Page 16

Bulletin

ERISA to plans created by religious organizations that are taxexempt pursuant to 26 U.S.C. § 501 or their associated corporations, see 29 U.S.C. § 1003(b)(2) and § 1002(33), unless the religious organization has elected to “opt in” pursuant to 26 U.S.C. § 410(d). Determining whether a valid election has occurred requires obtaining the forms and examining whether they comply with 26 C.F.R. § 1.410(d)-1. Identifying Those Who the Plan Covers In determining whether ERISA applies to a particular claim, an attorney must also keep in mind whether the person whose benefi ts are at issue is indeed a “participant” in the plan or the benefi ciary of such a participant. A “participant” is “any employee or former employee of an employer, ... who is or may become eligible to receive a benefi t of any type from an employee benefi t plan which covers employees of such employer ..., or whose benefi ciaries may be eligible to receive any such benefi t.” 29 U.S.C. § 1002(7). ERISA defi nes an “employee” as “any individual employed by an employer.” 29 U.S.C. § 1002(6). Th is issue goes back to ERISA’s intent to make up for the disparity in power between employees and employers in the context of ERISA benefi ts. Th us, this employeremployee relationship is crucial to determining whether ERISA governs the claim. Attorneys who fi nd themselves handling an off hand ERISA case but who do not specialize in the area sometimes become surprised to learn that persons having an ownership interest can also be considered “employees” for purposes of ERISA. In Raymond B. Yates, M.D. Profi t Sharing Plan v. Hendon, the Supreme Court found that a working owner can have dual status as both an employer and employee entitled to participate in the plan. 541 U.S. 1, 16, 124 S.Ct. 1330, 1341, 758 L.Ed.2d 40 (2004). Th at holding overturned the all contrary decisions in lower courts concluding previously that an owner could never be a participant in an ERISA plan. Id. at 18-24. Conclusion Th e key to preparing a successful ERISA claim begins early – often during the administrative remedies portion of the claim. Assessing whether ERISA applies should be done as soon as the claim arrives on your desk. If, for example, a client with a denied insurance claim asks you to “write a letter” to persuade the insurance company to pay the claim, beware. Your letter could be considered an “appeal” under the terms of the ERISA plan. If you fail to submit all the evidence in support of the claim with that “appeal” the insurance company could render a quick decision on the “appeal” and uphold the denial of the claim. Th us, the opportunity to include documentation supporting the claim during the subsequent litigation could be denied. Knowing whether ERISA applies at the front-end of your engagement will allow you not only to advise your client better about what his or her rights and remedies may be, but also to prepare for what lies ahead. In that event, you will need to be prepared for transfer of your case to federal court, oftenstrict limitations on discovery, a deferential standard of review heavily favoring your opponent, no opportunity for a jury, and restrictions on what remedies you can obtain. But if you fi nd you are unable to avoid having ERISA apply to your case, do not despair: many can and do prevail when their cases have been properly prepared with ERISA’s many nuances in mind. But they are always prepared from the beginning for the adversity they will be facing. Th e important thing is to know as soon as you can if ERISA applies so that such preparations, including the pursuit of necessary and important ERISA litigation strategies, can be made. G Contributors M. Clayborn Williams and Th omas O. Sinclair 16 Birmingham Bar Association


Bulletin
To see the actual publication please follow the link above