:: Plan Administrator Definition Ambiguity Defeats Insurer’s Motion To Dismiss

Defendants argue that controlling authority in this circuit rejects the concept of a “de facto” plan administrator, or one that is not expressly named in the health plan documents. However, a number of courts, including courts in this jurisdiction, have treated insurance companies as plan administrators if they “control the distribution of funds and decide[] whether or not to grant benefits under an employee benefit plan.”

Mbody Minimally Invasive Surgery v. Empire Healthchoice HMO, Inc., 2015 U.S. Dist. LEXIS 22592 (D.N.Y. 2015) (February 25, 2015) (citations omitted)

Who is the plan administrator?   The statutory definition has not always been satisfactory to the courts.  In this post I will take the recent provider reimbursement case as an opportunity to provide some commentary on “plan administrator” status.

In the case at bar, the providers were seeking reimbursement from insurance providers, presumably under assignment of benefits from their patient-plan participants.

Of course, claims under ERISA have to fit one of the civil remedies provisions to go forward.  In this case, the provision at issue was §502(a)(1)(B).

Were the defendants plan administrators?

That’s the context for the plan administrator inquiry –

The issue here is whether defendants are “plan administrators.”

ERISA Section 502 empowers participants and beneficiaries to bring a civil action to recover benefits due under the terms of a benefits plan. See 29 U.S.C.A. § 1132(a)(1)(B). However, the Second Circuit has determined that such claims may only be brought against the plan, the plan administrator, or plan trustee. See Crocco v. Xerox Corp., 137 F.3d 105, 107 (2d Cir. 1998).

Confusing plan documents

As is often the case with insured arrangements, the documents were a mess.  I have never really understood why that is one of the eternal verities but it just seems to be.

So in this case the documents were not clear on the designation – at least not to the court’s satisfaction.

The court was not then, and is not now, satisfied that all the health plan documents name entities other than the defendants as health plan administrators.

Even for those that appear to do so, it is impossible to discern from the materials provided which health plan documents correspond to which defendants, purportedly immunizing them from § 502(a)(1)(B) claims. And, as discussed, some of the health plan documents do not, in fact, name entities other than defendants as the plan administrator.

What happens when the documents are unclear?

The defendants, unsuccessful in their motion, argued that the district court was using the notion of a “de facto” plan administrator.  In some circuits, this is a viable approach but not in the Second Circuit.

To this argument, the court demurred, stating:

Defendants argue that controlling authority in this circuit rejects the concept of a “de facto” plan administrator, or one that is not expressly named in the health plan documents. See Rep. Mem. L. Further Supp. Mot. Part. Recons. at 2 (citing Crocco v. Xerox Corp., 137 F.3d 105, 107 and Lee v. Burhkart, 991 F.2d 1004, 1010 n.5 (2d Cir. 1993)). However, a number of courts, including courts in this jurisdiction, have treated insurance companies as plan administrators if they “controlf] the distribution of funds and decide[] whether or not to [*6] grant benefits under an employee benefit plan.” See, e.g., Sheehan v. Metro. Life Ins. Co., No. 01-CV-9182 (CSH), 2002 WL 1424592, at *2 (S.D.N.Y. June 28, 2002).

In any event, defendants’ argument misconstrues this court’s decision. This court did not reach the question of whether plaintiffs may maintain a § 502(a)(1)(B) claim against de facto plan administrators.

Rather, the court held that plaintiffs had plausibly alleged that defendants are plan administrators themselves, noting “plaintiffs … do allege [they] are the plan administrators in other sections of the complaint.” See Opinion of Aug. 15, 2014, at 7-8 (citing Compl. 1 56).

In other words, the court stated that the defendants had misconstrued its holding.  The defendants were free to adduce evidence that they were not the plan administrators at a later stage in the proceeding.

Note:   The question of plan administrator status is important in other contexts as well, such as in cases of plan information requests and the application of statutory penalties.  Please see my discussion of this topic in a prior post here.

Circuit Conflict – The conflict noted in the opinion is set forth in Crocco v. Xerox Corp., 137 F.3d 105 (2d Cir. 1998) as follows:

We believe, however, that our reasoning in Lee v. Burkhart, 991 F.2d 1004 (2d Cir. 1993), precludes a finding that an employer is a de facto co-administrator jointly liable with the named administrator in a suit to recover benefits under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). In Lee, we rejected a claim that an insurance company — under contract to provide assistance in the management of an employer’s self-funded employee benefits plan -was an unnamed plan administrator. See id. at 1010.

In doing so, we expressly stated our disagreement with decisions of the First and Eleventh Circuits holding employers responsible as de facto administrators under ERISA §§ 502(a)(1)(A) and 502(c), 29 U.S.C. §§ 1132(a)(1)(A), 1132(c). See id. at 1010 n.5 (citing Rosen v. TRW, Inc., 979 F.2d 191, 193-94 (11th Cir. 1992); Law, 956 F.2d at 372-74).

And we cited with approval the Tenth Circuit’s decision in McKinsey v. Sentry Insurance, 986 F.2d 401 (10th Cir. 1993), which criticized the view that an employer could be a de facto administrator, and held that HN2″[29 U.S.C. § ] 1002(16)(A) provides that if a plan specifically designates a plan administrator, [**7] then that individual or entity is the plan administrator for purposes of ERISA,” id. at 404. n3 In short, then, we think that the reasoning -if not necessarily the holding — of Lee precludes employer liability, as a de facto co-administrator, in a suit brought under § 502(a)(1)(B), where the employer has designated a plan administrator in accordance with 29 U.S.C. § 1002(16)(A).

 Statute – The statute provides:

(16) (A) The term “administrator” means–

(i) the person specifically so designated by the terms of the instrument under which the plan is operated;

(ii) if an administrator is not so designated, the plan sponsor; or

(iii) in the case of a plan for which an administrator is not designated and a plan sponsor cannot be identified, such other person as the Secretary may by regulation prescribe.

29 USCS § 1002