§ 5.11 Employee Retirement Income Security Act (“ERISA”) Plan Recovery Rights
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§ 5.11 – Employee Retirement Income Security Act (“ERISA”) Plan Recovery Rights
ERISA, 29 U.S.C. §§ 1001 to 1461, governs an array of “employee benefit plans.” See 29 U.S.C. § 1002(3). This includes health plans established or maintained by employers (or by employee organizations) for their employees (or employee-members) “through the purchase of insurance or otherwise.” See 29 U.S.C. § 1002(1). These health plans are called “employee welfare benefit plans” or “welfare plans.” See 29 C.F.R. § 2510.3-1 (clarifying the definition of “employee welfare benefit plans”).
a. The Scope of ERISA Plan Recovery Rights
“ERISA itself is silent with respect to subrogation and reimbursement, neither requiring a welfare plan to contain a subrogation clause, nor barring such a clause or otherwise regulating its content.” Alves v. Silverado Foods, Inc., 6 Fed. Appx. 694, 700 (10th Cir. 2001). ERISA’s statutory scheme, however, “is built around reliance on the face of written plan documents.” U.S. Airways, Inc. v. McCutchen, 133 S. Ct. 1537, 1548 (2013).
“The plan, in short, is at the center of ERISA.” Id.
To determine the scope of an ERISA plan’s recovery rights—including whether those rights extend to first-party recoveries—it is necessary to isolate the terms of “the plan” and, if applicable, then examine whether state law prohibiting subrogation is preempted by ERISA. For example, if the terms of a plan only include a right of subrogation against a third party, but do not include a right of reimbursement from claims against an injured person’s insurer, then the plan’s recovery rights would be limited to third-party liability recoveries obtained from a tortfeasor. See U.S. Airways, Inc. v. McCutchen, No. 2:08-CV-01593-DSC (W.D. Penn. Mar. 16, 2016) (Doc. 106) (holding, on remand from the supreme court, that plan recovery terms did not extend to an underinsured motorist claim).
i. Determining the Terms of the Plan
Determining the controlling terms of the plan is often controversial.
In litigated matters, the burden of proof is on the plan to show that it lawfully exists and to prove its terms. E.g., Prichard v. Metro. Life Ins. Co., 783 F.3d 1166, 1170 (9th Cir. 2015) (“MetLife bears the burden of proving the Plan’s grant of such discretionary authority”); cf. Credit Managers Ass’n of S. Cal. v. Kennesaw Life & Acc. Ins. Co., 25 F.3d 743, 747 (9th Cir. 1994) (“CMA argues that, because it failed to satisfy its burden of proving that an ERISA plan existed, it could not have been an ERISA fiduciary. We reject this argument.”). Despite this, resolving these issues at any stage requires understanding the various types, purposes, and interrelationships of ERISA plan documents and disclosures.
1. The Written Instrument
ERISA requires the specific terms of the plan be set forth in a “written instrument.” See 29 U.S.C. § 1102(a)(1). This document is sometimes called the “master plan document” or “formal plan document.” E.g., Apollo Educ. Grp. Inc. v. Henry, 150 F. Supp. 3d 1078 (D. Ariz. 2015) (discussing the “master plan document”); Mull v. Motion Picture Indus. Health Plan, 865 F.3d 1207, 1209-11 (9th Cir. 2017) (discussing the “formal plan document”). Importantly, the written instrument required by § 1102 is distinct from plan “disclosures,” also mandated by ERISA, 29 U.S.C. §§ 1021 to 1030, such as the “summary plan description” required by § 1022. Amara, 131 S. Ct. at 1877; see infra
§ 5.11(a)(i)(2).
Regardless of the term used to describe it, ERISA requires “[e]very employee benefit plan shall be established and maintained pursuant to a written instrument” prepared by a “plan sponsor.” See 29 U.S.C. § 1102(a)(1). Like a trust’s settlor, the plan sponsor creates the basic terms and conditions of the plan and executes the written instrument containing those terms and conditions. CIGNA Corp. v. Amara, 131 S. Ct. 1866, 1877 (2011).
ERISA requires that the written instrument must identify one or more fiduciaries “hav[ing] authority to control and manage the operation and administration of the plan.” 29 U.S.C. § 1102(a)(1). In addition, the written instrument must also contain the following other four elements:
(1) the procedure for funding the plan;
(2) the procedure for the allocation of responsibilities in the operation and administration of the plan;
(3) the procedure for amending the plan; and
(4) the basis on which payments are made to and from the plan.
29 U.S.C. § 1102(b); Mull, 51 F. Supp. 3d at 922 (“[T]he SPD here cannot constitute a formal plan document because it lacks three of the four features which 29 U.S.C. § 1102(b) requires of such documents.”).
