What Is ERISA? Welfare Benefits: Disability Benefits; Health Insurance; Severance Claims

As discussed in the prior post, ERISA governs almost all employee benefits, including non-pension benefits like LTD benefits, severance, and medical insurance.   These non-pension benefits were included in ERISA as an afterthought, and not many provisions of the law itself addresses them.  Over the forty years ERISA has been in effect, however, the courts have developed a complicated structure to apply ERISA to non-retirement benefits, a structure which the courts regularly change.  This is another one of the areas that makes ERISA complex.

With a Connecticut LTD denial, an attorney has many options in suing in court or pursuing a remedy with the Connecticut Department of Insurance.  With an ERISA LTD case, or other ERISA benefit claim, there are a different set of rules.  

• ERISA does not require that a company offer any particular benefits, or require that any particular class of employees be covered.  So, a company doesn’t have to offer severance benefits, and can decide that some employees (for instance, part-time employees) are not entitled to benefits.  As with everything with ERISA, there are exceptions to this, particularly regarding health insurance after Obamacare, and limitations on favoring highly compensated employees.  But generally, employers get to offer what they want to, and they don’t have to fair about it.

• Welfare benefits, as opposed to pension benefits, don’t vest.  That means until an employee earns the right to get a particular benefit, the employer can change or eliminate the benefit.  Pension benefits, on the other hand, cannot be changed once the benefits vest, even if the employee is not yet receiving pension payments.  So, the day before you are laid off, the employer can eliminate a severance plan, and there is nothing you can do about it.  As with everything with ERISA, there are exceptions: once you have started to receive benefits, the employer can’t take them away.

• Prior to going to court to get benefits, you must exhaust any appeal rights that exist with the plan.  Nothing in ERISA requires this appeal, but the courts require it in almost every case.  So, after the plan denies your severance claim, health insurance claim, LTD claim or other welfare benefit, you must write the employer and ask them to change its mind.  Once the courts imposed the requirement, the Department of Labor issued regulations requiring plans to provide a fair and unbiased review of the denial.  Anyone who has been following this blog knows how important the administrative appeal is.  Even though it is not required by ERISA itself, it is one of the most important things in getting benefits that have been denied.  It is an example of the dangers ERISA presents to inexperienced lawyers.

Regarding health insurance, the Affordable Care Act, or Obamacare, has changed the landscape for denied medical benefit claims in many cases.  See my post on this here, and my post on the Supreme Court’s decision in King v. Burwell upholding key provisions of the act here.

Despite the changes made by Obamacare, plan participants in Connecticut and elsewhere with medical benefit claims, long and short disability benefit claims and severance claims, will have to go through the ERISA maze to vindicate their rights to benefits.  Make sure you have a guide in the maze who has been there before.