INTRODUCTION TO ERISA INTRODUCTION TO ERISA WELFARE BENEFIT WELFARE BENEFIT

CLAIMSCLAIMSJonathan M. FeigenbaumJonathan M. Feigenbaum

Phillips & AngleyPhillips & Angley

One Bowdoin SquareOne Bowdoin Square

Boston, MA 02114Boston, MA 02114

617-367-8787617-367-8787

JonF@phillips-angley.comJonF@phillips-angley.com

www.phillips-angley.comwww.phillips-angley.com

ERISAERISA On September 2, 1974 (Labor Day) On September 2, 1974 (Labor Day)

Congress enacted the Employee Congress enacted the Employee Retirement Income Security Act Retirement Income Security Act (ERISA). Although the statute uses (ERISA). Although the statute uses the word retirement in its title, ERISA the word retirement in its title, ERISA governs both retirement benefits governs both retirement benefits (pensions) and employee welfare (pensions) and employee welfare benefit plan. Those are benefits that benefit plan. Those are benefits that private sector employers provide to private sector employers provide to employees; government employees employees; government employees and those employed by churches are and those employed by churches are not subject to ERISAnot subject to ERISA..

The History Behind The History Behind ERISAERISA..

Originally drafted with pension plans in Originally drafted with pension plans in mind, over time ERISA has come to govern mind, over time ERISA has come to govern much more. Part of the concept behind much more. Part of the concept behind ERISA was to create a uniform law for ERISA was to create a uniform law for employee benefits and pensions employee benefits and pensions nationwide. This was thought to protect nationwide. This was thought to protect employees and to make it more reasonable employees and to make it more reasonable for employers that operated in many states. for employers that operated in many states. Rather than dealing with 50 different state Rather than dealing with 50 different state laws, employers would be governed by one laws, employers would be governed by one Federal lawFederal law

The Two Sides of ERISA.The Two Sides of ERISA.

1. 1. PENSIONPENSION

-Defined Benefit Plans-Defined Benefit Plans

-Defined Contribution Plans-Defined Contribution Plans

2. 2. WELFARE BENEFIT PLANSWELFARE BENEFIT PLANS

-Disability Plans-Disability Plans

-Health Plans-Health Plans

ERISA Protects ERISA Protects Employees, right?Employees, right?

This must be good for This must be good for employees!employees!

It is hereby declared to be the policy of this It is hereby declared to be the policy of this chapter to protect interstate commerce and chapter to protect interstate commerce and the interests of participants in employee the interests of participants in employee benefit plans and their beneficiaries, by benefit plans and their beneficiaries, by requiring the disclosure and reporting to requiring the disclosure and reporting to participants and beneficiaries of financial participants and beneficiaries of financial and other information with respect thereto, and other information with respect thereto, by establishing standards of conduct, by establishing standards of conduct, responsibility and obligation for fiduciaries responsibility and obligation for fiduciaries of employee benefit plans, and by providing of employee benefit plans, and by providing for appropriate remedies, sanctions, and for appropriate remedies, sanctions, and ready access to the Federal courts. ERISA ready access to the Federal courts. ERISA Sec. 2., 29 U.S.C. Sec. 2., 29 U.S.C. 1001(b) 1001(b)

ADAMADAM

A 16A 16thth Century Interpretation of Century Interpretation of AdamAdam

Is ERISA That Good.Is ERISA That Good.Absolutely Not!Absolutely Not!

""Everything Ridiculous Imagined Since Everything Ridiculous Imagined Since AdamAdam. This court does not take so dim a . This court does not take so dim a view of the Employee Retirement view of the Employee Retirement Income Security Act of 1974. Instead, Income Security Act of 1974. Instead, this court is willing to believe that this court is willing to believe that ERISA has lurking somewhere in it a ERISA has lurking somewhere in it a redeeming feature. redeeming feature. Florence Florence Nightingale Nursing Service, Inc. v. Nightingale Nursing Service, Inc. v. Blue Cross/Blue Shield of Alabama,Blue Cross/Blue Shield of Alabama, 832 832 F.Supp. 1456, 1457 (N.D.Ala. 1993).F.Supp. 1456, 1457 (N.D.Ala. 1993).

ERISA – How Does It Work?ERISA – How Does It Work?

ERISA is truly a creature of its own. ERISA is truly a creature of its own. It ‘s a blend of:It ‘s a blend of:

trust lawtrust law contract lawcontract law disability insurance lawdisability insurance law Health insurance lawHealth insurance law federal common law of its own federal common law of its own

ERISA PREEMPTION, IT DOESN’T ERISA PREEMPTION, IT DOESN’T GET MUCH BROADERGET MUCH BROADER

Section 514(a) of ERISA states that Section 514(a) of ERISA states that the statute "shall supersede any and the statute "shall supersede any and all State laws insofar as they may now all State laws insofar as they may now or hereafter relate to any employee or hereafter relate to any employee benefit plan" that is covered by benefit plan" that is covered by ERISA. Section 514(b)(2)(A) ERISA. Section 514(b)(2)(A)

The Savings ClauseThe Savings Clause

29 U.S.C. § 1144(a). The saving 29 U.S.C. § 1144(a). The saving clause states as follows:clause states as follows:

Except as provided in subparagraph Except as provided in subparagraph (B) [the deemer clause], nothing in (B) [the deemer clause], nothing in this subchapter shall be construed to this subchapter shall be construed to exempt or relieve any person from exempt or relieve any person from any law of any State which regulates any law of any State which regulates insurance, banking, or securities.insurance, banking, or securities.

