ERISA

June 25, 2013

Insurance law attorneys who deal with ERISA plans, do so with a lot of caution. ERISA stands for Employee Retirement Income Security Act.
ERISA was enacted to protect the interests of employee benefit plan participants and their beneficiaries by:
Requiring the disclosure of financial and other information concerning the plan to beneficiaries;
Establishing standards of conduct for plan fiduciaries;
Providing for appropriate remedies and access to the federal courts.
ERISA is sometimes used to refer to the full body of laws regulating employee benefit plans, which are found mainly in the Internal Revenue Code and ERISA itself.
The reason a lot of caution is required is that ERISA law is unsettled and evolving regarding how and when ERISA claims are to be re-imbursed. This re-imbursement issue arises primarily when an ERISA benefit is paid to an employee who is injured as a result of the negligence of a third party. This happens the majority of the time in a car wreck situation.
As a result of a car wreck, or some other situation where an ERISA covered person is injured, there is usually going to be a settlement with the insurance company of the person or business who caused the injury. The ERISA covered person will have his medical expenses covered by the ERISA plan. Then when a settlement is achieved, ERISA has a right to be paid back for the benefits it has paid on behalf of the injured person.
The United States Court of Appeals for the Fifth Circuit issued an opinion in May 2013, that explains a lot of ERISA law. The style of the case is, ACS Recovery Services, Inc.; FKI Industries, Inc. v. Larry Griffin; Willie Earl Griffin; Larry Griffin Special Needs Trust; Judith Griffin. A reading of the case is important.
This case illustrates one of the reasons ERISA has to be approached carefully. To begin with, when an ERISA plan pays benefits on behalf of one of it's plan participants, ERISA or the Plan is entitled to be re-paid for all the benefits paid out. This is different than other types of insurance plans. Other plans may call to be paid back but the enforcement mechanisms are not as strong as those in ERISA.
The case above tells of ways that attorneys for the injured person attempted to get creative in order to keep from paying back the ERISA plan.
It is important to point out that the attempts to defeat paying back the ERISA plan are not attempts to "cheat" the plan, but are attempts to make the injured person "whole" for their injuries. Most recoveries in injury cases are not sufficiently large enough to compensate the injured person for all their losses. An example would be this:
An injured person is severely injured in an auto accident. The medical expenses paid by ERISA are $45,000, lost wages are $4,000, and the person has a limp for the remainder of their life. The person who caused the accident has only a $30,000 insurance policy and the insurance company offers the $30,000.
In the above scenario, the ERISA plan would be entitled to the entire $30,000, leaving the injured person with no compensation for his lost wages, impairment, or pain and suffering he has endured.
There is very little the injured person or their attorneys can do to defeat the requirement that the plan be paid back.
This does not mean there is no way of getting compensation for the injured person ..., it just means it is difficult and an experienced Insurance Law Attorney needs to be involved.