5 ways to a better ERISA administrative process
If an employer is unfortunate enough to be involved in ERISA litigation, having a disciplined and organized administrative process can go a long way toward protecting its interests. The law provides plan administrators with lots of discretion, says Tim O’Toole, a member of law firm Miller & Chevalier, and if the plan administrator has a fair process, and makes a reasoned decision, courts will almost always uphold those decisions even if they might have decided the ultimate question differently.
“Once you’ve gotten to litigation, the die is pretty much cast,” says O’Toole. “Whatever you’ve done is done and what you’re stuck with, for better or for worse.”
Here are five things employers can do to make their administrative process better, fairer and more reasoned from the outset – and possibly avoid litigation.
1. Make sure there’s a good process in place for dealing with participant requests for information. There are a number of provisions in ERISA and the Affordable Care Act that deal with information that plan administrators are required to provide plan participants and beneficiaries. Those provisions sometimes have short turnaround times in terms of how quickly the information must be provided to plan members and beneficiaries.
“What the worst thing that can happen for a company with requests for information is that they fall through the cracks,” says O’Toole, who recommends employers have a process in place for dealing with information requests.
“You want to make sure they [information requests] go to a particular person or a particular office,” he advises. “You want to make sure that office understands what the time frames are that they need to respond to, and what their obligations to produce are.”
2. Have a good process in place for dealing with participant assignments. Some healthcare plans allow plan participants to assign the right to payment of claims to the healthcare provider. “The company has [to have] a process in place so that they can figure out who the assignee is and, by the same token, some requirements in place so the assignee is required to come to the company and provide the company with particular types of information,” says O’Toole, adding that employers should figure out what sort of authorized representative form they want to use for this purpose.
Some employers, however, may choose to not to allow assignments at all. “If you want an anti-assignment clause, that’s fine,” he says. “You can draft one that fits with the controlling law.”
3. Think through statute of limitations issues. In Heimeshoff v. Hartford Life & Accident Insurance Co., the Supreme Court upheld a statute of limitations that was written into the plan document.
“Rather than being kind of left at the mercy of the statute of limitations that might be out there in every state, after Heimeshoff, a number of plan administrators decided to put a statute of limitations – which is just the amount of time you have to get into court to sue – right into the plan itself,” says O’Toole. “It is always the same under that plan and everybody knows that the time limit is in advance. You need to think through that issue.”
4. Think through fiduciary breach issues. A lot of ERISA litigation, particularly with respect to 401(k) plans, deals with breach of fiduciary issues. “One basic question a company needs to think about is ‘Who are the fiduciaries? Who are the individuals or officers of the plan that are going to take on the fiduciary responsibilities of loyalty and prudence to the participants?’” he says.
Also see: “Who is an ERISA fiduciary?”
Once the fiduciaries are decided on, plan sponsors “should identify what the fiduciary duties are so that if they do get sued they know who it was that was responsible and that the plan has done whatever it could to make sure those fiduciaries have been acting with loyalty and prudence and exercising their fiduciary responsibilities correctly,” he says.
5. Periodically review your administrative appeals process to keep up with the law. “A good plan administrator will keep up with changes in the law, or at least the development of the law and be aware of what their options are based on the developing law,” says O’Toole. “Whether it’s with respect to a statute of limitations provision or an arbitration provision – whatever the hot issues are out there, they’ll keep up with those issues and kind of revise their plan accordingly.”
Also see: “Supreme Court rulings to watch for in 2016.”