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FAQs - Why Should an Employer Comply With ERISA?
First of all, compliance is not optional; it's the law! Second, employers can avoid costly DOL penalties. Third, many states allow Participants and Beneficiaries to bring "bad faith" claims against insurers and Administrators who deny benefits. In a state court, they can collect the benefits that were denied plus compensatory damages, such as punitive or treble (triple) damages. Trials in state courts are decided by juries, which often favor the individual participant over a corporation or insurance company.
However, ERISA is a federal law which pre-empts state law. ERISA limits damages to the unpaid benefits and does not provide for jury trials. Having its Plan in compliance with ERISA will help an employer avoid a lawsuit in a state court, and perhaps several different state courts. However, being out of compliance creates exposure in either state or federal court.
In state court, every aspect of a case is subject to a "de novo" review, including matters that were not even in dispute. However, ERISA has a higher standard of review for overturning decisions of a Plan Administrator. In federal court, an Administrator's decision to deny a claim must be "arbitrary and capricious" before it can be overturned.
Many employers think "It's not going to happen to me." However, it happens all the time. Here is a brief list of court cases, awards, and DOL fines related to employers not being in compliance with ERISA laws pertaining to Welfare Benefit Plans:
| $4,540 - |
Employer indifference and irresponsibility led to disclosure violations1 |
| $5,215 - |
Employer inattentive in providing Life Insurance Plan Document and refused to furnish copy of Form 5500 to Participant until ordered to by court2 |
| $5,880 - |
Failure to deliver SPD within 30 days of request. Minimum fine of $10/day.3 |
| $9,800 - |
Failure to provide LTD Plan Document; employer only provided SPD4 |
| $10,220 - |
Excessive delay in providing Severance Pay Plan Document5 |
| $10,560 - |
Late delivery of SPD to employee after 3 written requests, max. penalty
$110/day6 |
| $11,550 - |
Failure to provide SPD after written notice7 |
| $17,475 - |
Employer did not have SPD; only provided certificate of insurance to Participant; repeatedly insisted they were the same thing8 |
| $17,550 - |
Failure to provide requested Plan Document and SPD to Participant9 |
| $18,400 - |
Failure to deliver SPD on request; $25 x 736 days; without prejudice or bad faith10 |
| $26,100 - |
Failure to respond to document request over very long time11 |
| $32,850 - |
Delay, indifference, disregard in failure to provide copy of requested Plan Document to Participant12 |
| $34,540 - |
Failure to provide participation agreement between employer and LTD carrier prejudiced Participant's ability to establish enrollment date13 |
| $37,650 - |
Requested documents provided at widely spaced intervals14 |
| $50,000 - |
Failure to file Form 550015 |
| $55,760 - |
Incompetence and neglect delivering insurance contracts to Participants16 |
| $62,250 - |
Failure to deliver SPD to Participant in manner required by DOL17 |
| $64,900 - |
Provided SPD, but failed to provide requested full Plan Document18 |
| $86,500 - |
Failure to file complete and accurate Form 550019 |
| $105,840 - |
Plaintiff's attorney's fees in LTD claim case; award unknown20 |
| $159,000 - |
Late entrant; employer gave employee wrong waiting period & ordered to pay claim21 |
| $241,000 - |
Failure to provide SPD to Participant22 |
| $5,000,000 - |