The Deemer ClauseThe Deemer Clause

29 U.S.C. § 1144(b)(2)(A). The deemer 29 U.S.C. § 1144(b)(2)(A). The deemer clause states as follows:clause states as follows:

Neither an employee benefit plan... nor any Neither an employee benefit plan... nor any trust established under such a plan, shall be trust established under such a plan, shall be deemed to be an insurance company or deemed to be an insurance company or other insurer, bank, trust company, or other insurer, bank, trust company, or investment company or to be engaged in the investment company or to be engaged in the business of insurance or banking for business of insurance or banking for purposes of any law of any State purporting purposes of any law of any State purporting to regulate insurance companies, insurance to regulate insurance companies, insurance contracts companies., banks, trust contracts companies., banks, trust companies, or investmentcompanies, or investment

The Genesis of the The Genesis of the TroubleTrouble

Referring to ERISA as a Referring to ERISA as a carefully “reticulated statute.”carefully “reticulated statute.”

""Pilot Life Ins. Co. v. Dedeaux,Pilot Life Ins. Co. v. Dedeaux,, , 481 U.S. 41, 54 (1987).481 U.S. 41, 54 (1987).

[T]he detailed provisions of [T]he detailed provisions of 502(a) set forth a 502(a) set forth a comprehensive civil enforcement scheme that comprehensive civil enforcement scheme that represents a careful balancing of the need for represents a careful balancing of the need for prompt and fair claims settlement procedures prompt and fair claims settlement procedures against the public interest in encouraging the against the public interest in encouraging the formation of employee benefit plans. The policy formation of employee benefit plans. The policy choices reflected in the inclusion of certain remedies choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme and the exclusion of others under the federal scheme would be completely undermined if ERISA-plan would be completely undermined if ERISA-plan participants and beneficiaries were free to obtain participants and beneficiaries were free to obtain remedies under state law that Congress rejected in remedies under state law that Congress rejected in ERISA. 'The six carefully integrated civil ERISA. 'The six carefully integrated civil enforcement provisions found in enforcement provisions found in 502(a) of the 502(a) of the statute as finally enacted ... provide strong evidence statute as finally enacted ... provide strong evidence that Congress did that Congress did notnot intend to authorize other intend to authorize other remedies that it simply forgot to incorporate remedies that it simply forgot to incorporate expressly.' "expressly.' "DedeauxDedeaux, 481 U.S. at 54., 481 U.S. at 54.

The Hidden Menace.The Hidden Menace.

Would a reasonable employer pay Would a reasonable employer pay premiums to an insurer if that premiums to an insurer if that employer really understood how employer really understood how long term disability benefits are long term disability benefits are calculated and paid? Would an calculated and paid? Would an employee make a partial or full employee make a partial or full payment toward the premium?payment toward the premium?

The Curses of ERISA.The Curses of ERISA. No Jury TrialNo Jury Trial No Damages – All actions are equitableNo Damages – All actions are equitable No Consequential DamagesNo Consequential Damages No Punitive DamagesNo Punitive Damages No Make Whole RemediesNo Make Whole Remedies Federal Court JurisdictionFederal Court Jurisdiction Almost Suspension of Fed. Rules of Civil ProcedureAlmost Suspension of Fed. Rules of Civil Procedure Extremely Difficult Burden to Obtain Discovery Extremely Difficult Burden to Obtain Discovery Rarely Live TestimonyRarely Live Testimony Claims Usually Decided on Cross MotionsClaims Usually Decided on Cross Motions Insurers are treated as fiduciaries and their Insurers are treated as fiduciaries and their

decisions will only be overturned if “arbitrary and decisions will only be overturned if “arbitrary and capricious,” not just unfair or probably wrongcapricious,” not just unfair or probably wrong

Semien v. Life Ins. Co. of Semien v. Life Ins. Co. of AmericaAmerica, 436 F.3d 805, , 436 F.3d 805,

815 (7th Cir. 2006). 815 (7th Cir. 2006). Congress has not provided Article III courts with Congress has not provided Article III courts with the statutory authority, nor the judicial resources, the statutory authority, nor the judicial resources, to engage in a full review of the motivations to engage in a full review of the motivations behind every plan administrator's discretionary behind every plan administrator's discretionary decisions. To engage in such a review would decisions. To engage in such a review would usurp plan administrators' discretionary authority usurp plan administrators' discretionary authority and move toward a costly system in which Article and move toward a costly system in which Article III courts conduct wholesale reevaluations of III courts conduct wholesale reevaluations of ERISA claims. Imposing onerous discovery before ERISA claims. Imposing onerous discovery before an ERISA claim can be resolved would undermine an ERISA claim can be resolved would undermine one of the primary goals of the ERISA program: one of the primary goals of the ERISA program: providing "a method for workers and beneficiaries providing "a method for workers and beneficiaries to resolve disputes over benefits inexpensively to resolve disputes over benefits inexpensively and expeditiously." and expeditiously." Perry v. Simplicity Eng'gPerry v. Simplicity Eng'g, 900 , 900 F.2d 963, 967 (6th Cir. 1990) (internal citation F.2d 963, 967 (6th Cir. 1990) (internal citation omitted). omitted).

The Nightmare, offsets and The Nightmare, offsets and other recoveries.other recoveries.

Who wants reimbursement?Who wants reimbursement?

-Health Plan-Health Plan

-Comp Insurer-Comp Insurer

-LTD Insurer-LTD Insurer

-All or some of the above.-All or some of the above.

What Does One Do?What Does One Do?

Read the documents.Read the documents. Plan Ahead.Plan Ahead. Advise your client well.Advise your client well. Get other counsel involved as Get other counsel involved as

necessary.necessary. Negotiate a settlement that that Negotiate a settlement that that

your client can accept.your client can accept. Tell your client about the nightmare of Tell your client about the nightmare of

ERISA.ERISA.

Fight back!Fight back!

Help your clients achieve Help your clients achieve justice. Sleep well at night!justice. Sleep well at night!