR 34106.

The rule does not say a dollar of premium saved. The rule does not say a filing fee that disappeared. The rule does not say a penalty amount for having used the 2018 criteria. Where 89 FR 34106 is silent on a figure, this page does not invent one. The operational saving is a single test instead of two, and a clear statement that the 2018 regulation is not the Department's current interpretation.

The Department also states that, without the core provisions the district court held invalid, the 2018 AHP Rule could not be operationalized and would provide no meaningful guidance. Rescission removes that unused, court-invalidated alternative from 29 CFR Part 2510 so producers are not citing a CFR section that the Department has withdrawn.

Related insurance operational pages on this site include the insurance compliance documentation checklist, insurance compliance automation ROI, and the insurance compliance automation checklist. Those pages do not interpret ERISA section 3(5).

How can an agency adopt the change without tripping what still applies?

Compliant adoption is a book-of-business review, not a marketing rewrite. Each association health arrangement the agency places maps to whether it was ever described as relying on the 2018 rule, whether it meets the pre-rule bona fide test, and whether the coverage is a single multiple employer plan or a collection of individual employer plans.

1. Inventory every association, chamber, or multiple-employer health arrangement in the book, then record the association's stated purpose, the commonality among employer members, and who controls the plan, against the three pre-rule criteria restated in 89 FR 34106.

2. Flag any file, proposal, or plan document that still cites 29 CFR Part 2510 as adopted in 2018, or that still describes geography-only commonality, a benefits-primary association, or working owners without common-law employees as the ERISA employer. Those are the 2018 criteria the rescission removes.

3. Do not treat the preamble's discussion of the expired 2019 safe harbor as a grandfather. Existing arrangements are addressed in the preamble; the Department says the safe harbor expired and that it is not aware of AHPs still relying on the 2018 rule, according to 89 FR 34106.

4. Route any arrangement whose bona fide status is unclear to counsel or a qualified benefits professional. The pre-rule test is facts-and-circumstances; a producer checkbox is not the Department's determination.

5. Separate MEWA and state-insurance questions from the ERISA employer question. The notice discusses MEWAs and state regulation in the background; this rescission decides the 2018 definition of “employer,” not every state form.

6. Keep 89 FR 34106 next to the file so a later reviewer can see that 29 CFR Part 2510 as the 2018 AHP Rule is rescinded.

Employee Navigator is the benefits-administration system many agencies and employers already use to store plan eligibility, enrollment, and employer-group records. EZLynx is the agency-management and quoting system many of the same producers already use to store accounts, policies, and carrier submissions. Neither product is named in 89 FR 34106. The operational question is whether an Employee Navigator group still labeled as an “AHP” and an EZLynx account still citing the 2018 rule reflect a bona fide association under the pre-rule test.

The rule does not say how an agency must configure Employee Navigator or EZLynx. The rule does not say that a group name of “association plan” is a bona fide group or association. Those tools can hold the account, the census, and the document. A qualified professional applies section 3(5) of ERISA.

How does an agency operationalize the change at volume?

Reconcile the book of business against the change: each policy or plan maps to the notice, form, or disclosure the rule now requires and the date it is due. US Tech Automations flags policies or plans still carrying the superseded wording and routes the renewal or amendment to the producer or plan administrator.

That is a flag-and-route job. US Tech Automations can mark an EZLynx account whose proposal still cites the 2018 AHP Rule, or an Employee Navigator group whose description still treats working owners without employees as AHP participants under rescinded 29 CFR Part 2510, and send that file to the producer. It cannot decide whether an association is bona fide, cannot issue a the annual return/report position, and cannot certify ERISA coverage.

The useful volume pattern is one source event per arrangement, split by what stopped applying and what still applies. The 2018 alternative criteria are gone as of July 1, 2024. The pre-rule bona fide test remains. Flattening those into “association health plans are illegal” is how an agency over-removes coverage that still fits the longstanding test. Flattening them into “nothing changed” is how an agency leaves 2018 wording in a live proposal.

US Tech Automations can keep the 2018-language flag and the bona fide-review owner visible. A qualified professional still reads the association documents. The software routes; the producer or plan administrator concludes.

What questions do brokers still ask?

What regulation section was rescinded?

The 29 CFR Part 2510 regulation established by the 2018 AHP Rule, and the related amendment to 29 CFR Part 2510, are rescinded, according to 89 FR 34106.

What test governs again?

The Department's longstanding pre-rule guidance on a bona fide group or association of employers: business purpose unrelated to benefits, commonality of interest unrelated to benefits, and employer control over the program, as restated in 89 FR 34106.

When did the rescission take effect?

This rule is effective on July 1, 2024.

Are existing 2018-rule arrangements grandfathered?

Existing arrangements are addressed in the preamble, not by a blanket grandfather. The Department states that the 2019 temporary safe harbor expired long ago and that it is not aware of any AHPs that currently exist in reliance on the 2018 AHP Rule, according to 89 FR 34106.

Does this notice say association health coverage is prohibited?

No. The rescission removes the 2018 alternative criteria. A bona fide group or association that meets the pre-rule test may still be an “employer” under section 3(5) of ERISA, according to the Department's description of the guidance left in place in 89 FR 34106.

Can agency software decide that an association is bona fide?

No. A workflow can flag superseded 2018 wording. A qualified professional applies the pre-rule criteria and 29 CFR Part 2510 as now in force.

Key Takeaways

• 89 FR 34106, RIN 1210-AC16, rescinds the 2018 AHP Rule effective July 1, 2024.

• The rescinded text is 29 CFR Part 2510 as adopted in 2018, plus the related amendment to 29 CFR Part 2510.

• The pre-rule bona fide test — business purpose, commonality, and control — is the Department's interpretation again.

• Existing arrangements are addressed in the preamble; the notice does not grant a blanket grandfather.

• The notice does not publish a penalty dollar amount; it removes an alternative definition of “employer,” it does not ban every association plan.

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Every date, citation, RIN, CFR reference, and figure in these posts is copied verbatim from the Federal Register and eCFR as of the snapshot date. Nothing is estimated, modeled, or extrapolated. This is not legal or tax advice.

Source: Federal Register / eCFR

This page is for informational purposes only. It is not legal or tax advice and does not create an attorney-client relationship. Read 89 FR 34106 and the current text of 29 CFR Part 2510, and consult a qualified professional about a particular association, plan, or employer group.

Last reviewed: April 30, 2024

The exception path is the agentic workflow layer.