Cancer treatment claim wrongfully denied as experimental. State court jury trial, punitive damages23 |
| $8,692,000 - |
Bad faith claim denial. Punitive damages. State court jury trial24 |
| 10 Months Prison - |
Plus $46,844 fine; failure to file 5500; diverting employee contributions25 |
| Award N/A - |
Court reversed Administrator's decision to terminate disability payments based on a de novo review of the facts.26 |
Footnotes
1Estate of Fields v. Provident Life & Accident Ins. Co., 26 EBC 2401 E.D. Pa. 2001)
2Neuma, Inc. v. AMP, Inc., 27 EBC 1983 (N.D. Ill. 2002)
3James Killian vs. Concert Health Plan, et. al., Case 07 C 4755
4Pisek v. Kindred Healthcare, Inc. Disability Ins. Plan, 2007 WL 2068326 (S.D. Ind. 2007)
5Reddy v. Schellhorn, 38 EBC 1312 (N.D. Ill 2006)
6Kasireddy v. Bank of America Corp. Benefits Committee, 2010WL 4168512 (N.D. Ill. Oct. 13, 2010)
7Brown v. Aventis Pharmaceuticals, Inc., U.S. Court of Appeals, Eighth Circuit, No. 02-4063/03-2084, Sept. 9, 2003
8Sunderlin v. First Reliance Std. Life Ins. Co., 235 F. Supp. 2d 222, 29 EBC 2227 (W.D.N.Y. 2002)
9Stegelmeier v. Doug Andrus Distributing Employee Health Benefit Plan, 40 EBC 2811 (D. Utah 2007)
10Mullins v. AT&T Corporation, Nos. 04-2135, 04-2136, 07-1717, 10-2010 (4th Cir. 2011 ) (Unpublished Opinion)
11Daniels v. Thomas & Betts Corp., 263 F3d 26 EBC 2132 (3rd Cir. 2001)
12Lampkins v. Golden, 1996 WL 729136 (6th Cir. 1996) (collecting cases from 1st, 3rd, 4th, 6th, 10th, and 11th Circuits)
13Logan v. Unicare Life & Health Ins., Inc., 2007 WL 1875943 (E.D. Mich. 2007)
14Hemphill v. Pers. Rep. of Estate of Ryskamp, 2008 WL 789894, as modified, 2008 WL 1696722 (E.D. Cal. 2008)
15PWBA v. Compgraphix, Inc., 199-RIS-52 (ALJ Oct. 14, 1999)
16Amschwand v. Spherion Corp., 37 EBC 1842 (S.D. Tex. 2006)
17Leyda v. AlliedSignal, Inc. 322 F.3d 199 (2d Cir. 2003)
18Keogan vs. Towers, Perrin, Forster & Crosby, Inc., 30 EBC 2641 (D. Minn 2003)
19Airport Hospitality, LTD, King of Prussia, Penn., 2010
20Alfano v. CIGNA Life Ins. Co. of New York, 2009 U.S. Dist. LEXIS 28118 (S.D.N.Y. Apr. 2, 2009).
21Hansen v. Harper Excavating, Inc., 2011WL 1379821 (10th Cir.2011)
22Gorini v. AMP Inc., 117 Fed. Appex. 193 (3d Cir. 2004)
23Fox v. HealthNet, 1993 Westlaw 794305 (Riverside County Super. Ct/Central Cal.Dec. 23, 1993).
24Fisher v. Aetna, No. 3AN97-291, Alaska Super., 3rd Jud. Dist 1998.
25U.S. v. Persons, Criminal Number 6:09-cr-00012; DOL News Release No. 09-875-ATL (220), July 28,2009., (August 14, 2009)
26Lundquist v. Continental Casualty Company, No.CV 02-9602-FMO, United States District Court, Central District of California, Sept 30, 2005.
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© 2012 ERISA Pros, LLC, All rights reserved. Information on ERISA Pros' website, its newsletter, “News & Views,” and its blog, “ERISA Wonk,” is published as a general informational source. Information and articles are general in nature and are not intended to constitute legal or tax advice in any particular matter. Blog posts and comments reflect the personal views of their respective authors - not those of ERISA Pros. Transmission of this information does not create an attorney-client relationship. ERISA Pros, LLC is not a law firm and is not giving legal or tax advice. It does not warrant and is not responsible for errors or omissions in the content on its website or in its newsletters. ERISA is a complicated and confusing law. Summary Plan Descriptions (SPDs), Wrap Plan Documents, and Form 5500s require review and updating by qualified ERISA compliance professionals.
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