ERISA Collateral Disability Benefits at Work: What Other Benefits Might a Disabled Person Be Eligible For at Work, and How Does the Person Find Out?
By Eric L. Buchanan
When a person becomes disabled, and can no longer work, he or she may be covered by a long term disability (LTD) policy or plan at work. About 28% of employees provide LTD coverage to their employees. Long term disability benefits typically provide monthly benefits that are a percentage of the employees’ pre-disability earnings, usually offset by other disability benefits such as those payable by the Social Security Administration.
However, some employers (but not all) provide for additional benefits to people who are disabled. Sometimes, those benefits are automatically provided for people who are receiving benefits under the LTD plan. For example, some employers allow people receiving LTD benefits to continue to be covered under the company health insurance plan. Some employers may offer other specific benefits for employees receiving LTD, such as continued pension contributions. Other employers have written policies that employees who become disabled and eligible for LTD benefits are treated as active employees and continue to receive all of their other employee benefits. These benefits that are provided automatically to people receiving LTD benefits are often called “collateral” benefits.
On the other hand, employers may offer other benefits that provide continued coverage or benefits to people who are disabled, but the person has to apply for that coverage separately from the application for LTD benefits. One common example of this occurs when the employer offers life insurance coverage at work, and the life insurance policy allows the person to keep the life insurance if the person becomes disabled and can’t work. This provision is usually referred to as a “life-waiver of premium” or (“LWOP”) provision. Typically, a claim to keep life insurance requires a separate application from the LTD claim, so that if an employee becomes disabled, the employee should can file an application with the life insurance company, and, if the employee proves he or she is disabled, then the employee can keep the life insurance coverage in place without paying premiums while the employee is disabled.
So, if you become disabled, how do you know what benefits you might be entitled to? The simple starting point is to ask your employer.
However, there are specific rules that apply to how you should ask for that information. Under ERISA, you are entitled to that information if you request it in writing. Also, technically, you should ask the “plan administrator,” for that information. In the vast majority of cases, the plan administrator is the employer (or union) from whom you get the benefits, but sometimes some other person is named as the plan administrator.1 And you should not only ask generally what you might be entitled to, but ask for all the “plan documents” that set out the rules for eligibility, and set out the rules stating how to apply.
So, the first question an employee should ask, in writing, is, “Dear employer, please provide me with copies of all plan documents or other documents describing what benefits an employee may be entitled to if I become disabled. If you are not the plan administrator for any such plans, please tell me who the plan administrator is and provide me their address so I can request the documents from them.” The second question to ask is, “because I am disabled, please tell me what actions my client needs to take to file a claim for any benefits he or she may be entitled to under any of those plans on account of his or her disability.”
Also, if you hire an attorney to help you with your long term disability case, your attorney should ask these same questions. At Eric Buchanan and Associates, our team will ensure that we ask these questions in the right way, to ensure you have the information you need to know what benefits you can pursue.
Not only must plan administrators provide documents when requested, but as a plan administrator, an employer has an affirmative fiduciary duty to communicate with a plan participant, and to fully inform a plan participant of the material facts necessary to assist with a claim or to tell an employee what benefits he or she may be eligible for. Plan Administrators are fiduciaries under ERISA, and courts have held that an ERISA fiduciary is specifically charged with the obligations of a trustee, who “is under a duty to communicate to the beneficiary material facts affecting the interest of the beneficiary which he knows the beneficiary does not know and which the beneficiary needs to know for his protection.” Krohn v. Huron Memorial Hospital, 173 F.3d 542, 548 (6th Cir. 1999) (citing Restatement (Second) of Trusts).
A fiduciary must give complete and accurate information in response to participant’s questions. Drennan v. General Motors, 977 F.2d 246, 251 (6th Cir. 1992). “Misleading communications to plan participants regarding plan administration (for example, eligibility under a plan, the extent of benefits under a plan) will support a claim for breach of fiduciary duty.” Id., citing Berlin v. Michigan Bell Telephone Co., 858 F.2d 1154, 1163 (6th Cir. 1988). A fiduciary breaches its duties by materially misleading plan participants, regardless of whether the fiduciary’s statements or omissions were made negligently or intentionally. Berlin, 858 F.2d at 1163-64. The Sixth Circuit has explained:
The duty to inform is a constant thread in the relationship between beneficiary and trustee; it entails not only a negative duty not to misinform, but also an affirmative duty to inform when the trustee knows that silence might be harmful.
