The Basics of an ERISA Life, Health and Disability Insurance Claim – Part One: ERISA Background, Purpose and Timing Requirements

In this several part Blog Series entitled The Basics of an ERISA Life, Health and Disability Insurance Claim, we will discuss the basics of an ERISA life, health and disability claim, from navigating a claim, handling a claim denial and through preparing a case for litigation.  In Part One of this Series, we discuss the background and purpose of ERISA, along with procedural rules and practical considerations for a disability claim.

Congress enacted the Employee Retirement Income Security Act of 1974 (“ERISA”) (29 U.S.C. § 1132(e)(2)) in response to public dissatisfaction with poorly funded pension plans, onerous vesting requirements and labor leader misuse of union benefit funds.  Senator Jacob Javits, a sponsor of ERISA, observed at the time that only a relative handful of the estimated tens of millions of American workers covered under private pension plans would ever receive any money from the plans on which they staked their financial futures.  Fearing that states would enact a patchwork of inconsistent pension reform legislation, employers began supporting federal regulation of private benefit plans, provided it had a strong preemption provision.  Thus, ERISA was enacted and sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.

In general, ERISA governs “employee benefit plans” but does not cover group health plans established or maintained by governmental entities, churches for their employees or plans which are maintained solely to comply with applicable workers compensation, unemployment or disability laws.

ERISA’s Subchapter 1—entitled “Protection of Employee Benefit Rights” sets forth the Congressional findings and contains a declaration of policy.  In enacting ERISA, Congress found that the “continued well-being and security of millions of employees and their dependents are directly affected by [employee benefit plans].”  29 U.S.C. § 1001(a).  Congress further declared that a policy of ERISA was “to protect . . . the interests of participants in employee benefit plans and their beneficiaries . . . by providing for appropriate remedies, sanctions, and ready access to the Federal Courts” and to “increase the likelihood that participants and beneficiaries . . . receive their full benefits.”  Id. at § 1001(b), 1001b(c)(3).  This section allows plan participants or beneficiaries whose benefit claims were denied to file an action to recover benefits in federal or state court.

While ERISA itself does not require a participant or beneficiary to exhaust administrative remedies in order to bring an action under Section 502 of ERISA, 29 U.S.C. Section 1132, courts adopted an exhaustion requirement that requires an ERISA claimant to exhaust available administrative remedies before bringing a claim in federal court.  However, when an employee benefits plan fails to establish or follow reasonable claims procedures consistent with the requirements of ERISA, a claimant may not be required to exhaust administrative remedies because her claims may be deemed exhausted.

The Supreme Court has noted that there is a two-tiered remedial scheme under ERISA—the first tier is the internal review process required for all ERISA disability benefit plans.  After the participant files a claim for disability benefits, the plan has 45 days to make an “adverse benefit determination.”  Two 30-day extensions are available for “matters beyond the control of the plan” giving the plan a total of 105 days to make that determination.  29 C.F.R. § 2560.503-1(f)(3).

Following denial, the plan must provide the participant with “at least 180 days . . . within which to appeal the determination.”  The plan has 45 days to resolve that appeal, with one 45-day extension available for “special circumstances (such as the need to hold a hearing.)”  In the ordinary course, the regulations contemplate an internal review process lasting about one year at the very latest, assuming the claimant waits until the 180-day time period expires.  Upon exhaustion of the internal review process, the participant is entitled to proceed immediately to judicial review, the second tier of ERISA’s remedial scheme.

Notably, the 180-day limit to appeal the determination is treated much like a statute of limitations.  If missed, the claimant may be denied the right to have her claim reconsidered, and also be denied the right to file suit in court.  Thus, it is critical that appeals of claim denials are made timely.

Further, federal courts have established rules limiting judicial review to the contents of the “administrative record.”  While there are some exceptions, generally it is important to supplement the record with as much evidence as possible during the appeal stage to support a claimant’s position.  Therefore, not timely filing an appeal or appealing but not including important documents and evidence to support an ERISA claim can have extreme negative consequences to an ERISA plan participant or beneficiary.  Highly experienced law firms like McKennon Law Group PC are often hired to navigate the ERISA claims and appeal process given the complexity of ERISA and its dangerous pitfalls.

The McKennon Law Group PC periodically publishes articles on its Insurance Litigation and Disability Insurance News blogs that deal with frequently asked questions in insurance bad faith, life insurance, long-term disability insurance, annuities, accidental death insurance, ERISA and other areas of law.  To speak with a highly skilled California/Nationwide disability insurance lawyer or ERISA lawyer at the McKennon Law Group PC, call (714)274-6322 for a free consultation or go to our website at www.mckennonlawgroup.com and complete our free consultation form today.

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