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Recent Ruling Highlights Importance of ERISA Document Disclosures

Employers that sponsor ERISA group health plans should regularly confirm that all required plan information and documentation has been properly disclosed to participants. A recent federal district court decision highlights the importance of making sure all necessary information has been disclosed, which may be more than just the summary plan description or underlying plan document.

Among other claims, the participant and his spouse and child (collectively, the “Plaintiff”) in the case brought claims against his employer as the plan administrator of the employer’s self-funded group health plan (the “Plan”), the third-party claims administrator of the Plan (the “TPA”), and the Plan itself (collectively, the “Defendants”) for penalty amounts under ERISA due to the failure of the Defendants to provide (i) the criteria used under the Plan to determine the medical necessity with respect to both mental health and substance use disorder benefits and medical/surgical benefits (the “Criteria”), and (ii) the administrative services agreement between the Plan administrator, the employer, and the TPA (“ASA”), as requested by the Plaintiff pursuant to the “other instruments under which the [P]lan is established or operated” clause for required document disclosures under Section 104(b)(4) of ERISA (the “Other Instruments Rule”).

  • Regarding the first claim, the court found that the Defendants did not comply with the Other Instruments Rule when they provided to the Plaintiff only the Criteria related to mental health and substance use disorder benefits, but failed to also provide the Criteria related to analogous medical/surgical benefits. The court stated that the ERISA regulations under the Mental Health Parity and Addiction Equity Act (the “MHPAEA”) make clear that the Other Instruments Rule encompasses both categories of Criteria. 
  • Regarding the second claim, the court held that the ASA was subject to disclosure because the ASA evidenced the divided administration of the Plan between the Plan administrator and the TPA, and that organizational structure affected the Plaintiff’s rights under the Plan.   

Key Takeaways

  • Plan sponsors should not overlook the requirements of the MHPAEA discussed above when responding to document requests under the Other Instruments Rule. 
  • Various federal circuit courts of appeal have applied different interpretations of the Other Instruments Rule to ASA disclosures (and this court’s holding is binding only in its jurisdiction, the U.S. District Court for the District of Utah). Plan sponsors may want to avoid a requirement to disclose their ASAs under the Other Instruments Rule if the ASA contains the parties’ proprietary information or for other valid business reasons, including a non-disclosure provision that may be included in the ASA. Accordingly, plan sponsors should consider incorporating certain details of plan administration, such as the delegation of claims administration and decision-making duties, into the governing plan document and summary plan description (SPD). In that case, participants could be informed of those rights via the plan document and SPD, rather than the ASA. If this approach is taken, plan sponsors must ensure that any such provisions in the plan document and SPD are consistent with corresponding provisions, if any, in the ASA and reaffirm this in the event any amendments are made to the ASA in the future.

The opinion in M.S., L.S., and C.J.S. v. Premera Blue Cross, Microsoft Corp., and the Microsoft Corporation Welfare Plan is available here. 

The lawyers of our Employee Benefits and Executive Compensation Practice Group are readily able to assist companies on a nationwide basis with implementing sophisticated benefit plans and providing answers to their most challenging compensation issues. Additionally, our lawyers are well aware of the daily employee benefits challenges facing companies of all sizes and are capable of helping in-house lawyers and human resources personnel with the day-to-day advice and guidance necessary to properly administer employee benefits plans.

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September 2021