How to Negotiate an ERISA Lien
While it has a taken a great deal of time, you’ve finally settled your client’s case. Before checks can be written and you can move on to the next case, potential liens against the settlement must be considered. If an Employee Retirement Income Security Act (ERISA)-governed plan is in the mix, pay close attention. These plans often assert their right to not have lien claims reduced, regardless of circumstance. It’s not uncommon for ERISA plans to successfully take a significant amount of a settlement. To reduce an ERISA lien, it’s critical to understand the process and take preemptive action.
The Employee Retirement Income Security Act of 1974 is the law the governs many employee health plans. Like other health plans, they strive to seek reimbursement for funds that were conditionally paid out prior to a settlement. As mentioned in the previous section, these liens can decimate the amount of settlement funds your client receives. Consider the following actions when dealing with ERISA plans:
Set Expectations and Get Everyone on Board
ERISA liens and laws governing them are complicated. It takes time to resolve these claims and it’s important for your client to understand that. It’s also important for you to get both sides of the settlement on board before pursuing a third-party settlement.
Understand the Law
There are several laws that govern ERISA Liens. It’s critical that you understand them. This includes, Sereboff v. Mid Atlantic Medical Services, Inc., (2006) 547 U.S. 356, which asserts that ERISA-governed plans must identify specific proceeds of a settlement and authorize a right to recovering them. It is also asserts that only payments related to an injury can be recovered. This law places parameters on what ERISA plans can and cannot do.
Consider Certain Defenses
There are a few defenses at hand that can guide you when negotiating an ERISA lien. An often used defense is the “Made Whole Defense”, which states that an individual should be fully compensated (made whole) prior to an insurer’s subrogation. If the settlement doesn’t make your client whole, than an argument for the reduction of the lien can be made.
If your client is the plaintiff and is partially at fault for damages, you can seek having an ERISA lien lowered. If the percentage for which you client is responsible for damages can be determined, it can be argued that’s the percentage of the settlement that can be paid out to the ERISA-governed plan.
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Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.