Friday, March 20, 2009


Posted by Matthew Garretson and Elizabeth Vish Schad

With ERISA, is the lien automatic, or it doesn't take effect until the notice is given and it has to be given before settlement?

-Recent Seminar Attendee

Once a plan has put you on notice, there are several considerations to determine the plan’s strength.

First, identify whether the plan is self-funded or insured. After determining the status of the plan, obtain a copy of the Summary Plan Description. It is the plain language summary of the plan. Under ERISA, the sufficiency of the plan language controls the right of recovery.

Reviewing the SPD will allow you to determine the plan’s strength. The Specific Fund Doctrine from Sereboff v. Mid Atlantic applies to all ERISA liens. It states that the plan must specify the fund to be enforced. Identify if the language states:

1. That the plan can recover specifically from the settlement or award?
2. That the plan can recover only up to the amount it paid in benefits?

If these requirements are not met, you can stop your analysis. If these requirements are met, you must consider the applicability of other defenses which will be dependent on your jurisdiction and plan language.

There are several defenses to consider. The Made Whole Doctrine bars liens or subrogation until the client has been “made whole” from his injury. Some jurisdictions have adopted the “Made Whole” Rule as a default rule of ERISA plan interpretation where the plan is silent on the matter. The Common Fund Doctrine requires the plan to contribute to attorney fees. Under Sereboff, a lien is enforceable against the settlement of the injured beneficiary on whose behalf benefits were paid. They are not enforceable against the settlements of others.