Employee Retirement Income Security Act (ERISA)
The Employee Retirement Income Security Act (ERISA) was enacted in 1974 to protect individuals with private health and pension plans. This is a federal law that establishes the minimum standards for most voluntarily established private employer-sponsored plans, including funding, vesting, and benefits coverage.
ERISA requires employers to provide employees information on the plan, including how the plan is funded and features of the plans. It also sets the minimum standards for participation, benefit accrual, and vesting under the plans. ERISA also sets forth a fiduciary duty for those who control and manage plan assets and provides for an appeals process and a legal cause of action for individuals who are denied benefits under the plan.
ERISA covers most private health and pension plans and generally does not apply to group health plans of government employees. Some employee benefits, such as paid vacation, bonuses, overtime, and childcare are also not covered by ERISA. While ERISA does not require employers to provide health insurance or a pension plan, if the company establishes pension and health benefit plans, ERISA regulates the operation of such plans.
ERISA Disability Benefits
While most employees have health insurance provided by their employers, a smaller percentage of workers have employer-sponsored disability insurance coverage. Without disability coverage, an injured worker may not be able to make up the difference between their expenses and public disability benefit programs. Additionally, workers' compensation benefits are only available to an employee who is injured in the course of their employment. However, employer-provided disability benefits can offer workers and their families peace of mind in the event of a serious illness or disability.
Disability plans generally replace a percentage of the worker's income if they are unable to work due to an injury or illness. This may include short-term disability, long-term disability, or combined short and long-term disability coverage.
ERISA provides regulations for plans that offer employee disability benefits. This includes regulating the how disability benefit claims are processed, the timeline for processing a claim, and the individual's rights if their disability claim is denied. One of ERISA's basic features is to ensure employers offer information about disability benefits to covered employees.
When an employee is initially covered by their employer's disability benefits plan, they should receive a brochure detailing the features of the plan in a summary plan description (SPD). The SPD provides information on how the disability plan works, what benefits are offered, and how an employee should file a claim if they become disabled.
Employees can find additional information in their Summary of Benefits and Coverage (SBC), which provides a summary of benefits and any out-of-pocket costs to the employee for coverage. Before filing a disability benefit claim, the employee should review their plan information on how to file a claim, to make sure they are eligible, and understand what to do if their claim is denied.
ERISA provides timeframes for evaluating health and disability claims. A disability claim is to be decided by the benefits provider within a reasonable time, but no later than 45 days after the claim has been received. In some cases, the plan administrator may request additional information to render a decision. The plan provider can extend the timeline by up to an additional 30 days if they need more time to review the claim, provided they inform the employee before the end of the initial 45-day period. Any further extensions require the employee's consent.
Denial of Disability Benefits
Most workers never expect to use their disability benefits, but they have the security in knowing that the benefits are available if they are ever injured, suffer a serious illness, or otherwise become disabled. However, when an employee has their disability claim denied, they may be unsure where to turn for assistance.
When seeking disability benefits, the claimant has to establish that they are considered disabled in order to receive the disability benefits. The plan may deny a claim for a number of reasons, including a determination that the claimant is not eligible for benefits, the claimant is not covered by the plan, or they are not considered disabled under the terms of the plan.
If a disability claim is denied, the plan provider must send the employee a notice with a detailed explanation of why the claim was denied. The plan must also provide a description of the appeals process and provide a reasonable opportunity for employees to receive a full review of the decision to deny their claim.
An appeal for a disability claim must be reviewed within a reasonable time, but not later than 45 days after the plan receives the request to review the decision. The plan may take an additional 45 days to decide the appeal, but they must notify the claimant in writing explaining why an extension is needed. Alternatively, some employers may use a collectively bargained grievance process for their disability claim appeals procedure.
After a final decision is made on the appeal, the plan must send the claimant a written explanation of the decision. This includes citing the specific reasons for denying the claim on appeal and describing the claimant's rights to a judicial review of the decision.
Federal law provides for a legal cause of action for employees who are denied disability benefits covered by ERISA. If a disability claim is denied and the appeal is denied, the claimant can contact an attorney to discuss their rights to file a legal claim against the employer or plan provider.
Through filing a lawsuit against the plan provider or employer for a denied benefits claim, the claimant can seek their benefits owed to them under their benefits plan. For disability benefits claims, this may include back payments owed, as well as interest. In some cases, the claimant can seek costs and legal fees associated with bringing the legal action.