Will your New York personal injury recovery be subject to an ERISA lien?
ERISA plans are not all the sameERISA is a highly detailed set of laws governing employer based health, welfare and pension plans. In New York, whether or not ERISA may assert a valid lien against your lawsuit proceeds generally boils down to whether or not the ERISA plan is "self funded."
Self Funded v. Insured plansSome employers fund their employee benefit plans with their own money. They set up a trust or other type of fund, and pay employees' medical bills from the trust as they come in. This is known as a self-funded plan.
By contrast, some companies elect to pay an insurance premium to a health insurance company, such as Aetna or Cigna, among others. In these cases, the premiums are used to purchase a policy of insurance that pays the employees' medical bills as they come in.
Third Party Administrator or Insurer?It can sometimes be difficult to determine whether or not a plan is self funded. This is because ERISA allows plans to contract with third parties to manage the billing and payment of employees' medical bills. These third party administrators are often companies like Aetna and Cigna, among others. The common names can make it difficult to determine whether or not a given plan is self funded or insured.
Who is entitled to reimbursement?The basic rule is a self funded plan is entitled to reimbursement if the plan contains a clause allowing reimbursement. By contrast, in New York, insured plans are generally not entitled to reimbursement. This is because of a New York General Obligations Law section that prohibits subrogation by insurance companies. The legal reasoning behind this difference is much discussed, but the rule can be stated briefly as above.
What should you do?Some plans claim a lien even when it is not in fact valid. This can be because the plan is not aware of the anti-subrogation law, or for other reasons. Accordingly, if your ERISA plan claims a lien on injury proceeds, your attorney should already be working to determine its validity.
You can help by finding out whether the plan is self-funded or insured. Other than the obvious (such as asking your human resources or plan sponsor) there are several ways to do this:
First, you can get a copy of the Summary Plan Description (SPD) from your plan. ERISA requires that the plan sponsor provide you with this document upon request. The SPD should tell you how the plan is funded.
Second, you can access a form called a 5500 that your plan is required to file each year with the Department of Labor. This information can be searched for free online at www.freeerisa.org. The form has a check box indicating how the plan is funded (i.e., trust, insurance, etc.).
ConclusionAs a lawsuit comes to a close, whether by settlement or otherwise, the presence of an ERISA lien can muddy the waters and slow down your getting paid. By understanding the basics of the ERISA lien, especially the self-funded v. insured plan issue, and by gathering the information described above, you can help make the process more clear, maximizing your lawsuit proceeds and streamlining your payment.