Krohn v. Huron Memorial Hospital, 173 F.3d 542, 548 (6th Cir. 1999), citing Bixler v. Central Pa. Teamsters Health and Welfare Fund, 12 F.3d 1292, 1300 (3rd Cir. 1993).
In addition to having an affirmative fiduciary duty to explain to an employee who is a plan participant about any benefits the employee may be entitled to, a Plan Administrator who fails to provide requested documents within 30 days of a written request may be liable to the employee for a penalty of up to $110 per day. See, ERISA § 502(c), 29 U.S.C. § 1132(c).
What documents should an employee who is a plan participant be able to obtain? Basically, it is generally accepted that the Plan Administrator must provide the controlling plan documents. ERISA § 104(b)(4), 29 U.S.C. § 1024(b)(4) states, “The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary  plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.”
In addition to the specific documents described in the ERISA statute itself, at ERISA § 104(b)(4), 29 U.S.C. § 1024(b)(4), such as the summary plan descriptions and other documents under which the plan is operated, the ERISA statute, at § 109(c), 29 U.S.C. § 1029(c) provides that the Secretary of Labor may also prescribe what other documents should be furnished. The Secretary of Labor’s ERISA claim procedures regulations, set out in 29 C.F.R. § 2560.503-1 (h)(2)(iii), describe what documents an administrator must provide. The additional documents described in the regulations include all the documents “relative” to the claim, including the insurance company’s claim file and any policy statements describing how a decision on a claim is made.
Beware that in many cases, the employer, who is nominally the “Plan Administrator” may not have all the “relevant documents.” Many times, the benefit provided is actually provided by an insurance company, and that insurance company acts as a “claims fiduciary.” Therefore, under the ERISA regulations, the insurance company has an obligation to provide all the “relevant documents” in its possession. Also, as an ERISA fiduciary, the insurance company has a fiduciary duty to fully answer any questions and to affirmatively give information that your client needs to pursue a claim.
ERISA § 502(c)(1) provides that “any administrator” who “fails or refuses to comply with a request for any information which such administrator is required by this title to furnish to a participant or beneficiary” shall be, in the court’s discretion, liable to the participant or beneficiary in the amount up to $110 a day from the date of such failure or refusal.
However, in most circuits only the designated Plan Administrator is liable for a penalty under ERISA § 502(c). Many courts-of-appeal have read into the ERISA statute an additional implied term that the language “any administrator” actually means only the Plan Administrator. See, e.g. Caffey v. UNUM Life Ins.Co., 302 F.3d 576, 584 (6th Cir.1989) and VanderKlok v. Provident Life & Accident Ins. Co., 956 F.2d 610, 618 (6th Cir.1992).
Attorneys who represent insurance companies in ERISA benefits claims should remember that, in many circumstances, the employer may not understand its obligations under ERISA, and may not understand what documents should be provided and what information employees should be given. Many employers rely on the insurance company to provide information to employees, and may also rely on the insurance company to create and distribute ERISA documents, such as SPD’s. While the insurance company may not have a technical requirement to be subject to penalties for the failure to provide plan documents, it is not very good customer service for an insurance company to leave its customer, the employer, in a position where it may be subject to a claim from an employee for plan document penalties.
In sum, people who are disabled should ask for information and documents about all their benefits, and if they hire an attorney, they should hire an attorney who understands how to ask for all that information properly. At Eric Buchanan and Associates, we know how the ERISA rules work, can ensure that we gather all the information about the benefits you are entitled to, and can help protect your rights to those benefits.
Attorneys who represent insurance companies and employers when claims for ERISA benefits are filed should protect their client by ensuring that all documents that are requested are provided quickly. Further, such attorneys should encourage the employers to go out of their way to inform employees of all benefits they may be eligible for and what the employees should do to apply for them.
1 Under ERISA, the plan “administrator” is the person who is named in writing in the plan as the administrator; if no administrator is named, the administrator is deemed to be the plan sponsor (i.e. the employer, or, in the case of a union plan, the union). ERISA § 3(16)(A)(i) and (ii).