2. The Summary Plan Description (“SPD”)
The SPD is a statutorily required non-binding summary of a plan’s terms.
ERISA requires the SPD must: (1) “be written in a manner calculated to be understood by the average plan participant,” and (2) “be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan.” 29 U.S.C. § 1022(a) (emphasis added). In other words, ERISA contemplates the SPD’s separate existence from “the plan,” requiring the SPD to be an easily understandable, sufficiently accurate, and comprehensive summary.
In addition to appropriately summarizing the terms of the plan, ERISA also requires the SPD must contain the following other twelve elements:
(1) the identity of the plan administrator;
(2) in the case of a group health plan, whether a health insurance issuer is responsible for the financing or administration (including payment of claims) of the plan and (if so) the identity such issuer;
(3) the identity of the designated agent for the service of legal process;
(4) identity of any trustees;
(5) a description of any applicable collective bargaining agreement;
(6) the plan’s requirements concerning eligibility;
(7) a description of non-forfeitable pension benefits provisions;
(8) circumstances which may result in loss of benefits;
(9) the source of financing of the plan and the identity of any organization through which benefits are provided;
(10) the date of the end of the plan year and whether the records of the plan are kept on a calendar, policy, or fiscal year basis;
(11) the procedure to be followed in presenting claims under the plan; and
(12) the remedies available under the plan for the redress of denied claims.
29 U.S.C. § 1022(b).
In contrast to the “plan sponsor” who prepares the “written instrument,” supra, ERISA contemplates the SPD will be prepared by a “plan administrator.” “The plan’s administrator, [is] a trustee-like fiduciary, [who] manages the plan, follows its terms in doing so, and provides participants with the summary documents that describe the plan (and modifications) in readily understandable form.” Amara, 131 S. Ct. at 1877 (emphasis added). Although a plan sponsor and plan administrator can be the same person or entity, “that is not always the case,” and “ERISA carefully distinguishes these roles.” Id.
The SPD, therefore, is a non-authoritative summary disclosure about the plan. As bluntly observed in Amara, “summary documents, important as they are, provide communication with beneficiaries about the plan, but that their statements do not themselves constitute the terms of the plan.” Id. (emphasis in original).
The Amara majority’s sentiment was echoed in Justice Scalia’s concurring opinion, which pointedly observed:
It would be peculiar for a document meant to “apprise” participants of their rights “under the plan” to be itself part of the “plan.” Any doubt that it is not is eliminated by ERISA’s repeated differentiation of SPDs from the “written instruments” that constitute a plan, and ERISA’s assignment to different entities of responsibility for drafting and amending SPDs on the one hand and plans on the other.
Id. at 1882 (Scalia, J., concurring) (emphasis added).
In other words, the SPD has a limited role. As the Supreme Court admonished in McCutchen, “[w]e have made clear that the statements in a summary plan description ‘communicat[e] with beneficiaries about the plan, but . . . do not themselves constitute the terms of the plan.’” McCutchen, 133 S. Ct. at 1543 n.1 (quoting Amara, 131 S. Ct. at 1877) (emphasis in original).
3. Issues Concerning SPDs
Despite the foregoing being “clear,” however, there is still surprising controversy concerning what document actually contains “the terms of the plan” and courts still struggle with the relevance of SPDs. In discussing Amara, for example, the court in Eugene S. v. Horizon Blue Cross Blue Shield of N.J., 663 F.3d 1124 (10th Cir. 2011), dismissed it as “presenting either of two fairly simple propositions, given the factual context of that case: (1) the terms of the SPD are not enforceable when they conflict with the governing plan documents, or (2) the SPD cannot create terms that are not also authorized by, or reflected in, governing plan documents.” Eugene S., 663 F.3d at 1131.
The issue in Eugene S. was whether an SPD could be incorporated into a master plan document. The court noted that provisions of an SPD are not automatically part of a formal plan document merely because the insurer “claims [it] is integrated into the Plan.” Id. Instead, “the insurer must demonstrate that the SPD is part of the Plan, for example, by the SPD clearly stating on its face that it is a part of the Plan.”28 Id. (emphasis added).
Other courts have followed suit. See, e.g., Tetreault v. Reliance Standard Life Ins. Co, 769 F.3d 49, 56 (1st Cir. 2014) (holding an SPD creates enforceable rights and duties when a plan document expressly incorporates the SPD); Bd. of Trustees of Nat. Elevator Indus. Health Ben. Plan v. Montanile, 593 Fed. Appx. 903, 909 (11th Cir. 2014) (noting, with respect to a written instrument and an SPD, “[w]e have previously indicated that a single document can serve both functions”), reversed on other grounds, 136 S. Ct. 651 (2016); Mull v. Motion Picture Industry Health Plan, 865...
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