What is ERISA? How does ERISA impact my disability insurance claim?
What is ERISA?
ERISA is a federal law passed by Congress in 1974 to regulate employee benefits offered by private employers. ERISA stands for the Employee Retirement Income Security Act. After tens of thousands of workers lost their pensions in the 1960’s due to a series of corporate bankruptcies (the most famous of which was the Studebaker automobile corporation), President Kennedy created a study commission to devise a way to protect employee pension benefits. After 10 years, Congress created a law that was designed to encourage private employers to offer employee benefits, but also protect employees’ benefits. When ERISA was signed by President Ford, the final bill passed by Congress included not only pensions, but nearly all employee benefits (including insurance) offered by private companies.
Does apply to every employer?
No. ERISA applies to benefit plans offered by private employers, but not government or church employers. If you work for a government entity or a church, your benefits are not covered by ERISA. However, if you work for a private or publicly traded company, ERISA applies to your benefits.
Does it matter how many employees a company has for ERISA to apply?
Yes, but the number of employees can be one. Even though Congress used its power to regulate interstate commerce to pass ERISA, small local employers are still covered by the law. ERISA applies no matter how many employees a company has in addition to its owners.
If a company has one or more employees other than its owner(s), ERISA will apply to everyone (including the owners). For example, if you are a receptionist for a small business, you and the owner would be covered by ERISA. ERISA will still apply to covered plans no matter how many more employees a private employer has.
What kinds of employee benefits does ERISA cover?
There are two general categories of benefit plans covered by ERISA: pension benefit plans and welfare benefit plans. The types of plans covered include the following:
- Traditional pension plans (fewer than 1% of employees have these now); and
- 401k plans
Welfare Benefit Plans:
- Disability benefit plans (Short Term Disability or Long Term Disability)
- Health benefit plans
- Life and Accidental Death & Dismemberment benefit plan
- Long Term Care benefit plans
- Other fringe benefits (i.e. pre-paid legal services, etc.)
Does it matter if my employer’s disability benefit plans is self-funded, rather than a group disability insurance plan?
No. The way your employer chooses to fund any welfare benefit plan, including a disability benefit plan, does not impact whether ERISA applies. Some employers choose to pay disability claims out of general assets. This is common with Short Term Disability (STD) plans. Others choose to buy an insurance policy to fund their plan and pay claims. This method is almost universal for Long Term Disability (LTD) plans for private companies. ERISA applies not matter what funding method your employer chooses.
Why do I care that ERISA applies to my group disability claim? How does ERISA effect a claim for disability benefits?
If you have disability coverage through your employer’s group plan, ERISA drastically changes how your claim is handled compared to a private disability policy you purchase outside of work.
First, your employer’s disabilty plan documents are the rulebook for your claim. There may be a insurance policy which funds, the plan, but that may only be one of the documents that matter. You want to ask for every document, procedure or guideline that is used to administer the plan. You must ask for this from your employer, not the insurance company. Under most ERISA disability plans, the employer is the administrator designated for distributing plan documents. Asking the right entity is crucial, because ERISA gives you the power to collect up to $110 per day after 30 days if the documents are not provided, but only if you ask the right company (or person) to give it to you.
Second, ERISA has a complicated claim and claim appeal process. The Secretary of Labor has adopted federal regulations that spell out how long an ERISA administrator has to decide your claim. If the claim is denied, you only have 180 days to appeal, and the administrator then has a deadline to decide the appeal. You can use these regulations to your advantage to keep the administrator from delaying your claim.
Third, if you have to file suit because the disability claim administrator (usually, but not always, an insurance company), your case is covered by federal law and will be heard in a federal court. More importantly, unlike a private disability insurance case in state court, you will not get a jury to hear your case. A federal judge who was appointed for life by a President will decide whether you were improperly denied benefits.
Fourth – and most important of all – much of the law about ERISA has been made by federal judges interpreting the somewhat limited text of the statutes passed by Congress. A key development in the law happened in the 1980’s, when it was decided that federal courts reviewing ERISA claims will usually only review the evidence that was submitted during the pre-lawsuit claim process. This means that any evidence you would ever want a judge to see in court must be submitted before the final decision on your claim (or claim appeal).
Is it really true that there is no new evidence when an ERISA case goes to court?
Although hard to believe, with the exception of a few very limited cases, you will not get to submit any evidence to prove why you are disabled in court. Not only will you not get to testify, but none of your doctors will get to testify. If you want to submit any expert opinions – doctors, functional capacity evaluators, vocational experts, etc., you must submit them during your claim.
Some limited evidence on more technical matters like what documents were considered, how a disability insurance company evaluated the claim or whether it properly applied its guidelines, and other matters may come into evidence. However, in most ERISA cases, the evidence will be very limited.
This underscores why it is so crucial for you to get all of your evidence in during your claim. Making sure you get the right type of expert opinions, the proper documentation from lay witnesses, and the right documentation of your functional restrictions and limitations is crucial to winning your case, but it must all be submitted by the time you appeal a denied disability claim.
If you have questions about ERISA or your ERISA disability insurance claim, call (866) 282-5260 to speak with ERISA Disability Attorney John V. Tucker. Free consultations are available.