ERISA vs. Non-ERISA Disability Insurance Plans

Understand How the Employee Retirement Income Security Act Affects Long Term Disability Insurance Claims

ERISA Plans

If a worker has a short- or long-term disability insurance plan to which their employer makes regular contributions, the plan is considered “employer sponsored.” Employer sponsored plans are governed by the Employee Retirement Income Security Act, more commonly known as “ERISA.” However, if an employer is either a Church (sometimes including church affiliated organizations such as a hospital) or a government employer then the plan is not governed by ERISA.

ERISA is designed to protect both employees and employers by laying out specific rules and processes for both an employer providing a benefit plan and employee participants making claims for benefits under those plans. Participants in an ERISA governed plan must meet specific deadlines and follow an appeal process determined by the plan before a claim can be filed in court. There are also specific rules regarding the types of evidence required during this appeal process before a claim is filed in court.

A plan governed by ERISA owes its participants “fiduciary duties,” which requires plan managers act in the best interest of its participants, or at least requires the employer and insurance company involved to place the participant’s interests ahead of the employer’s interest. This means when a plan sponsor denies benefits to a participant, it must do so because the participant does not qualify for the benefit according to the language of the plan. If the plan sponsor denies the benefits and provides an invalid reason, or fails to give any reason at all, then the participant has a right to appeal the plan’s decision. Only after the available appeals under the plan have been exhausted may a participant then file a lawsuit for the wrongful denial of benefits in an effort to obtain their entitled to benefits.

There are also requirements for plan sponsors to provide individuals with various documents either when the documents are requested or when details of the plan change. Any failure of the sponsor to ensure these documents are properly provided to participants is also a violation of ERISA.  

Non-ERISA Plans

Not all short and long-term disability insurance claims are governed by ERISA. For example, ERISA will not govern your claim for benefits under your employer-sponsored plan if you are a government employee (including a school district employee) or if you are covered by a “Church plan” (which is defined by 29 U.S.C. § 1002(33)(A)). Additionally, ERISA will not govern your claim if you purchased your own individual long-term disability insurance policy.

Unlike ERISA plans, these plans do not create any fiduciary duties for the employer or insurance companies involved. Instead, in Wisconsin and a few other states, there are several state laws that help protect participants’ rights for these types of plans. The most common of such protections are claims for breach of contract and the denial of benefits in bad faith. These claims, again after the internal procedures of the plan are exhausted, are actionable in Wisconsin state court.

Contact Us for a Free Consultation

Our firm represents clients at all stages of benefits claim process, including disability claims, for both ERISA and non-ERISA governed plans. Contact us if you would like to discuss your situation or legal rights with a Wisconsin disability attorney. Please call a Madison disability attorney directly at (608) 257-0040 or a Milwaukee disability attorney at (414) 271-8650, or email us via our Contact Page.

To learn more about our Long Term Disability practice, please see our Long Term Disability blog topics.

ERISA Plans

If a worker has a short- or long-term disability insurance plan to which their employer makes regular contributions, the plan is considered “employer sponsored.” Employer sponsored plans are governed by the Employee Retirement Income Security Act, more commonly known as “ERISA.” However, if an employer is either a Church (sometimes including church affiliated organizations such as a hospital) or a government employer then the plan is not governed by ERISA.

ERISA is designed to protect both employees and employers by laying out specific rules and processes for both an employer providing a benefit plan and employee participants making claims for benefits under those plans. Participants in an ERISA governed plan must meet specific deadlines and follow an appeal process determined by the plan before a claim can be filed in court. There are also specific rules regarding the types of evidence required during this appeal process before a claim is filed in court.

A plan governed by ERISA owes its participants “fiduciary duties,” which requires plan managers act in the best interest of its participants, or at least requires the employer and insurance company involved to place the participant’s interests ahead of the employer’s interest. This means when a plan sponsor denies benefits to a participant, it must do so because the participant does not qualify for the benefit according to the language of the plan. If the plan sponsor denies the benefits and provides an invalid reason, or fails to give any reason at all, then the participant has a right to appeal the plan’s decision. Only after the available appeals under the plan have been exhausted may a participant then file a lawsuit for the wrongful denial of benefits in an effort to obtain their entitled to benefits.

There are also requirements for plan sponsors to provide individuals with various documents either when the documents are requested or when details of the plan change. Any failure of the sponsor to ensure these documents are properly provided to participants is also a violation of ERISA.  

Non-ERISA Plans

Not all short and long-term disability insurance claims are governed by ERISA. For example, ERISA will not govern your claim for benefits under your employer-sponsored plan if you are a government employee (including a school district employee) or if you are covered by a “Church plan” (which is defined by 29 U.S.C. § 1002(33)(A)). Additionally, ERISA will not govern your claim if you purchased your own individual long-term disability insurance policy.

Unlike ERISA plans, these plans do not create any fiduciary duties for the employer or insurance companies involved. Instead, in Wisconsin and a few other states, there are several state laws that help protect participants’ rights for these types of plans. The most common of such protections are claims for breach of contract and the denial of benefits in bad faith. These claims, again after the internal procedures of the plan are exhausted, are actionable in Wisconsin state court.

Contact Us for a Free Consultation

Our firm represents clients at all stages of benefits claim process, including disability claims, for both ERISA and non-ERISA governed plans. Contact us if you would like to discuss your situation or legal rights with a Wisconsin disability attorney. Please call a Madison disability attorney directly at (608) 257-0040 or a Milwaukee disability attorney at (414) 271-8650, or email us via our Contact Page.

To learn more about our Long Term Disability practice, please see our Long Term Disability blog topics.

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