ERISA GLOSSARY
Administrative Services Only (ASO) - An arrangement in which an insurance company provides claims paying assistance to a self-funded plan, such as claims adjudication, forms and enrollment, and perhaps arranging for stop loss insurance, but does not assume any insurance risk to plan participants or beneficiaries.
Arbitrary and Capricious - When applied in terms of a review of a claims denial, the phrase is tantamount to the least demanding form of judicial review. In effect, the Court must only determine whether, in light of the plan’s provisions, the plan administrator’s decision was rational. “[W]hen it is possible to offer a reasoned explanation, based on the evidence, for a particular outcome, the outcome is not arbitrary or capricious.†Id. Though extremely deferential, the standard does not permit the reviewing court to merely “rubber stamp the administrator’s decision.†See, Jones v. Metropolitan Life Ins. Co., 385 F.3d 654 (6th Cir.2004)
Beneficiary - The term “beneficiary†means a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder. See, 29 U.S.C. 1002 (7)(8).
Complete Preemption – Complete Preemption arises under the section 502 civil-enforcement provisions of ERISA when a state-law cause of action duplicates, supplements, or supplants one of the remedies provided in that section. See Aetna Health Inc. v.. Davila, 542 U.S. 200, 207-08, 124 S.Ct. 2488, 2495 (2004). If an individual, at some point in time, could have brought his claim under ERISA § 502, and where there is no other independent legal duty that is implicated by a defendant’s actions, then the individual’s cause of action is completely pre-empted by ERISA Section 502. See Davila, 542 U.S. at 210. In the case of complete preemption, a claim which comes within the scope of ERISA Section 502, even if pleaded in terms of state law, “is in reality based on federal law.†Complete preemption permits removal to federal court because the cause of action “arises under†federal law.
Conflict Preemption – Conflict preemption arises when state-law claims are asserted that “relate to any employee benefit plan described in section 1003(a) of this title and are not exempt under section 1003(b) of this title.†29 U.S.C. § 1144(a). A state-law claim may “relate to†a benefit plan even if the state law is not specifically designed to affect such plans and the effect is only indirect. Once the defense of conflict preemption is raised, § 1144(a) “governs the law that will apply to the state-law claims, regardless of whether the case is brought in state or federal court.†Conflict preemption is insufficient to produce federal removal jurisdiction.
Employer - The term “employer†means any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan; and includes a group or association of employers acting for an employer in such capacity. See, 29 U.S.C. §1002(5) The term implies a bona fide group or association of employers acting in the interest of its employer-members to provide benefits for their employees.
ERISA - The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.
Fiduciary - ERISA defines a person or entity as a plan fiduciary if that person: (1) exercises any discretionary authority or discretionary control respecting management of the benefits plan, or disposition of its assets; or (2) has any discretionary authority or discretionary responsibility in the administration of the benefits plan.
Fiduciary Duties - ERISA imposes duties on fiduciaries by statute which incorporate principles from the law of trusts. These responsibilities include:Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them;
Carrying out their duties prudently;
Following the plan documents (unless inconsistent with ERISA);
Diversifying plan investments; and
Paying only reasonable plan expenses.
See, 29 U.S.C. Section 1104(a).
A fiduciary that breaches the foregoing duties “shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary.” Nonetheless, a fiduciary will not be liable if the breach was committed “before he became a fiduciary or after he ceased to be a fiduciary”.
See, 29 U.S.C. Section 1104(a).
Form 5500 - Each year, pension and welfare benefit plans generally are required to file an annual return/report regarding their financial condition, investments, and operations. The annual reporting requirement is generally satisfied by filing the Form 5500 Annual Return/Report of Employee Benefit Plan and any required attachments. See, Form 5500 page.
Governmental Plan - The term “governmental plan†means:
a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing. The term “governmental plan†also includes any plan to which the Railroad Retirement Act of 1935, or 1937 [45 U.S.C.A. § 231 et seq.] applies, and which is financed by contributions required under that Act and any plan of an international organization which is exempt from taxation under the provisions of the International Organizations Immunities Act [22 U.S.C.A. § 288 et seq.]. See, 29 U.S.C. § 1002(32) The question is one of federal, not State law, and requires evaluation under one of several tests depending on the venue.
See full discussion here.
MEWA or “Multiple Employer Welfare Arrangement - The term “multiple employer welfare arrangement†means:
- an employee welfare benefit plan (as defined below), or
- any other arrangement (other than an employee welfare benefit plan)
- which is established or maintained for the purpose of offering or providing [welfare plan benefits]
- to the employees of two or more employers (including one or more self-employed individuals), or to their beneficiaries.
[except that such term does not include any such plan or arrangement pursuant to collective bargaining agreements, and certain limited exceptions] See full explanation here.
Multiemployer Plan - A multiemployer plan is a collectively bargained plan maintained by more than one employer, usually within the same or related industries, and a labor union. These plans are often referred to as “Taft-Hartley plans”. (ERISA Secs. 3(37) and Sec. 4001(a)(3)) Multi-employer plans are excluded from the definition of MEWAs:
[The following is from the DOL] Once it has been determined that an ERISA-covered welfare plan provides benefits to the employees of two or more employers, a determination must be made as to whether any of the exclusions from MEWA status apply to the arrangement. Pursuant to ERISA Section 3(40)(A), three types of arrangements are specifically excluded from the definition of “multiple employer welfare arrangement,†even though such arrangements may provide benefits to the employees of two or more employers. Each of these types of arrangements is discussed in general terms below.
