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Like many other employee benefits, ERISA disability law is designed to protect employees who have paid for or been promised these benefits through their employer. These benefits include:
A pension plan is an employee benefit plan established or maintained by an employer (or employee organization) that provides retirement income for employees. Primarily, pension plans are funded by the employer. More recently, traditional pension plans are becoming less available. Companies have replaced them with alternative plans (like 401(k) retirement savings plans) because they are less costly for employers. Some companies, like UPS, still have pension plans in place for their employees. However, when UPS reclassified some of their positions from nonunion to union it negatively impacted those employees’ pension plans. Consider the following:
Ralph Gragg worked for UPS as a driver hauling freight for approximately thirty years. When UPS decided to reclassify Mr. Gragg’s position, he transitioned from being a nonunion worker to a union worker. With his new classification status, his pension plan would then be funded by two distinctly different pension plans that existed within UPS. Each pension plan had a “Social Security Leveling Option” that would “increase the beneficiary’s monthly benefit before age 65 and thereafter reduce it by the amount of his Social Security benefit.” Gragg v. UPS Pension Plan, 55 F.4th 1059, 1061 (6th Cir. 2022). Mr. Gragg selected the “Social Security Leveling Option” for both of his pension plans. Each plan sent Mr. Gragg a letter that indicated what his payments would be before and after receiving his Social Security benefit. Each plan indicated that his monthly payment would be reduced by $1754 (the anticipated amount for his Social Security benefit).
However, when Mr. Gragg retired and began collecting his Social Security benefit each plan was reduced by his Social Security benefit for a combined total of $3508. When Mr. Gragg inquired about the discrepancy with each plan individually, they both responded with complicated messages that, in the end, indicated that the “reduced benefit amount was the correct amount.” Id. So, in November of 2020 Mr. Gragg filed a lawsuit against the UPS Pension Plan. He asserted a claim under the Employee Retirement Income Security Act, 29 U.S.C. § 1132 (a)(1)(B), that alleged that both pension plans paid him less than he was entitled to each month. Namely, $1754 less due to both plans being reduced by that exact amount.
The federal District Courts are beginning to adjust their views on how to best handle ERISA denial-of-benefits cases. Some courts use a modified summary judgment standard unique to ERISA denial-of-benefits cases that are based exclusively on an administrative record and the non-moving party is generally not entitled to the usual inferences in its favor (unlike the traditional summary judgment standard). In Anderson v. Liberty Lobby, Inc., the Supreme Court stated that “at the summary judgment stage the judge’s function is not himself to weigh the evidence… but to determine whether there is a genuine issue for trial.” Therefore, if material facts are in genuine dispute, then summary judgment may not be appropriate. Some courts have concluded that when fact-finding is required, or there is genuine issue related to material facts, then a bench trial is best. The 4th Circuit has held that this situation may arise when there is a necessity “to resolve competing factual contentions within the administrative record about the cause, severity, or legitimacy of an individual’s impairment.” Tekmen v. Reliance Standard Life Ins., 55 F.4th 951, 960 (4th Cir. 2022) (citation omitted).
Of note, the 6th Circuit, which is relevant Kentucky, has discussed not using summary judgment procedures or bench trials to decide ERISA actions, but instead reviewing the merits of the action based solely upon the administrative record with findings of fact and conclusions of law. It was suggested that the courts only consider evidence outside of the administrative record for limited exceptions. Wilkins v. Baptist Healthcare Sys., 150 F.3d 609, 619 (6th Cir. 1998) (Gilman, J., concurring).
For example, when insurance companies try to determine whether or not to award disability benefits, they may seek to hire their own physicians to review the medical records on file to reach a determination. This determination may or may not conflict with the medical opinions of the treating physicians. When there are conflicting opinions between the physicians hired by the insurance company and the treating physicians, however, this will likely lead to material facts in dispute. This is when a bench trial may be the most appropriate way for courts to rule on ERISA denial-of-benefits cases. Like in the example outlined below:
Disability insurance is a unique type of insurance that protects a person’s ability to earn a paycheck if that person experiences a serious injury or illness. Disability insurance is meant to provide employees with a way to receive a portion of their expected income if they later become unable to work. Disability insurance is often categorized as either short-term or long-term. The primary difference between short-term and long-term disability plans are the periods of time a person may receive benefits due to her inability to work. Short-term disability plans usually work in tandem with long-term disability plans. Generally, once short-term benefits are exhausted, then a long-term disability policy would become effective in an effort to continue providing an employee with income until she is able to return to work. Some long-term disability plans may last for the lifetime of the policyholder, most will usually provide coverage for approximately thirty-six (36) months.
