ERISA Clain Or Not?

ERISA stands for Employee Retirement Income Security Act.  When making an insurance claim related to employment, it is important to know it the claim is subject to ERISA, which is governed by Federal Law, or not ERISA, in which case the claim is governed by State Law.

Plus, there are employee benefit plans that would be governed by ERISA however, elements of the employee benefit plan may fall outside of ERISA.  This is discussed in a 2020 opinion from the Western District of Texas, Austin Division.  The opinion is styled, Stephen Burrell v. Metropolitan Life Insurance Company and Deloitte LLP.

Burrell’s lawsuit was for short term disability (STD) benefits that had been denied and for long term benefits (LTD) that had been denied.  This discussion will focus on the STD benefits claim.

This part of the opinion was decided on a Motion For Summary Judgement filed by Burrell and his employer Deloitte.  It was decided in favor of Deloitte.

Deloitte argues that Burrell has no viable ERISA claim for Short Term Disability benefits because the STD plan is a payroll program, not an employee benefit plan governed under ERISA pursuant to 29 C.F.R., Section 2510.3-1(b)(2).

In discussion, this Court pointed out that Department of Labor regulations exclude certain payroll practices from ERISA coverage under a “safe harbor” provision.  The Fifth Circuit has called this the payroll practices exemption.  Under that exemption, an ERISA plan shall not include payment of an employee’s normal compensation, out of the employer’s general assets, on account of periods of time during which the employee is physically or mentally unable to perform his or her duties, or is otherwise absent for medical reasons.  To determine whether an employee benefit plan qualifies as an ERISA plan, the Fifth Circuit considers whether: (1) the plan exists; (2) the plan falls within the safe-harbor provision established by the Department of Labor; and (3) the employer established or maintained the plan with the intent to benefit employees.

None of the parties in this lawsuit dispute the existence of the STD Plan.  Deloitte provides a copy of the complete 2014 STD policy through which Burrell applied.

Viewing the evidence in the light most favorable to Burrell, the STD plan falls within the payroll practice exemption.  First, uncontroverted evidence indicates that the STD plan was paid as part of an employee’s normal compensation.  The terms of the 2014 STD Policy provide that “[t]here is no need to enroll for STD benefits.  If you meet the eligibility requirements . . . coverage is automatic.”  A salaried employee who works at least 20 hours per week is eligible.  Ther is also testimony that eligible employees are automatically enrolled in the STD Program at no cost to the employees.  Second, the evidence indicates that Deloitte paid for the STD program through general assets.  The Policy states that “STD benefits are provided by the Deloitte U.S. Firms at no cost to you.”  There is also testimony that Deloitte pays the STD benefits from its general assets.  Third, the terms of the policy indicate that the STD plan covers periods of time when an employee is physically or mentally unable to perform his or her duties, or is otherwise absent for medical reasons: “STD benefits. . .provide you with income replacement during times when you are unable to work because of a Disability.”

In cases where a Court finds that a benefit plan falls within the safe harbor provision, it need not proceed to consider the third element to determine whether an employee benefit plan qualifies as an ERISA plan.

Deloitte’s uncontroverted evidence demonstrates that the STD plan is a payroll practice and therefore not an ERISA plan.