Navigating ERISA liens can be a daunting task, given the complexity of the Employee Retirement Income Security Act (ERISA) and its impact on self-insured health plan reimbursement. Although a comprehensive exploration of ERISA is beyond this blog, understanding some key strategies can help in resolving ERISA liens effectively.
ERISA Overview
Enacted in 1974, ERISA aims to protect employee benefit plan participants by enforcing standards of conduct for plan managers and ensuring plan funds are secure. However, its application in lien resolutions often draws criticism, particularly concerning the practical protection it offers.
ERISA and Health Plans
ERISA governs most employer health plans, with notable exceptions including government and certain religious plans. ERISA health plans generally include subrogation clauses, requiring reimbursement for injury-related expenses paid by the plan. Section 502(a)(3) of ERISA allows these plans to seek equitable relief for enforcement, often through equitable liens or constructive trusts. The law’s intricacies, slightly clarified by the Supreme Court, reveal that the statute in its application is far from straightforward.
Key Supreme Court Rulings
- Sereboff v. Mid Atlantic Medical Services, Inc. (2006): The Supreme Court confirmed that ERISA plans could enforce reimbursement provisions under equitable principles, affirming the power of self-funded plans to claim recovery via equitable liens.
- U.S. Airways, Inc. v. McCutchen (2013): The Court reinforced that written ERISA plan terms take precedence over equitable doctrines like “make whole” and “common fund.”
Select Strategies for Lien Reduction
While there are many tactics you can use to possibly reduce an ERISA lien, here are a few key ones to consider:
- Determine Plan Funding Status: Identify whether the plan is self-funded or fully insured. Self-funded plans are governed by ERISA and are harder to reduce under Supreme Court precedent, while fully insured plans generally will be subject to state law or common law principles. Review the Summary Plan Description (SPD) and Master Plan to determine funding status.
- Utilize ERISA Section 1024(b)(4): Request plan documents directly from the plan administrator, not from third-party administrators or recovery contractors. This legal right via the document request helps assess the strength of the plan’s claim and identify potential leverage points, such as challenging the applicability of equitable principles.
- Examine Plan Language: Look for ambiguities or specific provisions in the plan’s reimbursement clauses. Ambiguities can be used as leverage to reduce the amount owed to the lien holder.
- Leverage Equitable Doctrines: If the plan language does not explicitly reject doctrines like “make whole” or “common fund,” use these principles to argue for lien reduction. Make arguments based on partial reimbursement or proportional sharing of legal costs.
- Address Equitable Defenses: Use defenses like unjust enrichment or undue hardship to argue against full reimbursement, where applicable.
Conclusion
Effectively addressing ERISA liens requires a deep understanding of the plan’s funding status, precise examination of plan documents, and strategic application of legal and equitable arguments. The US Supreme Court’s ruling in McCutchen emphasized the importance of plan language, making it crucial to use Section 1024(b)(4) requests to your advantage. By leveraging these strategies, you can begin to navigate ERISA liens more effectively and potentially achieve optimal reductions in a claimed ERISA lien.
Working with specialized lien resolution companies can provide essential expertise and prevent costly mistakes when it comes to ERISA liens. If you want to find out more, contact us today to Partner with Synergy for lien resolution.
Written by: Jason D. Lazarus, J.D., LL.M., MSCC | CEO