Most employers provide some type of disability insurance coverage for their employees. It might be time to refresh your memory on what your employer provides you with specifically. In an unpublished opinion, the Ninth Circuit recently determined that an employer provided disability insurance company was within its rights to reduce an employee’s disability benefits by $800,000. The $800,000 came from a recent personal injury settlement the employee received on a completely unrelated matter. Haddad v. SMG Long Term Disability Plan, No. 16-CV-01700-WHO, 2021 WL 2187979 (E.D. Cal. May 28, 2021).
The case turned on the legal distinction between “offsets” and “exclusions” and “limitations” in regard to long-term disability plans. This marginal difference may be the difference between receiving the anticipated total value of long-term disability benefits or having that total value later diminished. Exclusions and limitations carve out areas from the scope of an insurance policy’s coverage. Offsets reduce the total amount owed for covered claims.
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Towards the end of last year, the Department of Labor (“DOL”) released its final rule titled, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights.” 87. Fed. Reg. 73822 (Dec. 1, 2022) (the “Socially Conscious Investing Rule”). This new rule is now in effect and the DOL stated one of the purposes of its new rule was to focus on “the chilling effect and other potential negative consequences caused by the previous rule, ‘Financial Factors in Selecting Plan Investments,’ 85 Fed. Reg. 72846 (Nov. 13, 2020), with respect to the consideration of climate change and other environmental, social, and governance (“ESG”) factors.” The Socially Conscious Investing Rule provides guidance related to the fiduciary duties of both prudence and loyalty, as applicable to the selection of plan investments. This new rule specifies that a “fiduciary’s determination with respect to an investment or investment course of action must be based on factors that the fiduciary reasonably determines are relevant to a risk and return analysis.” 29 CFR § 2550.404a-1(b)(4).
However, not everyone agrees with the Socially Conscious Investing Rule or its future impact on retirement plans managed by employers. For instance, twenty-five Republican state attorneys general formed an alliance and filed a lawsuit against the DOL. Kentucky is one of the states that joined in this lawsuit. In their complaint, the Republican attorneys general alleged that the new Socially Conscious Investing Rule violated the Employee Retirement Income Security Act (“ERISA”). In their complaint, the attorneys general are requesting that the U.S. District Court for the Norther District of Texas makes a declaration that the Socially Conscious Investing Rule is in direct violation of ERISA. “The 2022 rule undermines key protections for retirement savings of 152 million workers — approximately two-thirds of the U.S. adult population and totaling $12 trillion in assets — in the name of promoting environmental, social, and governance factors in investing, including the Biden administration’s stated desire to address climate change,” the complaint stated.
Their 46-page complaint states that in 2014, in Fifth Third Bancorp v. Dudenhoeffer, the Supreme Court unanimously concluded that ERISA requires fiduciaries to consider financial benefits and not any nonpecuniary benefits. Further, their complaint asserts that the exclusive purpose that ERISA fiduciaries must pursue are financial benefits. Also, the legislative history of ERISA supports the idea that the financial benefits alone should be the sole and exclusive purpose of the statute itself. ERISA’s fiduciary duties are the highest duties recognized by the law and therefore require that fiduciaries act with undivided loyalty towards the beneficiaries.
Simply put: Yes, but with limitations. It is important to speak to an attorney to know your rights and to ensure that you do not miss any deadlines related to your specific claim. To our current clients and to those seeking our services for short-term and long-term disability claims and appeals, we are still here to help you every step of the way.
On May 5, 2020, Mehr Fairbanks posted a blog that outlined how COVID-19 can impact the claims and appeals process for both our short-term and long-term disability clients. That blog post can be found here. However, since the original post, the Department of Labor has updated the guidance on the deadlines and extensions that may impact short-term and long-term disability claims and appeals under ERISA.
Because ofthe COVID-19 National Emergency, it was first announced that deadlines related to filing and appealing claims under ERISA were tolled until a certain amount of time after theNational Emergency ended. Originally, ERISA deadlines were suspended until 60 days after the end of the National Emergency. However, because of certain restrictions in the authority to extend deadlines for longer than a period of one year, the suspension of ERISA deadlines has been clarified.
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Kentucky ERISA Disability & Life Insurance Claim Lawyers