Understanding Which Benefit Plans Are Subject To ERISA
Benefits a person receives through their employer are often called “group benefits.” In other words, you do not buy these benefits privately on your own. ERISA is a federal law that governs most employer-sponsored group benefit plans and sets the minimum standards of protection for plan participants.
If you have a group plan through your employer, then you must be aware of ERISA. It is complex and often the subject of court litigation. It can be challenging for employees to ascertain which benefits plans are subject to this stringent law. Moreover, those who have benefits that are subject to ERISA may not be aware of their rights under this law.
This article will explain what individuals with ERISA-governed claims must know about this complex law. Further, it will explain how this federal law can potentially affect those with long-term disability policies.
What Is ERISA?
ERISA is an acronym that stands for the “Employee Retirement Income Security Act of 1974.” It is a federal law that covers most employer-provided pension, health, and welfare benefit plans.
ERISA was enacted to protect employees from the mismanagement of their benefit plans by inept employers. However, this federal law often benefits the insurance company, not the claimants. This can be frustrating, especially when you are filing for long-term disability (LTD) benefits. Such benefits can protect a percentage of your pre-disability earnings—typically between 60 and 80 percent.
What Plans Are Subject to ERISA?
As mentioned, ERISA governs most benefit plans that a person receives through their employer. These plans include:
- Long-term disability
- Short-term disability
- Life insurance
- Health insurance
- Long-term health care
- Pensions
- 401(k)s
- Deferred compensation plans
- Profit-sharing plans
- HMOs
- FSAs
However, if a person holds any of the plans mentioned above privately, then ERISA does not govern their claim. In other words, you must obtain these benefit plans through your employer to be subject to ERISA.
Moreover, not all long-term disability plans are subject to ERISA. If you work for a government entity or church, for example, then it does not govern your disability insurance policy.
Your Rights Under ERISA
Regulations tend to be strict for those insured under ERISA-governed plans. There are rules such as information disclosure requirements; document submittal guidelines; and strict filing deadlines that you and your employer must follow. Failure to adhere to these rules may result in a denial of your benefits.
Under ERISA, you are entitled to your plan information. This information can include how your policy is funded. Moreover, ERISA explains the fiduciary duties of those who manage your benefit policies, and it allows plan participants to sue (i.e., file a lawsuit) for benefits.
If you have a long-term disability policy that ERISA governs, then the default standard of review is the “de novo” standard. However, it is important to note that in several states, insurers are allowed to include discretionary language within their policies that effectively changes the de novo standard to the much-harder-to-meet “arbitrary and capricious” standard of review.
Long-Term Disability Claims
There are two types of long-term disability policies. You may have either an “individual policy” (not subject to ERISA), or you may have a “group policy” (subject to ERISA in most circumstances). If you have a policy that ERISA governs, then there are a few procedural obstacles of which you must be aware.
Unfortunately, this law often works in favor of insurance companies rather than for LTD claimants. If the insurance company denies your claim, then you have the right to file an appeal. However, you must file this appeal directly to your insurer, which does not allow for any third-party judgment of your claim. Moreover, under ERISA, your insurer has 45 days to issue a decision on your initial claim but may take up to two 30-day extensions for various reasons.
An ERISA-governed administrative appeal is often the last time you may submit new or updated evidence in support of your claim. In other words, if the insurance companies deny your appeal(s), and you decide to file a lawsuit in court, then the court will only reference this administrative record while deciding the fate of your claim.
Note: Under ERISA, you have 180 days to file an appeal with your insurer. During this time, you should request a copy of your claim file, which you are entitled to under ERISA for free from your insurer. Further, ERISA requires claimants to exhaust all appeals available to them before filing a lawsuit in court.
Additionally, if you do file a lawsuit to win your benefits, then you must be aware of some unique aspects of ERISA that apply to this stage. Filing a lawsuit under ERISA looks quite different from what most people think of when they think of “court.”
For example, under ERISA, you are not entitled to a jury. Instead, only a single judge will hear your case. In many cases, the arbitrary and capricious standard of review is used, which means the court does not have to determine if the insurer was wrong in its decision to deny you your benefits. Rather, the court only needs to decide whether your insurer had a reasonable basis for denying your claim.
Additionally, you may only file a lawsuit to win your benefits. In other words, you cannot file a lawsuit to win damages or due to bad faith practices.
Call CCK Today for a Free Case Evaluation
Receiving a denial of your long-term disability claim can be disheartening. However, the LTD claims and appeals process is not something you must handle on your own. If you need help filing your claim; appeal; or lawsuit for such benefits, CCK may be able to help.
CCK’s attorneys have over 20 years of experience helping LTD claimants receive the benefits they deserve under the terms of their policies. We have helped hundreds of people receive their benefits and may be able to help you too. Call CCK today at (800) 544-9144 for a free case evaluation. A member of our team will evaluate your case and determine if we can assist you.
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