WHAT IS ERISA?
What is an ERISA Disability Plan?
"ERISA" stands for The Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1002(1), which is a federal program that was designed by Congress to help protect funds that have been set aside to pay for employee benefits that typically include long-term disability and retirement benefits.
Not all long-term disability plans are governed under ERISA. A disability plan governed under ERISA is a "plan, fund or program" which has been "established or maintained" by an employer or employee organization for the purpose of providing employee benefits that usually include life, health, disability, and pension benefits.
A "payroll practice" is sometimes confused with an ERISA plan, which it is not. A payroll practice is defined as a "payment of an employee's normal compensation, out of the employer's general assets, ... during which the employee is physically or mentally unable to perform his or her duties ..." 29 C.F.R. 250.3-1(b)(2). In Bassiri v. Xerox Corp., 463 F.3d 927, 933 (9th Cir. 2006), the court explained that if the disability benefits paid to the employee comes out of the employer's bank account (like wage payments), those disability benefits constitute a "payroll practice" and are not subject to ERISA.
Some Employers are Excluded By Law From ERISA.
Plans where the employer is either the government or a church are usually excluded from ERISA.
A "government" plan is defined under 29 U.S.C. § 1002(32) as "a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of the foregoing."
A "church" plan is defined under 29 U.S.C. 1002 (33)(A) as "a plan established and maintained ... by a church or by a convention or association of churches, which is exempt from tax under section 501 of Title 26."
In other words, if the IRS considers it a church, then for the purposes of ERISA, it's a church and its plan is exempt from ERISA. (However, under certain circumstances, a church can decide to "opt in" to the provisions of ERISA.)
The Plan Document and the Summary Plan Description.
The plan document is a description of the plan's terms and conditions related to the operation and administration of the plan. It is required for each welfare benefit plan (life, health, disability, pension) that an employer maintains.
The summary plan description (SPD) is simply a summary of the plan document, written in such a way that it can be easily understood by lay persons.
Statute of Limitations/Limitations Period.
The Plan will set forth the time you have to file an initial claim or to file an administrative appeal to the insurance carrier, if your claim has been denied. This is called the "limitations period."
The Plan will also set forth the time you have to file a lawsuit in federal court (the statue of limitations) if you have exhausted your administrative remedies and seek to challenge a final denial in court.
In California, the statute of limitations is usually four years from the time the claimant knows or should know that his/her claim has been denied. Wetzel v. Lou Ehlers Cadillac Group Long Term Disability Ins. Program, 222 F.3d 643, 648 (9th Cir. 2000).
However, plans can mandate shorter periods. For a health plan or a disability plan, ERISA mandates that the minimum period for an appeal to federal court is 180 days. For all other plans, the minimum time period is 60 days.
Therefore, one of the first things to do is to check the limitations period(s) in the Plan. That will tell you the date by which you must file an internal appeal, or a lawsuit in federal court once all administrative appeals have been exhausted.
The limitations period(s) is extremely important. If a claim denial is not appealed in a timely manner, a claimant may lose his/her right to challenge the denial.
The Exhaustion of Remedies Doctrine.
Before a lawsuit can be filed in federal court, a claimant must first exhaust all available administrative remedies with the insurance carrier. This is called the "exhaustion of remedies" doctrine. If an initial claim for disability benefits is denied by the carrier, the denial must be appealed to the carrier in a timely fashion. And, if there is a 2nd appeal that is permitted or required by the carrier, that appeal should be submitted as well. If after all appeals have been denied, then the claimant's right to file a lawsuit in federal court under ERISA accrues.
The Administrative Record.
You must submit all the medical evidence (and any other evidence) you have during the "administrative period," which is up to the last administrative denial. After that, your file is closed.
If you file a lawsuit in federal court to challenge a final denial of your disability claim by the carrier, the judge will consider only the evidence in your file and (except for unusual circumstances) no other evidence.
It is important to make certain that all the relevant medical evidence is up to date and has been received by the insurance carrier and in your administrative file.
The Trial in Federal Court.
When you file an ERISA lawsuit in federal court, it will usually be under 29 U.S.C.§ 1132 (a)(1)(B) for breach of ERISA "to recover benefits due ... under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan."
At an ERISA trial, you are not entitled to a jury. All ERISA claims are decided by the judge ("bench" trial). There are no punitive damages that are permitted under ERISA. You are entitled to benefits that should have been paid. Attorney fees and costs are discretionary with the judge. In the 9th Circuit, they are usually awarded to successful plaintiffs, but not to successful defendants. However, remember that this is entirely at the discretion of the trial judge.
