Erisa claims are typically resolved in one of several ways. The first is if you are appealing the denial of a benefit claim, and the appeal is successful, that’s how the claim’s resolved. So if your claim was denied because perhaps a disability insurer said, we don’t believe you’re disabled and you submit an appeal and the appeal is successful, then what would typically happen is your benefits would be reinstated, retroactive to the date they were denied, and then would be payable in the future subject to the terms of the disability plan, including remaining disabled. If it’s a retirement benefit claim under that same scenario, or perhaps the retirement plan claim determined that you were not fully vested in your benefit in the title to a retirement benefit, and you appeal it, and the appeal is successful, then your retirement benefits would be reinstated and paid for as long as those benefits were payable under the plan, which if we’re talking about a traditional pension plan would be for your lifetime.
The second way ERISA claims are resolved is in court. When you file a lawsuit under ERISA, those lawsuits are typically brought in federal court. And they are often resolved on what we call cross motions for summary judgment, which is where both sides provide a written submission to the court explaining why they believe they should prevail. The court will look typically at the record that was created during the appeal process and then make a decision. And again, they’re like if you were doing the internal appeal and the lawsuit is successful, your benefits would typically be reinstated and then paid prospectively, subject to the terms of the benefit plan. Also, when you do this in federal court, you have the possibility of recovering your costs and your attorney’s fees, which typically does not occur when you’re doing an appeal. The third way these claims are often resolved is via settlement. And that settlement most typically looks like a lump sum payment. Not always, but typically.
And so when we’re settling a disability benefits claim, for example, we’ll look at a couple of different components. The first thing we’ll look at is what benefits are owed to you in arrears. That’s an easy number. We’ll add a figure for interest. And then we take the present value of your future payments. So we look at the stream of future payments that are potentially payable to you under the terms of the plan. And we figure out what that future stream of payments is worth in today’s dollars. We add those figures together, come up with a lump sum total, and then the parties tend to negotiate off of that figure. And there’s often a dispute as to the value of that future stream of payments, which can typically be the first hurdle that the parties have to work through when they’re trying to negotiate a settlement of an ERISA disability benefits claim or retirement plan claim. It’s less of an issue when you’re dealing with a benefit like life insurance, for example, where there’s a single payment. And so everybody knows what the claim is worth. Then there’s simply a negotiation over the settlement value of that life insurance claim.