Enforcing Employee Benefits: Navigating the ERISA Nebula

Introduction

Most private sector employees that participate in an employee welfare benefit plan (such as a health care plan, disability plan, or retirement plan) are subject to a 1974 federal law called "ERISA." ERISA is the acronym for the Employee Retirement Income Security Act. Despite the name, ERISA applies to all sorts of employee benefit plans, not just retirement plans.

ERISA applies to health and medical insurance plans, short and long term disability income insurance plans, and retirement plans such as pension plans, 401K plans, and other retirment plans that are sponsored by private sector employers.

Congress enacted ERISA to regulate abuse and misuse of employee welfare benefit plans, require equality in application and enforcement, and try to establish a more uniform administration of very complex benefit plans. In recent years, the focus on health care reform has shed light on a number of problems that evolved partly because of the gaps and shortcomings that exist in ERISA.

Over a multi-part series, just as with the prior discussion on the Federal Estate Tax, I will attempt to provide a common sense approach to ERISA and employee benefits that will hopefully give you a better understanding of the procedures and legal rights available to plan beneficiaries when an insurance company, plan administrator, or employer fails to live up to its obligations to provide benefits.

Does ERISA apply to my benefits?

Not all employee benefit plans are covered by ERISA. Government employers on the state, local, and federal level are exempt from ERISA. There are also other limited types of employers that are exempt from ERISA's coverage. However, most private sector employers are subject to ERISA's provisions.

The more difficult question many times is whether or not the employer's particular benefit plan is covered by ERISA. Not all private sector employer plans qualify as ERISA plans. This issue is a particularly complicated one that is dependent upon whether the employer is not only sponsoring, but also funding part or all of the cost of the plan or benefits provided. There are other factors too that can determine whether or not the plan is governed by ERISA.

One sure way to know whether or not your employee benefit plan is an ERISA plan is to request a complete copy of the plan agreement. Employers and their administrators are required to provide the plan documents to their eligible employees, and the plan documents themselves many times explain whether or not the plan is subject to ERISA.

If you are a private sector employee, and your employer provides an employee benefit to all of its employees, and the employer either funds the plan or pays part or all of the premiums, the chances are good that it is an ERISA plan.

If my ERISA plan benefits are improperly denied, can I bring a lawsuit?

The short answer is yes. Plan participants, including the employee and the employee's family members that may also be plan participants, have the right under ERISA to bring a civil action to enforce the plan benefits. ERISA permits a civil enforcement action to be filed either in state court or federal court. ERISA also allows the plan member to recover attorneys fees (in the Court's discretion) in the event that he or she is successful in the action. A recent U.S. Supreme Court decision has made it much easier to recover an award of attorneys fees if the plan participant is successful in the enforcement action. Prior to that case, awards of attorneys fees were not as certain.

Many people have the misperception that a plan participant can collect punitive damages, emotional distress, or other similar types of damages if their benefits are improperly denied. ERISA makes it very clear that the sole remedy to a plan participant seeking to enforce his or her right to benefits is an order that enforces the plan benefits and the reimbursement of attorneys fees and legal costs. Punitive damages, emotional distress damages, pain and suffering, and the like are not available remedies.

Is it a waste of time to try to appeal the denial of my benefits under an ERISA plan?

Not only is it NOT a waste of time, you are legally required to exhaust all appeal remedies that are available to you under the plan agreement before you are permitted to file an enforcement action. Failing to timely appeal the denial of benefits or adverse decision through the plan's appeal procedures will allow the Court to dismiss your claim EVEN IF YOU ARE RIGHT! Therefore, it is absolutely critical that you follow your plan's appeal procedures, file all appeals to the appropriate persons, and raise every reason why the decision is incorrect.

As long as I appeal and state the reason for my appeal, do I have to have supporting documents?

Yes! Unlike most lawsuits, ERISA enforcement actions are essentially just another level of appeal to the Court. The Court typically will not permit you to rely upon medical records, documents, witness testimony, or other types of evidence that are not already contained within the claim file and appeal that was developed by the insurance company or plan administrator before the enforcement action was filed.

This means that not only do you have to raise every argument as to why the decision is improper, you also need to make certain that you submit to the insurer / administrator a complete set of all documents that support your arguments. This may include medical records demonstrating your condition, and why it is a covered condition. It may also include your physician's letter explaining the medical records and further explaining why you qualify for benefits. It may include affidavits setting forth witness testimony that supports your claim for benefits. It may include treatises or other supporting documentation.

To put yourself into the best possible position to win an enforcement action, the work must be done before the enforcement action is even filed. Typically, plan participants are well-advised to engage experienced legal counsel during the appeal process so that all information can be well-developed, fully documented, and incorporated into an argument that considers the terms and conditions of the plan agreement itself.

Insurance companies and plan administrators can and do reverse initial denials when they believe that there was an error, or that they failed to consider all of the evidence. However, even if the insurer / administrator does not reverse the denial, the proper documentation of the file will preserve your ability to argue the case before a Court that will be independent in its review of the facts.

In the next installment, I will discuss some issues faced by persons that become disabled and unable to perform their job duties. If there is a disability income plan, will it provide you with coverage?