ERISA stands for the Employee Retirement Income Security Act, a federal law passed by Congress in 1974. President Nixon signed ERISA into law after 10 years of study designed to reform the nation's pension system.
Congress ultimately included employer-provided insurance benefits as part of the law. That is why most Short Term Disability, Long Term Disability, Health, and Life Insurance benefits that are offered by private employers are covered by ERISA. ERISA applies only to employee benefits provided by private employers. If you work for a government entity or a church, ERISA will not apply to your claim. However, any private employer (even a small company with only one employee other than the owner) that provides employee benefits will be subject to ERISA.
With certain exceptions, ERISA creates one uniform system to administer these group benefit programs sponsored by employers. However, this “uniform system” is far from uniform. The law actually allows employers to establish nearly any type of benefit plan they wish, as long as they provide certain documents to employees and allow for an appeal when benefits are denied.
No matter which lawyer your hire, if you have a group benefit claim covered by ERISA, make sure your lawyer has experience handling ERISA cases. There are many differences between ERISA cases and insurance claims regulated by state laws, and if you or your lawyer do not know those differences and how to handle them, it can hurt your case. ERISA Attorney John Tucker is an experienced attorney who has handled over 1000 ERISA benefit claims of all types, including disability insurance, health insurance, life insurance, accidental death, 401k, and pension cases.
ERISA will apply to any employee benefits offered by a private employer if one or more employees other than the owner are in the plan. Typical employee benefits that are covered by ERISA include:
ERISA is so broad that it even includes on-site benefits like day-care services offered by employers.
In 1974, the U.S. Congress passed a group of laws originally designed to protect pensions and other employee benefits. This followed over 10 years of study begun while President John Kennedy was in office. At that time, there was a concern that large companies could fail, and workers had no protection from losing their pension benefits. An example of this was the bankruptcy of the Studebaker Corporation in the 1960s which led to thousands of workers losing pension benefits.
Congress intended to protect workers and their families by passing the Employee Retirement Income Security Act - known by the shorthand “ERISA.” It is contained in Title 29 of the United States Code, and like many other federal statutes, provides a rather general guideline for how the law is to be implemented. Under our system of laws, general laws like these are often fleshed out in the courts, where judges interpret the meaning of the vague wording of the statutes. Because of its generality, a lot of the law that guides us today in the area of ERISA has come from the courts, and a simple reading of the statutes rarely provides a complete answer to an ERISA question.
When Congress passed ERISA in 1974, it defined several terms which apply to ERISA plans. Because you will see these terms used repeatedly in ERISA plans, we are providing you with a short glossary to assist in reading your plan. The complete, technical definitions of these and other words can be found in the statute at 29 U.S.C. §1002 .
Plan Participant
Usually the employee who is enrolled in the plan.
Usually the spouse or child of the employee who may be actively enrolled in a plan (for example, health insurance) or who may be entitled to receive benefits under the plan if something happens to the employee/participant (for example, if the employee dies and a life insurance or a 401K death benefit has to be paid out).
Usually the employer or a union.
Exactly what it sounds like. This is a summary (often a booklet or certificate of coverage) which explains what the benefits are under the particular plan, how you apply, when benefits are paid, and how you appeal if benefits are denied. The summary is supposed to be accurate and not misstate the plan document (see below):
Very often, a plan will have a more complete document than the summary plan description, which spells out in detail all of the plan's rules and terms.
Benefits that are paid under a pension plan are usually case payments made to retirees based in part on their years of service, as distinguished from welfare benefits (see below).
Any benefit that is not a pension benefit, such as disability, health, or life insurance and pre-paid legal services, or any non-monetary benefit like day care services.
The method a court uses to decide a case is called the “standard of review.” In ERISA cases, there are 3 different types of review that a court may use, depending on key language which may be found in your plan document (that is, your benefit booklet or group insurance policy). They are: 1) de novo, 2) abuse of discretion (also called arbitrary and capricious), and 3) heightened abuse of discretion.
The key to which standard may be applied in particular case is whether the administrator has been granted “discretionary authority to interpret the plan or decide claims.” In a case decided in 1989 called Firestone v. Bruch, the U.S. Supreme Court stated that ERISA claims will be reviewed using a de novo standard unless the plan documents state that the administrator has this type of discretion.
So, what are these different types of review?
De Novo:
When a court takes a fresh look at a case, and pays no attention to what has occurred before the lawsuit was filed, it is called de novo or plenary review. This is what you might see on television in a trial, where witnesses are brought into court and the Judge or Jury makes a decision based on the evidence that is introduced at trial.
Abuse of Discretion and Heightened Abuse of Discretion:
If the language of the plan gives the administrator discretion, then a court must use a form of abuse of discretion review, and the administrator's decision will only be reversed if they were both wrong and that there is no reasonable basis for their decision. This gives the administrator's decision a lot of deference, and it can make it very difficult (but not impossible if handled properly) for a person whose benefits have been denied to win. If the plan is insured, the court may apply the so called heightened abuse of discretion, which gives the administrator less deference because it has a conflict of interest (i.e. it benefits financially if it denies claims).
A key aspect of abuse of discretion review relates to what evidence the court considers. In these cases, the judge will usually not allow any witnesses. Instead, the judge will only review the claim file which was created before the lawsuit was filed, and will make a decision based solely on those documents. In these types of cases, it is very important to have an attorney that is familiar with ERISA law to handle the pre-suit claim and appeal, as the contents of the claim file can make or break your case.
This is a very complex area of ERISA law, and it often takes lawyers a very long time to learn it. We understand if this is not clear, and more importantly, we understand that it is not necessarily fair. We would be happy to answer any questions you may have about the standard of review. Please contact us if you believe we can be of assistance. If you have been denied benefits (whether they are covered by ERISA or not), we may be able to help you. Please contact us to see if we may be able to help you recover your benefits.
Also, Mr. Tucker has written a chapter titled “What is the Appropriate Standard of Review” for a recently published book, titled ERISA Litigation (BNA 2007), and you can read his chapter to learn more about the law related to Standard of Review by clicking here.
To learn more about ERISA, visit the U.S. Department of Labor's web site HERE.
