Is Short Term Disability Covered by ERISA?
If you’ve made any kind of insurance claim, you likely know the claim process can be lengthy, confusing, and unfair. If the Employee Retirement Income Security Act of 1974 (ERISA) covers the insurance benefits you receive through work, you get certain protections when making claims on those benefits. You also have to follow certain rules to appeal an adverse decision.
But is short term disability covered by ERISA?
Generally put, ERISA covers many short term disability plans. More specifically, ERISA coverage of a short term disability plan depends on a lot of different factors. Read on to learn about when ERISA covers a short term disability plan.
The Purpose of Short Term Disability Claims
No matter how much you want or need to work, uncontrollable circumstances might prevent you from doing so. If you suffer from a prolonged illness or impairment that affects your ability to work, short term disability payments can replace some of your wages. This wage replacement can be crucial to a peaceful recovery. Unfortunately, you’ll likely have to jump through administrative hoops before you get short term disability benefits. Also, your employer might deny your claim. Knowing whether your short term disability claim is covered by ERISA and what protections you have under ERISA can help you effectively fight for your right to benefits.
What Are the Benefits and Drawbacks of an ERISA-Covered Plan?
If ERISA covers your short term disability plan, your employer or employee organization has to follow certain federal rules. You have to follow certain rules as well.
Benefits of an ERISA-Covered Plan
ERISA requires covered plans to provide participants and beneficiaries with many protections, including:
- Protections against conflicts of interest in plan administration;
- Requirements to provide a claimant with detailed information when a claim is denied;
- Requirements to make claim-denial notices easy to read; and
- Requirements to make coverage determinations relatively quickly.
Claimants also have multiple options for appealing a full or partial benefit denial.
Drawbacks of an ERISA-Covered Plan
Though ERISA provides a lot of protections to claimants, you might find that state laws are more favorable to your short term disability claim. If ERISA covers your short term disability claim, then you can’t make arguments regarding favorable state laws; your claim has to follow federal law, and you have to bring any lawsuits in federal court. You also have to seek administrative remedies before you can file a lawsuit regarding an ERISA-covered claim, and you have a short amount of time to seek remedies.
For more information on ERISA claims and their benefits and drawbacks, you can visit the Peace Law Firm’s website.
When Does ERISA Cover a Short Term Disability Plan?
Generally, ERISA covers employer-provided insurance plans that are “employee welfare benefits plans.” Employee welfare benefit plans include plans that provide benefits in the event of sickness, accident, and disability. Short term disability plans fit squarely within this definition, but there are some exceptions.
First, a short term disability plan doesn’t count as an employee welfare benefits plan if payment of wage replacement for an employee’s disability comes out of the employer’s general assets. That is a payroll practice exemption. Second, ERISA does not cover a short term disability group insurance plan if:
- The employer or employee organization doesn’t make any contributions to the plan;
- Employee’s don’t have to participate in the plan;
- The only role the employer or employee organization has in the group insurance program is to allow the insurance to inform employees about the plan and collect premiums from payroll deductions for remission to the insurance company (the employer or employee organization cannot endorse the plan); and
- The employer or employee organization doesn’t receive any compensation in connection with the plan except for payment for performing administrative tasks.
There are obviously a lot of details to review before you can determine if ERISA covers your short term disability plan. Short term disability plan policy language and features can be hard to read and understand when determining if ERISA applies. An experienced ERISA attorney can help you make that determination.
Contact an Attorney Who Can Effectively Advocate for Your ERISA Short Term Disability Claim
Attorney John Peace founded the Peace Law Firm in 2002, and he has been advising lawyers and non-lawyers about ERISA issues for more than 19 years. John has a passion for ERISA claims, and he wants to protect claimants from mistreatment by big insurance companies.
In fact, John doesn’t represent insurance companies or employers. He represents claimants fighting for their rights. If you’re an ERISA claimant, John can help you. Contact the Peace Law Firm online, or call us at 864-485-6967 for a free consultation.
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