ERISA is federal statute which regulates most, but not all, group employee benefits. Thus, most employer-provided or employer-sponsored group benefits are subject to ERISA.
Benefit claims subject to ERISA require submitting an internal or administrative appeal of a denial or termination of benefits. Most non-ERISA claims have essentially the same appeal processes for denials or termination of benefits. Therefore, pre-litigation ERISA and non-ERISA claims are very much alike.
The difference arises with the remedies available in litigation. In a claim subject to ERISA, the claimant can recover benefits and, if it is an ongoing claim such as a disability claim, the right to continue to pursue future benefits, and can make a claim for attorneys’ fees and costs, but not receive any other damages or compensation. In a non-ERISA case, depending upon the state, claimants may recover past benefits, the present value of future benefits, compensation for emotional distress, consequential damages. For example, if the termination of LTD benefits cause eviction or foreclosure, compensation for such events can often be obtained — that is, “consequential” damages, attorneys’ fees, in some jurisdictions multiple damages, and in some jurisdictions punitive damages. Furthermore, while claims subject to ERISA are subject to restricted discovery rules in litigation, claims not subject to ERISA, i.e., bad faith, are not.
How do you know whether your claim is subject to ERISA or not? Most significantly, government plans — those provided or sponsored by a government entity, are not subject ERISA. Additionally, church plans —those provided or sponsored by churches — are not subject to ERISA, unless the church plan affirmatively “opts in” to be subject to ERISA. (Government plans cannot opt into ERISA.)
While, generally, public employee benefit claims are not subject to ERISA, there is a qualification. If the group benefits are provided through or sponsored by a public employee union, then even though the claimant is a public employee, the benefits and claim is subject to ERISA. For example, many teachers in California obtain group disability insurance through a policy provided, to or sponsored by, The California Teacher Association. Even though they are public employees, their claims are subject to ERISA because the union sponsored the policy, not the individual employer.
Most individual policies are not subject to ERISA. But, sometimes claims of an individual policyholder are subject to ERISA. For example, some employers provide group disability insurance to their employees, and sponsor additional benefits for higher paid employees who can pay for the benefits themselves and get an individual policy. Usually, the employer negotiates a discounted rate for such employees and negotiates a premium checkoff from paychecks. Most courts hold that under such circumstances, an ERISA plan has been created even though the employee is issued an individual policy and pays the premium. Therefore, under certain circumstances an individual disability or life insurance, etc. policy may actually be a part of an ERISA plan.
Sometimes, in some jurisdictions, a group benefit that starts out as an ERISA benefit, can become a non-ERISA benefit. For example, in some circuits around the country (the United States is divided into 12 geographical circuit courts of appeal), a conversion policy from a group policy subject to ERISA, is not itself subject to ERISA. That is, the person first became insured under a group disability or life insurance policy subject to ERISA; the person left employment and exercised the right to convert the policy to an individual policy. In some parts of the country such as within the Ninth Circuit, a claim made under that individual conversion policy is not subject to ERISA, a reality which the insurance companies often are reluctant to tell claimants or do not recognize.
Most of the time, a claimant can tell whether the claim is subject to ERISA or not. Most of the time the policy, certificate of insurance, or summary plan description of a benefit subject to ERISA, so states. But sometimes insurance companies issue policies or certificates of insurance and employers provide summary plan descriptions which state that a claim is subject to ERISA, when in fact, it is not. It happens — not frequently — but sometimes it does.
Whether your claim for benefits — disability benefits, life insurance benefits, accidental death and dismemberment benefits — is subject to ERISA or not subject to ERISA, the ERISA Law Center has extensive experience representing claimants in such claims. We not only routinely represent ERISA claimants, we also routinely represent benefits claimants with non-ERISA claims.