ERISA Frequently Asked Questions

ERISA stands for the Employee Retirement Income Security Act of 1974. It is a federal law passed in 1974 that went into effect on January 1, 1976. It governs nearly all private sector employer-provided benefit plans, including retirement plans, medical plans, life insurance plans, disability benefits, and some severance plans. It does not apply to governmental plans, and so-called “church plans” that are sponsored by certain religious employers. Link to ERISA related video.

If your ERISA claim is denied, and if you want to continue to pursue your claim, you are generally required to appeal the denial of your claim. If you choose not to appeal the denial of your benefits claim, the decision will become final.

You are not required to have an attorney assist you with your ERISA appeal, but it is generally a good idea. An experienced ERISA lawyer will know: (i) what information you need to submit to the plan or insurer; (ii) the right arguments to make; and (iii) how to spot the issues with your claim or the fiduciary’s handling of it. An experienced ERISA attorney cannot guarantee your appeal will be successful, but he or she can put you in the best position to prevail on your appeal. Moreover (and more importantly), if your ERISA appeal is denied, and you file a lawsuit in court, the Court may not allow you add additional documents or facts to the record created during the appeal when you go to court. Instead, the court may limit its review of the case to the facts contained in the claim file record (often inaccurately described as the “administrative record”). Thus, the appeal stage is your best and the most important opportunity to demonstrate the facts the support your claim.

The answer depends on the type of benefit claim at issue. For example, by law, you are entitled to a minimum of 180 days from the date of the adverse claim determination to appeal a denial of a claim for benefits under a disability benefits or medical benefits plan. Similarly, you have a minimum of 60 days to appeal the denial of a claim for retirement benefits or life insurance benefits. The actual deadline will be set forth in your “plan document.” Please note that the denial letter you receive from your plan’s claim administrator, which is often an insurance company such as Cigna, SunLife, MetLife, Standard, The Harford, Prudential, or Unum Life Insurance Company, is required to state how long you have to appeal, and it must also include instructions for submitting an appeal. Link to related long-term disability video.

ERISA benefits plans are required to be administered subject to a written instrument – the plan document. The plan document is required to set forth all of the terms of the plan.

An SPD is a summary of the benefit plan and is required to set forth the material terms of the plan in a way that can be understood by the average benefit plan participant. Every participant is required to be furnished with a copy of the SPD. Sometimes the SPD is also the plan document, but not always.

Generally, ERISA preempts any and all state laws insofar as they relate to an employee benefit plan. This means state law generally does not apply to ERISA plans. There are some exceptions, however, such as certain laws regulating insurance. State insurance bad faith law is generally preempted by ERISA.

An ERISA discretionary clause is a provision that provides that the plan’s administrator or claim fiduciary has the discretionary authority to interpret the terms of the plan and determine eligibility for plan benefits. In 1989, the Supreme Court of the United States issued a decision in a case called Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), that held that claim fiduciaries receive a very deferential review of their claim determinations when a plan contain a discretionary claim. This deferential review, which is known as either the “abuse of discretion” or “arbitrary and capricious” standard of review, means that a court will not overturn an adverse claim determination if it thinks the decision is wrong. Rather, the court will only overturn the decision if it is unreasonable and unsupported by substantial evidence.

An ERISA Plan Sponsor is most often the employer who sponsors the benefit plan at issue. Thus, for example, the ABC Company is the plan sponsor of the ABC Company medical plan. With multiemployer benefit plans for union employees, the sponsor is generally the Board of Trustees of the multiemployer plan. A plan sponsor is not a fiduciary. An ERISA Plan Administrator is a fiduciary charged with administering the plan. By default, the Plan Sponsor is also the Plan Administrator, but the sponsor can designate someone or something (like a committee) else to serve as the Plan Administrator.

A fiduciary is someone who is legally required to act in the best interests of another on all matters within the scope of the fiduciary relationship. Under ERISA, certain people or groups of people are fiduciaries by statute. They include: (i) those people who exercise any discretionary authority or control over the plan, (ii) those who render investment advice to a plan for a fee or other compensation; or (iii) those people who have any discretionary authority or discretionary responsibility in the administration of a plan. An ERISA fiduciary has many responsibilities, and is required to act solely in the interest of the participants and beneficiaries and for the exclusive purpose of: (i) providing benefits to participants and their beneficiaries; and (ii) defraying reasonable expenses of administering the plan. An ERISA fiduciary must further exercise its duties as a reasonably prudent person would under the same or similar circumstances.