In 1974 the federal government established the Employee Retirement Income Security Act (ERISA) to regulate employer-sponsored health and retirement plans.

However, the ERISA may have a negative impact on a personal injury claim you make against a third party.

What are liens?

Liens are a claim against someone to repay a debt or duty. In personal injury cases, an employer-sponsored insurance company may be able to claim a lien on your settlement.

For example, if you suffered an injury, and your health insurer paid for your medical bills, they may be able to file a lien on any compensation you receive from a third-party lawsuit.

How liens relate to funding status

Because of certain case decisions, different jurisdictions apply to liens depending on the funding status of your ERISA plan. There are two kinds of employer-sponsored plans:

  • Self-funded plans: These plans are funded by the employer’s own assets. In these cases, an employer may use a third party to help administer the policies but will have its own separate pool of assets that collects premiums and pays claims.
  • Insured plans: These plans are funded by an insurance company. In these cases, the insurance company will collect premiums from your employer and pay for claims.

Due to a previous Supreme Court case, a plan’s funding status affects what rules apply to an insurer’s ability to claim liens.

In general, if a plan is self-funded, ERISA preempts state law, and the employer does not have to contend with state regulation—this usually benefits the insurer because they do not need to limit their liens claim. If your employer purchases a plan through an insurance company, then both ERISA and state law apply to the claim—this is usually more favorable for you, as you may be able to reduce or negate the insurance policy’s lien.

A complicated area of law

How funding status relates to liens is just one of the ways that ERISA law is complicated. If you have a claim involving an ERISA plan, a lawyer can assist you in navigating all your options.