1. THE BASICS
A federal law known as ERISA (Employee Retirement Income Security Act of 1974) is a complicated and comprehensive law that sets minimum standards for retirement and welfare benefit plans in private industry. ERISA does the following:
- Requires plans to provide participants with information about the plan including important information about plan features and funding. The plan must furnish some information regularly and automatically. Some is available free of charge, some is not.
- Sets minimum standards for participation, vesting, benefit accrual and funding. The law defines how long a person may be required to work before becoming eligible to participate in a plan, to accumulate benefits, and to have a nonforfeitable right to those benefits. The law also establishes detailed funding rules that require plan sponsors to provide adequate funding for your plan.
- Requires accountability of plan fiduciaries. ERISA generally defines a fiduciary as anyone who exercises discretionary authority or control over a plan’s management or assets, including anyone who provides investment advice to the plan. Fiduciaries who do not follow the principles of conduct may be held responsible for restoring losses to the plan.
- Gives participants the right to sue for benefits and breaches of fiduciary duty.
- Guarantees payment of certain benefits if a defined plan is terminated, through a federally chartered corporation, known as the Pension Benefit Guaranty Corporation.
2. WHAT TYPE OF BENEFITS ARE GOVERNED BY ERISA?
At the most basic level, ERISA applies to two types of plans: Employee Welfare Benefit Plans and Employee Pension Benefit Plans.
An Employee Welfare Benefit Plan is any plan, fund, or program established or maintained by an employer or by an employee organization, or by both, which provides any of the following benefits, through insurance or otherwise:
- health insurance
- group life insurance
- long-term disability (LTD) income
- severance pay
- funded vacation benefits
- apprenticeship or other training programs
- or day care centers, scholarship funds, or prepaid legal services
In most cases, health insurance, group life insurance, long-term disability insurance, and short-term disability insurance are provided through an HMO or Insurance company, such as Unum, Cigna, Liberty Mutual, MetLife, Aetna, Anthem, Sun Life, LINA, Mutual of Omaha, Matrix, The Hartford, among others. The employer purchases, for instance, a group long-term disability insurance policy to offer its employees. Is this plan subject to ERISA? Probably, although there are exceptions depending on the type of employer.
An Employee Pension Benefit Plan under ERISA is any plan, fund, or program established or maintained by an employer or by an employee organization, or by both, which provides retirement income to employees, OR results in a deferral of income by employees for periods extending to the termination of covered employment or beyond. Employee Pension Benefit Plans include:
- Profit-sharing retirement plans
- Stock bonus plans
- Money purchase plans
- 401(k) plans
- Employee stock ownership plans
- Defined benefit retirement plans
3. WHY DOES IT MATTER IF MY BENEFIT CLAIM IS GOVERNED BY ERISA?
ERISA will have a profound effect on how your claim should be handled- both by you and the insurance company. If your disability claim, for instance, is denied, then it is important that you contact an attorney with experience in ERISA. For instance, you would not be able to sue the insurance company most likely without “exhausting” your “administrative remedies”, which means appealing an adverse benefit determination with the insurance company. On appeal, the disability insurer must follow certain procedures, such as making a decision within a certain period of time, having a different qualified medical professional review your medical records, and review your medical condition in conjunction with the requirements of your policy’s definition of disability. You are also entitled to receive a copy of all relevant information used by the insurance company when making its decision to deny your claim. This includes not just medical records, but internal case notes, correspondence, medical opinions from outside consultants, any surveillance data, and any occupational data considered.
Although ERISA was enacted to protect individuals, it is commonly understood that ERISA actually protects insurers, not claimants as intended. Some of these reasons include:
- ERISA disability disputes can take a long time. Before any lawsuit, the claimant must “exhaust administrative remedies” by sending a written appeal to the denying insurance carrier. Denied claimants generally have 180 days to appeals, and insurers have up to 90 days to consider the appeal. This means that by the time the internal appeal process has concluded, 270 days have easily passed. During that time, the disabled person generally has no income whatsoever.
- If the disabled claimant also seeks Social Security Disability (SSD) income, the long term disability insurer usually is allowed to deduct the SSD income from the amount it owes the claimant. This is referred to as an offset. If the disabled person does not seek SSD income, the long term disability plan usually allows the insurance company to estimate the SSD income and offset it anyhow.
- ERISA allows insurers the discretion to administer their own policies. Essentially, if such discretion is allowed under the disability plan, then a denial can generally only be overturned only by a showing that the denial was “arbitrary and capricious.” This standard is very difficult to overcome. The court doesn’t look at whether you are disabled, but whether the insurer was “arbitrary and capricious” when it used its discretion to determine that you were not disabled.
- If the insurance company upholds its denial on appeal, then the only option left is to file a suit in the United States District Court. But a lawsuit under ERISA does not necessarily mean the individual will have his or her day in court, so to speak. This is because testimony is usually not allowed and cases are decided by judges, not a jury. Very rarely will the judge even be able to see the claimant in person. Instead, the case is decided on the “record”- meaning that the judge will only look at the lawyers written arguments and the “claims file”, which is comprised of everything the insurer had before it when it made the decision to deny the individual’s benefit claim
Unfortunately, very few people have the stamina or resources to put up a fight against the disability insurance companies, and they know this. If you had to stop working due to an illness or injury, you should be using this time to focus on your health, not dealing with the insurance company endlessly to figure out what new piece of information they need or tracking down all of your doctors to make sure your medical records have been sent. Many people do not challenge wrongfully denied benefit claims, and the insurance companies bet against you doing so.
Claire Bushorn Danzl takes viable long term disability cases on a contingency basis throughout Ohio and Kentucky. If you have been denied LTD benefits, contact The Bushorn Firm, LLC to see if you qualify for a free consultation.