1. Plans maintained pursuant to collective bargaining agreements
Section 3(40)(A)(i) specifically excludes any plan or other arrangement that is established or maintained “under or pursuant to one or more agreements which the Secretary finds to be collective bargaining agreements.â€
This exception generally includes the type of plans commonly referred to as “multiemployer plans,†a term which in some instances has been confused with the term “multiple employer welfare arrangements.†Multiemployer plans, as distinguished from MEWAs, are established and maintained under collective bargaining agreements negotiated between unions and employers or an association of employers, and, in accordance with the Labor Management Relations Act, employer contributions to the plans are held in a trust that is jointly administered by labor trustees (appointed by the union) and management trustees (appointed by the employers or employer association).
In general, a collective bargaining agreement is an agreement or contract that is the product of good faith bargaining between bona fide employee representatives and one or more employers. Determinations as to whether a particular document is the product of good faith bargaining between bona fide employee representatives and one or more employers can be made only upon an examination of relevant facts and circumstances, taking into consideration the pertinent provisions of the National Labor Relations Act, 29 U.S.C. §151 et seq., and the cases decided thereunder, as well as other relevant laws.
For purposes of Section 3(40), an employee benefit plan will generally be considered to be established or maintained “under or pursuant to a collective bargaining agreement†if the agreement is a bona fide collective bargaining agreement and the agreement provides, directly or indirectly, for establishment or maintenance of a plan for the benefit of employees represented by a union in the collective bargaining process.
While no one item is determinative, factors generally indicative of a bona fide collective bargaining agreement may, among others, include: the agreement provides for wages, benefits, working conditions or resolution of grievances; the agreement is executed by representatives of a labor organization/union which is either certified by the National Labor Relations Board or is elected by the majority of employee of signatory employers as the exclusive bargaining representative of the employees; neither the agreement nor of the labor organization/union was promoted by the employer(s); and the agreement is the product of good faith bargaining.
Participant - The term “participant†means any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit. See, U.S.C. 1002 (7). Also, see standing issue discussed here.
Plan Administrator - The term can mean (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.
Rule # 1: The administrator is the person or entity identified in the plan documents. [29 U.S.C. 1002 Section 16(A)(i)]
Many documents will identify the plan administrator and the query may end there. On the other hand, if none is so identified, two default rules are supplied in cascading fashion, as follows:
Rule #2: If Rule #1 does not apply, the “plan sponsor†is the “administrator†for purposes of the statute. [29 U.S.C. 1002 Section 16(A)(ii)]
Once again, ERISA defines the term. The statute defines “plan sponsor†as:
(i) the employer in the case of an employee benefit plan established or maintained by a single employer, (ii) the employee organization in the case of a plan established or maintained by an employee organization, or (iii) in the case of a plan established or maintained by two or more employers or jointly by one or more employers and one or more employee organizations, the association, committee, joint board of trustees, or other similar group of representatives of the parties who establish or maintain the plan.
Rule #3: If neither Rule #1 nor Rule #2 apply, the administrator is “such other person as the Secretary may by regulation prescribe.†[U.S.C. 1002 Section 16(A)(ii)]
Preemption – Section 514(a) of ERISA preempts all state laws insofar as they relate to employee benefit plans covered by Title I of ERISA subject only to certain exceptions expressly provided in section 514(b) of ERISA, was enacted to ensure that ERISA’s substantive standards would uniformly apply to all plans to protect plan participants and beneficiaries, to promote the development of employee benefit plans, and to assure uniform regulation of such plans. Congress intended through section 514(a):
to ensure that plans and plan sponsors would be subject to a uniform body of benefits law; the goal was to minimize the administrative and financial burden of complying with conflicting directives among States or between States and the Federal Government . . ., [and to prevent] the potential for conflict in substantive law . . . requiring the tailoring of plans and employer conduct to the peculiarities of the law of each jurisdiction.
See also, “Complete Preemption” and “Conflict Preemption”, supra.
Third Party Administrator - A third party administrator or “TPA” is an entity that processes or adjudicates claims for an employee benefit plan. A TPA may provide additional services to an employee benefit plan or employer, such as collecting premiums, contracting for PPO services, providing utilization review of claims, and similar ancillary services to the operation of the employee benefit plan.
Welfare Benefit Plan – The terms “employee welfare benefit plan†and “welfare plan†mean any plan, fund, or program established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services, or (B) any benefit described in section 186(c) of this title [Title 29] (other than pensions on retirement or death, and insurance to provide such pensions).
Well-Pleaded Complaint Rule - As a general rule, determining whether a particular case arises under federal law turns on the “ ‘well-pleaded complaint’ †rule. Under this rule, determining whether federal question jurisdiction exists, permitting a removal to federal court, must be determined from what appears from the plaintiff’s statement of claims, “unaided by anything alleged in anticipation of avoidance of defenses which it is thought the defendant may interpose.†Thus, the existence of a federal defense normally does not create statutory “arising under†jurisdiction and “a defendant may not [generally] remove a case to federal court unless the plaintiff’s complaint establishes that the case ‘arises under’ federal law.
