AVERAGE OF SAVINGS
The dreaded ERISA lien. The vendors representing ERISA self-funded health plan’s interest certainly want you to believe that it must be reimbursed in full. They will cite the US Airways v McCutchen case, tell you that they are not subject to equitable doctrines and therefore do not have to reduce for attorney fees or limit or waive their full recovery even if your client was not made whole from a compromised settlement. We demand that an ERISA plan be fair and equitable.
How We Get Results/Technical Compliance
The most important thing that must be fully vetted is the policy language of the ERISA plan. If you are not obtaining, reviewing, and analyzing the Plan Documents, you may be losing too many settlement dollars to repaying a reimbursement demand.
Our team dives deep into the Plan Documents after thoroughly reviewing the individual claims that create the asserted interest.
What is ERISA?
The Employee Retirement Income Security Act of 1974 (ERISA) establishes the terms of employee pension and benefit plans. According to the U.S. Department of Labor, ERISA protects the interests of employee benefit plan participants and their beneficiaries. It requires plan sponsors to provide plan information to participants. It establishes standards of conduct for plan managers and other fiduciaries. It establishes enforcement provisions to ensure that plan funds are protected and that qualifying participants receive their benefits, even if a company goes bankrupt.
How Do You Identify an ERISA Plan?
Obtaining a copy of your client’s insurance benefit card is always the best way to identify the appropriate entity with a possible lien interest on the settlement funds.
ERISA governs nearly all employer health plans. The primary exceptions are government employer plans or church plans which are governed by state law. Most, if not all, ERISA health insurance plans state that injuries caused by a liable third party are not a covered expense and provide for reimbursement when a plan does pay for injury related medical expenses (often referred to as subrogation clauses).
In terms of lien resolution, the subrogation rights of an ERISA plan are loosely defined by federal code 29 USC 1132(a)(3) which allows for “appropriate equitable relief.” It is from this statute that employee benefit health insurance plans are evaluated for their validity.
ERISA Plans are identified as being either self-funded or fully insured based on the type of policy held by the employer and where the funds originate for payment of medical claims. There are two main ways to assess the funding status of the plan. Subrogation vendors will point you to the policy language (usually the Summary Plan Description (SPD)). It likely has a section indicating that it is self-funded, if they are alleging that they are collecting for a self-funded plan. It may also make a declaration that it is not an insured plan and by default is self-funded.
It is important to evaluate the Master Plan Description (MPD) of an ERISA plan to determine the validity of the lien. While the SPD is important to review, our US Supreme Court has said that it is the MPD that ultimately controls the recovery rights of the Plan.
Under the ERISA statute and the Internal Revenue Code, employee benefit plans generally are required to file the Form 5500, ‘‘Annual Return/ Report of Employee Benefit Plan,’’ including any attachments and schedules. The Form 5500 is information, required by and filed with, the Department of Labor (DOL). It serves as a disclosure document for plan participants and beneficiaries, and an important source of information and data for use by other Federal agencies.
Unfortunately, even with an 82 plus page instruction guide, these Forms are often completed incorrectly or incompletely which makes them often unreliable for determining funding status. But it can be a negotiating point if there are inconsistencies.
The first step to assess the rights of an ERISA Plan asserting subrogation or reimbursement right is a request for documents pursuant to the ERISA statute – 29 U.S.C. 1024(b)(4).
A 29 U.S.C. 1024(b)(4) request is of the import for two reasons:
- to obtain the necessary documents to evaluate the strength of the ERISA plan’s recovery rights,
- to exert pressure by means of 29 U.S.C. § 1132 (c) (1) (B) penalties.
What is a 1024 (b)(4) request?
Pursuant to 29 U.S.C. § 1024(b)(4), the administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.
The key is that it must be sent to the Plan Administrator not to a Claims Administrator (an insurance company) or to a subrogation vendor.
It should be sent with a read/received receipt to begin the count for penalty if the Plan Administrator does not comply with the request.
Pursuant to 29 U.S.C. § 1132(c), any administrator who fails or refuses to comply with a request for any information which such administrator is required by this subchapter to furnish … within 30 days after such request may … be personally liable … in the amount of up to $100 a day. Pursuant to 29 C.F.R. § 2575.502c-1, the civil monetary penalty established by … ERISA is hereby increased from $100 a day to $110 a day.
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