Discovery of "extrinsic" evidence, which is outside of the administrative record, is typically not allowed, except under certain narrow circumstances that include (a) "when ... additional evidence is necessary to conduct an adequate de novo review of the benefits decision." Mongeluzo v. Baxter Travenol Long Term Disability Benefit Paln, 46 F.3d 938, 943-44 (9th Cir. 1995). (b) In an abuse of discretion case, "to decide the nature, extent, and effect on the decision-making process of any conflict of interest." Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955, 970 (9th Cir. 2006). And, (c) "When a plan administrator has failed to follow a procedural requirement of ERISA," and, for example, failed to provide a full and fair hearing as required by ERISA. Abatie, 458 F.3d at 972-973.
The Goal of ERISA
The United States Department of Labor has stated that:
The goal of Title I of ERISA is to protect the interests of participants and their beneficiaries in employee benefit plans. Among other things, ERISA requires that sponsors of private employee benefit plans provide participants and beneficiaries with adequate information regarding their plans. Also, those individuals who manage plans (and other fiduciaries) must meet certain standards of conduct, derived from the common law of trusts and made applicable (with certain modifications) to all fiduciaries. The law also contains detailed provisions for reporting to the government and disclosure to participants. Furthermore, there are civil enforcement provisions aimed at assuring that plan funds are protected and that participants who qualify receive their benefits.
ERISA covers retirement plans (including traditional defined benefit pension plans and individual account plans such as 401(k) plans) and welfare benefit plans (e.g., employment based medical and hospitalization benefits, apprenticeship plans, and other plans described in section 3(1) of Title I). Plan sponsors must design and administer their plans in accordance with ERISA. Title II of ERISA contains standards that must be met by employee retirement benefit plans in order to qualify for favorable tax treatment. Noncompliance with these tax qualification requirements of ERISA may result in disqualification of a plan and/or other penalties.
Important legislation has amended ERISA and increased the responsibilities of EBSA. For example, the Retirement Equity Act of 1984 reduced the maximum age that an employer may require for participation in a retirement plan; lengthened the period of time a participant could be absent from work without losing credit towards the plan's vesting rules for pre-break years of service; and created spousal rights to retirement benefits through qualified domestic relations orders (QDROs) in the event of divorce, and through pre-retirement survivor annuities. The Omnibus Budget Reconciliation Act of 1986 eliminated the ability of employers to limit participation in their retirement plans for new employees who are close to retirement and the ability to freeze benefits for participants over age 65. The Omnibus Budget Reconciliation Act of 1989 requires the Secretary of Labor to assess a civil penalty equal to 20% of any amount recovered for violations of fiduciary responsibility. The Pension Protection Act of 2006 made many changes to ERISA, including expanding the availability of fiduciary investment advice to participants in 401(k)-type plans and individual retirement accounts (IRAs), removing impediments to automatic enrollment through qualified default investment alternatives, and increasing the transparency of pension plan funding through new notice requirements.
The department's responsibilities under ERISA have also been expanded by health care legislation. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) added a new part 6 to Title I of ERISA which provides for the continuation of health care coverage for employees and their beneficiaries (for a limited period of time) if certain events would otherwise result in a reduction in benefits. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) added a new Part 7 to Title I of ERISA aimed at making health care coverage more portable and secure for employees, and gave the department broad additional responsibilities with respect to private health plans. These responsibilities were increased further with the enactment of the Newborns' and Mothers' Health Protection Act of 1996, the Mental Health Parity Act of 1996, the Women's Health and Cancer Rights Act of 1998, the Genetic Information Nondiscrimination Act of 2008, the Mental Health Parity and Addiction Equity Act of 2008, and the Children's Health Insurance Program Reauthorization Act. Most recently, the 2010 passage of the Patient Protection and Affordable Care Act (ACA) brought widespread health care reform. In addition to the ACA's market reform provisions, significant changes impact dependent coverage, lifetime and annual benefit limits, coverage of preventative services, preexisting condition exclusions for minors, disclosures to plan participants, claims procedures and external review, and many other areas. The ACA also provided EBSA with additional enforcement authority to protect workers and employers whose health benefits are provided through Multiple Employer Welfare Arrangements. As the ACA phases in to full implementation in 2014, EBSA and the Department of Health and Human Services, the Department of the Treasury and the Internal Revenue Service will continue to work to issue guidance on the law's many provisions