Many workers have health benefits and retirement benefits through their employer; however, fewer understand what type of disability coverage they may have. Every year, thousands of people end up disabled because of an illness or injury, unable to work for days, months, or years. For employees who receive disability insurance through their employer, federal laws protect their rights to seek disability benefits and provide legal remedies for employers who refuse coverage. However, not all disability insurance programs are covered by ERISA.
What is ERISA?
ERISA is the Employee Retirement Income Security Act. The law was enacted in 1974 to protect workers with private health and pension plans. ERISA also applies to private long-term and short-term disability insurance coverage provided by the employer. ERISA regulates employer disability plans including how disability benefit claims are processed, the timeline for processing a claim, and the individual's rights if their disability claim is denied.
Employees covered by their employer's disability benefit plan should receive a brochure detailing the features of the plan in a summary plan description, which provides information on how the disability plan works and what benefits are offered. Additional information is provided in a summary of benefits and coverage, including whether there are any out-of-pocket costs to the employee for coverage.
Types of Disability Coverage
Many people understand the importance of disability coverage. Every year, thousands of people become disabled before they reach the age of retirement. Without disability coverage, they may be forced to live on the minimal Social Security benefits. Disability insurance offers benefits, usually based on a percentage of their salary, during the time they are unable to work.
Disability insurance may be provided to employees of a private company or public sector workers. Disability insurance may also be obtained by an individual on their own. Some states require employers to provide disability benefits to their employees. Who provides the insurance may determine whether the disabled individual is covered by ERISA.
When an injured individual files a disability claim, their employer or insurance company may try and deny their claim. The claim may be denied because they claim the individual is not disabled, they are not covered by the policy, or the claim can be denied for some other reason. It is important to understand whether ERISA governs the disability insurance claim because ERISA provides the right to appeal a claim denial, file a lawsuit to compel coverage.
Private Company Coverage
Most private companies who provide their employees with short- or long- term disability insurance will be governed by ERISA. Generally, a group disability insurance policy is covered by ERISA if the plan is employer sponsored, established by the employer or employee organization, for the purpose of providing disability benefits to plan participants.
Alternatively, a plan may not be governed by ERISA if the employer makes no contributions to the disability insurance policy and participation is completely voluntary. Some workplaces may allow contributions voluntarily made to be taken out of employee payroll, or allow an insurer to publicize a disability insurance program without being actively involved in the plan, which may not necessarily make them governed by ERISA.
If you have any questions about whether your disability insurance program may be covered by ERISA, talk to your human resources department. If you have had a disability claim denied by your employer or insurance company, you may want to talk to an experienced disability attorney to make sure you get the benefits you have earned.
Government Worker Benefits and Church Plans
While employees of state, local, and the federal government often receive disability benefits, their benefits may not be covered by ERISA. Church benefits plans may also be exempted. ERISA was enacted to provide protections for employees who were covered by private plans, including providing ways to appeal and challenge decisions to deny claims. Public employee plans may already have such protections in place.
Some individuals contract to do work with government agencies, including federal, state, and local governments. These workers may not be aware if they are considered to be an employee of the government, a temporary employment agency, or some other private employer. Talk to your employer if you are unsure what type of benefits you may have, and which company or entity provides coverage.
Employer-Provided Disability Insurance
Some individuals seek out their own disability insurance coverage, even if their employer does not offer any type of disability plan. These plans may have been introduced by the employer, another co-worker, or obtained on the open market. If the plan participant is responsible for paying the premiums, then the disability insurance is generally not governed by ERISA. The individual should still make sure they understand what rights and obligations they have under the insurance disability plan, including possible remedies if they are denied coverage.
States Requiring Employer Disability Benefits
Some states require employers to provide disability benefits for their employees, including California, Hawaii, New Jersey, New York, and Rhode Island. This applies to employees in these locations, not limited to the corporate headquarters of the company. Employers who do not provide disability coverage in these states may be subjected to fines and penalties.
Even though these plans are provided by employers, they may not necessarily be subjected to ERISA protections. ERISA does not apply to disability plans “maintained solely for the purpose of complying with applicable...disability insurance laws.” 29 USC 1003 (b)(3).
When ERISA Does Apply
When an employee is covered by an ERISA-governed plan, there are a number of protections available to help the employee seek disability benefits. This includes notification of their coverage and benefits and information on how to file a claim. If the individual is injured and files a disability claim, the plan has a certain amount of time to allow or deny or the claim. If the claim is denied, the individual can appeal that decision. If the appeal is denied, the individual can file a lawsuit against the plan or their employer for benefits.
However, some injuries may not be covered by disability insurance plans. In many cases, an injury on the job will be covered by workers' compensation instead of disability. Workers' compensation generally provides payment benefits and medical care for an accident that occurred in the course of employment.
In most cases, workers' compensation provides benefits to employees in exchange for limiting liability to the employer. Like disability claims, employers may deny workers' compensation claims, and employees have a venue for appealing those denials. Some employers may try and deny both a workers' compensation claim and a disability claim covered by ERISA. Talk to an experienced attorney if you have been denied short-term or long-term disability by your insurance company or employer.
ERISA and Disability Benefits Attorney
Greg Paul has 16 years of experience fighting for long-term disability benefits against the insurance companies. We represent individuals and families who have been denied benefits by their insurance company or plan administrator. You have a limited time to appeal your disability denial, so do not delay. If you have been denied short-term or long-term disability benefits, contact our office for a free consultation.