This section is for you if you are fighting to recover disability benefits under the terms of a privately purchased disability plan not sponsored or provided by your employer. Individual disability plans are governed by State law, rather than by  ERISA

Most privately purchased long term disability plans do not fall under the scope of ERISA.  As such, you have the right to file suit in State Court and to ask for punitive damages, attorney’s fees and other remedies that may not be available in an ERISA Federal Court lawsuit.

As a general rule, most lawyers prefer to litigate non-ERISA cases because opportunities for recovery are much greater.

However, do not assume that your insurance company will concede that your plan is non-ERISA.

ERISA itself contains a “safe harbor” regulation that sets forth when a LTD plan does not fall within the ERISA rules.  Each of the following provisions must be met:

(A) there must be no contribution made by the employer or employee organization; and

(B) participation in the insurance plan must be completely voluntary; and

(C) the function of the employer must be limited to collecting premiums through payroll deduction or publicizing the program without endorsing it; and

(D) the employer or employee organization must not receive any payments - other than for actual administrative costs - in connection with the insurance program

Potential issues to watch for

 - if the insurer discounts premiums to a group, is that considered a contribution by the employer? (probably not a contribution)

 - if the employer arranged and provided a location for a meeting between employees and the insurance agent, is the employer “endorsing” the plan? (probably not employer endorsement)

 - if the employer arranged financing to fund the benefits to be paid (probably is employer endorsement)

 - if the employer establishes procedures for disbursing benefits (probably is employer endorsement)

ERISA/non-ERISA issues often arise in the context of private LTD plans offered to members of a professional practice like doctors, lawyers, accountants or engineers.  Since these policies often provide large income replacement benefits, a finding that ERISA controls can take away the leverage of a punitive damage threat.

Note to readers: I am rewriting this section to include new material.  If you have questions about your individual policy plan benefits, please call me at 770-393-4985 or email me at jonathan@glolaw.com.  I hope to have the new material posted within a few days.

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