ERISA Reimbursement Claims

Posted by Sylvius Von Saucken

Question:
I have a couple of questions that are related to your [recent presentation] on ERISA reimbursement claims. I have one that I’m preparing to negotiate, and have pulled the Form 5500 from freeerisa.com, along with schedule A.

Line 9a of the form 5500 pertaining to the plan funding arrangement shows the plan in question to be funded by insurance, trust and general assets of the sponsor based on the boxes checked. On line 7 of schedule A regarding the benefit and contract type, only the box pertaining to dental is checked.

Does this indicate that the only portion of the plan that is funded via insurance is the dental, and that the remainder is self funded? Also, if an employee contributes to the health insurance through a contribution deducted from his or her paycheck, does this take the plan out of the domain of self funded?

Lastly, I understand that an important consideration is whether or not the employee still needs the coverage. The plan language in the plan at issue does have language stating that in the event a reimbursement claim is not honored that benefits will cease to be paid. Can a plan do this even if the plan is funded by insurance and/or the plan language does not meet Sereboff/Popowski?

-Georgia Attorney

Answer:
Facts: Line 9a of the form 5500 pertaining to the plan funding arrangement shows the plan in question to be funded by insurance, trust and general assets of the sponsor based on the boxes checked. On line 7 of schedule A regarding the benefit and contract type, only the box pertaining to dental is checked.

Q1: Does this indicate that the only portion of the plan that is funded via insurance is the dental, and that the remainder is self funded?

A1: Not necessarily. Without looking at the plan, but based on your description it is possible that you have obtained the Form 5500 for the dental plan, administered by a TPA, but another 5500 may exist for the health insurance (full) plan.

One way to check is to compare the plan numbers (or employer or administrator EINs) with the Summary Plan Documents to ensure you have matched the correct 5500 with the correct plan documents.

You might also look to Schedules H and I to glean the rest of the information to help you to determine the funding arrangements of the plan (if only one). As Matt indicated in his presentation, the information on the Form 5500 on line 9a (Funding Arrangement) is intended to provide the DOL (Dept of Labor) and IRS with relevant information concerning how the plan is funded before benefits are paid out. Line 9b (Benefits Arrangement) shows how the benefits are paid. The responses on Lines 9a and 9b are cross-referenced against information on Schedules H, I, and/or A, as appropriate. Plan administrators must attach the appropriate financial or insurance schedule (H, I, A) that corresponds to the Benefit and Funding Arrangements indicated by the plan administrator.

For example, where "Trust" is indicated as an Arrangement, then a Schedule H or I (as appropriate) should be submitted with the Form 5500. Likewise if "Insurance" is listed on line 9a you look to Schedule A. Schedule H is for “large plan” filers (generally plans with 100 or more participants at the beginning of the plan year) and all Direct Filing Entities (with DOL). Schedule I is for “small plan” filers (generally plans with fewer than 100 participants at the beginning of the plan year).

Q2: Also, if an employee contributes to the health insurance through a contribution deducted from his or her pay check, does this take the plan out of the domain of self funded?

A2: That is unlikely. The definition of self-funded plans under ERISA provides certain key points as follows:

Definition: written contract for health benefits between employer and health plan provider, NOT insurance policy, can cross state lines (multi-state application):
Participation: mostly large employers
Payout: employers pay claims out of company assets
Types of health plans: managed care plans only
Consumers: pay deductibles, co-pays, and / or coinsurance
Benefits: usually selective, often restrictive

The point of the self-funded distinction is that the employer and employee have engaged in a private contract using the employer’s own funds to start the plan. The fact that co-pays are made does not change the nature of the plan, as at the point of inception (and each successive year), the funding of the plan is made by the employer. However, this can vary by contract, provided the employer follows the ERISA guidelines with respect to plan operations.

Q3: Lastly, I understand that an important consideration is whether or not the employee still needs the coverage. The plan language in the plan at issue does have language stating that in the event a reimbursement claim is not honored that benefits will cease to be paid. Can a Plan do this even if the Plan is funded by insurance and/or the Plan language does not meet Sereboff/Popowski?

A3: The plan language can provide that benefits will cease to be paid, as this is a private contract. We have seen similar language used before to great effect in terms of negotiations, but typically those terms include the concept of reasonableness.

Our private lien group can certainly take a look at the language you uncovered and see if there is more to the story on the way towards negotiating down the equitable lien (if any) to ensure your client’s net settlement is maximized.

Please feel free to contact us with any further questions.