ERISA, short for The Employees Retirement Income Security Act of 1974, is a series of federal laws that sets minimum standards for retirement, health, disability and other benefits plans. The laws do not require employers to provide employees with benefits plans, or even offer a minimum set of benefits, but it does regulate the operation of those plans when they exist.
There are two types of ERISA plans: insured, and self-funded. An insured plan means an employer has purchased an insurance policy for employees from an insurance carrier. A self-funded plan, on the other hand, means the employer fully funds the plan, and pays for employee healthcare out of that funding.
And when it comes to your ability to get compensation in a personal injury or medical malpractice case, the difference between the two is enormously significant. Here’s why the type of ERISA plan matters, and what you need to know before you find yourself at the wrong end of an unexpected – and unwelcome – outcome.
Why Self-Funded ERISA Plans Matter To Your Personal Injury Case
It’s not something anyone wants to imagine, but there may come a time when you’re involved in a serious auto accident, experience a traumatic slip-and-fall, or even suffer injury at the hands of a medical professional.
In each of these cases, you’re likely to accrue significant medical expenses, and perhaps require long-term care, experience ongoing pain and suffering, or lose wages or even your ability to continue working altogether.
During times of crisis you rely on your benefits plan to provide support, and on your attorney to seek compensation from responsible third parties.
Here’s where ERISA comes in.
If you’re covered by a self-funded ERISA policy, then the insuring party – in this case your employer – has a right to place a lien on your personal injury case and be reimbursed for the full amount of their payment out of any eventual settlement you may reach.
Imagine, for a moment, that your employer pays out $100,000 for your medical care after a serious car accident. Your attorney then negotiates a settlement of $100,000 for you from the other party involved in your accident. ERISA requires that every dollar goes back to your employer as reimbursement for expenses. You receive nothing.
If you require long term care or have experienced a significant loss of wages and were relying on a settlement to help get you through a tough time, you could find yourself without the assistance you might have expected.
In any settlement, the funds must be dispersed to satisfy the lien first, preempting any out-of-pocket expenses on your behalf, including attorney’s fees. If the lien is not satisfied, you risk a lawsuit.
Circumventing ERISA Concerns Involving Auto Accidents
One of the mistakes that many people make in their quest for inexpensive auto insurance is failing to purchase adequate PIP (Personal Injury Protection) insurance as part of the policy.
You may wonder why you need additional medical insurance when you already have a benefits plan, but there are a number of good reasons to rely on PIP rather than your employee benefits in the case of an auto accident. You can read more details here, but in a nutshell, PIP is not subject to ERISA law, which means you will not be required to pay back any costs to your insurers.
The difference between the cost of an auto insurance policy with and without good PIP benefits is negligible when compared with the possibility a mountain of red tape and a lifetime of debt.
Just as importantly, if you choose to purchase PIP benefits through your auto insurer, you must set PIP to be your primary source of coverage. Otherwise, having those benefits will be essentially worthless since your primary health benefits plan will supersede it.
In short, purchase adequate PIP benefits as part of your auto policy and set PIP to be your primary source of coverage. In the event of an auto accident, you’ll be glad you did.
Managing ERISA In Personal Injury Cases
The complexities of ERISA laws are best navigated by an experienced attorney. In fact, the laws governing ERISA are still evolving, which makes them even more complex in a court of law.
For example, liens only apply in relation to a self-funded ERISA policy, and even employers may not be clear on whether the benefits plan they offer is self-funded by legal standards. Your attorney will request and review the appropriate documentation to be sure that the lien is valid.
There are a number of requirements that govern ERISA; for example, an employer must file appropriate forms in order to submit a lien on your case, and failing to do so will invalidate their right to recovery. In addition, an insurer must have written plan documentation that complies with current law and clearly establishes a right to recovery of benefits paid. If the language is ambiguous or the documentation insufficient, then the lien may be invalid. Likewise, there is much debate over the scope of the right of an insurer to recover benefits paid, which highlights the importance of having an attorney who understands how to navigate the complexities. Otherwise, you risk losing any money you might have gained through a settlement on your personal injury case, and that can have long-lasting effects on your ability to recover.
If you have been injured and are relying on an ERISA plan, contact us for a free consultation.