ERISA Employee Health Plan Language

Question:
We have received a very small judgment in a PI case. There is a no fault medical lien and of course our expenses and fees to be paid per our contract. The ERISA carrier says that they have a lien for the total amount of their payments and it has priority over these liens. What is the priority if any of ERISA carrier's right of reimbursement?

Answer:
An ERISA employee health plan will be governed according to the terms of its plan language. From our perspective as a third-party provider of lien resolution services, the most pivotal step in resolving Private/ERISA liens is the plan evaluation. The language in a plan will dictate the priority, if any, of the reimbursement interest and will identify the scope of that interest.

First, ERISA plans are limited to seeking appropriate equitable relief. 29 U.S.C. 1132(a)(3)(B). An ERISA plan has a right of reimbursement which sounds in equity if the plan language imposes a constructive trust or equitable lien upon a third party recovery. To qualify as equitable the plan language MUST 1) specify that recovery will be made from an identifiable fund and 2) specify that recovery must be limited to a specific portion of said fund. If either of these requirements are not met in the plan language, the plan does not have an equitable right to recovery and thus they do not have a reimbursement interest under ERISA. See Sereboff, 126 S.Ct. 1869 (2006).

Second, ERISA plans which are funded through an insurance provider may be subject to state law defenses through the “savings clause” of ERISA 1144(b)(2)(A) (if the state law is found to regulate insurance). ERISA plans which are self-funded through the assets of the employer or a trust of similar nature will preempt state law but may be subject to federal common law defenses. Whether or not a defense will apply will be controlled by the language of the plan as well. In addition, the plan’s funding status should be identified in the plan language; although this alone should not be relied upon.

Third, as a general matter, the plan language will specifically state what type of priority it possesses.

In conclusion, to properly identify and assess a plan’s interest and what priority such an interest may have it is absolutely necessary to obtain a copy of the Summary Plan Description from the year in which benefits were provided. Under 1024(b)(b), your client has the right to request this and any other document under which the plan is operated or established. The request should be directed to the administrator of the plan and they are required to comply.

If you obtain the plan language I would be happy to give it a quick review and provide my general thoughts on the strength or priority. Thanks.

Michael D. Russell