What would you do if an illness or injury left you disabled and unable to work for days, months, or ever again? Every year, thousands of people become disabled before they reach the age of retirement. Disability insurance offers benefits, usually based on a percentage of your salary, during the time you are unable to work. Many employees are aware that they receive health and retirement benefits through their employer, but fewer know if they have disability coverage, or what type of disability coverage they have.
When you need to draw on your disability coverage, it can make a difference if your policy is governed by the federal Employee Retirement Income Security Act, better known as “ERISA.” This is because ERISA, unlike an insurance policy you might purchase yourself from an insurance agent, provides legal protections to employees, as further discussed in this article. Most group disability plans provided by your employer are governed by ERISA. But private policies you purchased on your own are not.
What Exactly is ERISA?
The Employee Retirement Income Security Act of 1974 (ERISA) was enacted to set minimum standards for employee group benefits including health, life, and disability benefits. ERISA protects benefit plans from mishandling and abuse, and ensures that employers are acting in the best interest of their employees. ERISA regulates how disability plans are managed by the employer including how disability claims are to be processed, deadlines for filing a claim, and an employee’s rights if their disability claims are denied.
ERISA also requires accountability and transparency, to guarantee that employees have access to information about their benefit plans. Any employee covered by their employer’s disability benefit plan should receive a written summary of their plan detailing key features: how the disability plan works, what benefits are offered, and any out-of-pocket costs to be incurred by the employee for coverage.
When Does ERISA Apply?
An individual may choose to purchase disability insurance on their own or it can be provided by an employer. Some states require employers to provide disability benefits for their employees, including New York, New Jersey, California, Hawaii, and Rhode Island. Employers operating in these states must provide disability insurance regardless of where the employer’s corporate offices are located. Employers who do not provide disability coverage in these states may be subjected to fines and penalties. Who provides the insurance may determine whether the disabled individual is covered by ERISA.
The protective laws of ERISA only apply to private-sector companies that offer employer-sponsored benefits. It is irrelevant whether the private company is organized as a partnership, corporation, LLC, or a non-profit. Although ERISA provides protection to people who work for most types of employers, ERISA does not ordinarily apply to:
- Privately purchased, individual insurance policies or benefits
- Benefit plans offered through state, local, or federal government employers
- Benefit plans offered through church employers
- Benefit plans that are maintained only for purposes of complying with workers’ compensation, disability, or unemployment laws
- Unfunded excess benefit plans
- Plans that are maintained outside of the United States and are intended primarily to benefit non-resident aliens
If you don’t know whether your disability coverage is governed by ERISA, you can start by asking the human resources department at your place of employment. However, if your disability claim has already been denied or terminated, it may be time to speak to a disability attorney to help you advocate for your rights under your policy and ERISA.
Why is ERISA Important?
When an injured individual files a disability claim, their insurance company or employer may attempt to deny the employee’s claim. The claim may be denied because the employer alleges that the individual is not disabled, they are not covered by the policy, or that the employee failed to follow the proper guidelines when applying for benefits. It is important to understand whether ERISA governs the disability insurance claim because ERISA provides the right to appeal a claim denial and file a lawsuit to compel coverage.
How Does ERISA Affect My Disability Claim?
When an employee is covered by an ERISA-governed plan, the federal law provides a number of protections to help the employee obtain disability benefits. If an employee’s disability benefits are denied, ERISA demands the claimant receive copies of any documents, records, or information relevant to their claim for benefits, free of charge on request. Following an adverse decision, ERISA also requires that the claimant be allowed a full and fair review through an appeals process.
While ERISA provides certain protections for employees, ERISA has been interpreted in a way that also significantly benefits insurance companies. Perhaps most importantly, if the denial of your claim is upheld on appeal, in most cases, you cannot add additional evidence to prove your disability. In addition, if you have to go to court, a judge may be required to review the denial under an “arbitrary and capricious” standard of review. That means, even if the judge would have found you disabled, he or she can only overturn the insurance company’s decision if it is without a rational basis. Simply put, proving the insurance company’s denial was wrong may not be enough.
There are numerous ways in which ERISA effects disability claims, but the bottom line remains this: the primary purpose of ERISA is to safeguard employees who are counting on benefits that their employer promised them. ERISA is a broad and complex federal statute, and the protections that it affords claimants stated above are by no means exhaustive, and as noted above, ERISA may also negatively impact your rights, making it vitally important that you obtain all the evidence you could possibly need to prove your claim before the insurance company makes a “final” decision. For that reason, it is imperative to consult with an experienced ERISA attorney to explain your rights and fight for the benefits that you deserve.
Contact a Disability Benefits Attorney
Bross & Frankel, P.A. is dedicated to representing employees and individuals who have had their disability benefit applications wrongly denied or terminated. We encourage you to contact our office for a free, no-obligation consultation to discuss your rights and the next steps in your case. You have a limited amount of time to appeal the denial of your application, so it is advisable to act quickly. A claim review can bring you great peace of mind — at no cost to you.