A multiple employer welfare arrangement (MEWA) has agreed to shut down its operations and distribute the plan assets to the plan participants.

The Internal Revenue Service (IRS) negotiated the agreement with the Millennium Multiple Employer Welfare Benefit Plan, Richardson, Texas, IRS officials say.

The MEWA filed for bankruptcy court protection at the U.S. Bankruptcy Court for the Western District of Oklahoma in June 2010.

The agreement with the IRS calls for the Millennium Plan to terminate its operations and liquidate and distribute $80 million in assets to the plan’s individual participants.

The agreement should help resolve the hundreds of income tax and penalty examinations of employers and employees who had participated in the Millennium Plan, officials say.

A MEWA is supposed to give small employers a vehicle for joining together to buy health insurance at attractive rates, but the IRS has accused some MEWA organizers of offering to provide participating employers with tax benefits that the IRS believes the MEWAs cannot provide.

The Millennium Plan marketed itself as an Employee Retirement Income Security Act (ERISA) plan that would qualify participating employers for a tax deduction, officials say.

In 2009, in a lawsuit filed in a U.S. District Court in eastern Texas, the IRS described the Millennium Plan as being a fraudulent tax shelter and demanded the payment of penalties, officials say.

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