Navigating the complexities of an ERISA lien negotiation can be a daunting task for even the most experienced personal injury attorneys. An ERISA (Employee Retirement Income Security Act) lien, a type of claim that may be made against a client’s settlement funds in personal injury cases, can play a pivotal role in the outcome of your client’s case.
But by understanding some key insights, you can tackle these challenges and ensure the best outcomes for your clients.
In this article, we will delve into five common mistakes attorneys make when negotiating an ERISA lien and offer insights on how to avoid them. Whether you are a seasoned lawyer or new to the field, understanding and avoiding these common pitfalls is crucial for safeguarding your clients’ interests and ensuring a favorable lien resolution.
1. Failing to Unlock Hidden Information with a 29 USC 1040(b)(4) Request
The ability to unlock pivotal information can be a game-changer in an ERISA lien negotiation.
A significant tool often overlooked by personal injury attorneys is the 29 USC 1040(b)(4) request.
Working with accurate and current plan documents is essential to resolving an ERISA lien.
29 USC 1024(b)(3) requires an ERISA plan administrator to furnish plan documents to a plan participant upon written request.
Only by issuing a 1024(b)(3) request do you ensure that you are obtaining the correct plan documents. If you fail to use this provision, the ERISA plan or its contractors may provide you with self-serving or outdated information.
There is another benefit to issuing a 29 USC 1040(b)(4) request. If the plan administrator fails to provide the documents within 30 days, they may be subject to certain penalties. This can provide extra leverage in the negotiation.
2. Overlooking Plan Document Details
Taking the ERISA plan at its word and not scrutinizing the plan document is the biggest mistake you can make in an ERISA lien negotiation.
The ERISA plan’s right to assert a subrogation lien on your client’s settlement arises from the plan document. If it is not in the plan document, the right does not exist.
Also, ERISA plan documents must contain essential language that ensures that the ERISA lien is enforceable. Outdated or poorly written plan documents will miss this language, and you will have a significant defense to enforcement of the plan document.
The case law on ERISA subrogation and reimbursement is constantly evolving. ERISA plans must amend their plan documents to keep up with new rulings and regulations. But ERISA plans may not always keep up with the latest changes in the law, leaving you with some leverage to reduce the lien.
Further, a plan document might leave holes that can be filled by equitable doctrines or defenses.
Another common mistake is accepting the Summary Plan Description (SPD) as the plan document. Relying on the SPD can be a grave error as it may not be the legally operative document.
3. Neglecting the ERISA Plan’s Funding Status
A plan’s funding status can significantly inform the direction of an ERISA lien negotiation. Whether an ERISA plan is insured or self-funded will significantly impact its power to enforce the ERISA lien.
Too often, when confronted with an ERISA lien, attorneys will automatically assume that the ERISA plan is self-funded.
If a plan is entirely self-funded, it generally will enjoy complete ERISA preemption. If a plan is insured, it generally will be constrained by state anti-subrogation laws.
The funding sources of an ERISA plan are available on the IRS Form 5500. The ERISA plan should provide this form through a 1024(b)(4) request. But the form is also available online through the Department of Labor’s online database.
For more information on how to read the IRS Form 5500, look here.
4. Not Contesting Unrelated Medical Charges
Every dollar counts in an ERISA lien negotiation. Accepting medical charges without a thorough review can lead to your client reimbursing the ERISA plan more than it is owed.
The key is not to take the ERISA plan’s lien statement at face value. The ERISA plan or its contractor works with imperfect information to arrive at their stated lien amount. They are also prone to mistakes or miscalculations.
As the participant’s attorney, you are much more acquainted with the nature of the injuries and the underlying case. Use this knowledge to your advantage.
Throughout the case, you should watch out for and contest any claims unrelated to the injury.
These include claims that may be related to a preexisting condition. They may also be any claims that a physician or expert witness has indicated unrelated to the injury. You can even use the defendant’s expert witness to contest the relatedness of the ERISA lien charges.
Scrutinizing the ERISA plan’s lien statement may significantly reduce the lien amount. But you also ensure fairness and transparency in the negotiation process.
5. Delaying ERISA Lien Negotiations
Timing is crucial in an ERISA lien negotiation. Being proactive will always yield better results.
Personal injury attorneys will often wait to resolve the ERISA lien after they have secured a settlement in the underlying case.
But, by waiting until the underlying case is concluded, you may miss a significant opportunity to secure an ERISA lien reduction.
In the worst-case scenario, the ERISA lien may take up most of the settlement, and you have backed yourself into a corner.
In a more common scenario, you may have missed several opportunities to exact concessions from the ERISA plan.
By being proactive and taking the first step, you can set the frame and tone for the ERISA lien negotiation for the benefit of your client.
Further, during the pendency of a personal injury case, every offer from the defense is an opportunity to constrain the ERISA lien.
You can use the low offer to obtain concessions from the ERISA plan, arguing that it is better to be reimbursed a portion now rather than nothing later.
Conclusion: Turning ERISA Lien Negotiations into Opportunities
ERISA liens can be complex, but with the right knowledge and approach, an ERISA lien negotiation can become a valuable opportunity to win big for your client. By steering clear of these common errors, you are well on your way to improving your outcomes in ERISA lien negotiations.