It takes a lot of paperwork to put together an ERISA-compliant benefit plan, so every time a process shortcut is provided in the form of a simplified reporting requirement, companies should look at the shortcut and determine if it offers them any benefits. A recent decision in federal court has found that companies can have a single document that serves as both the formal plan document and the summary plan description (SPD) required by ERISA for benefit plans.

Subrogation and Summary Plan Documents

In the case at hand, the plan administrator was responsible for a self-insured medical benefits plan that provided certain benefits to plan participants for injuries sustained in accidents. The lawsuit was brought by a plan participant who was in an accident. The participant sued the third party responsible for the accident and was able to recover a significant sum. The benefit plan then sought a share of this recovery under subrogation law, where medical plans can be reimbursed for their expenses when those expenses are part of a lawsuit’s recovery.

The plaintiff in the lawsuit argued that since the SPD was supposed to be distinct from the plan document, it could not serve as the plan document. Further, the participant argued that the SPD was unenforceable because some of the terms of the document conflicted with the provided administrative services agreement (ASA). The plan administrator provided the ASA document which laid out plan benefits, terms and conditions, and ERISA-mandated language. The ASA was silent on reimbursement and otherwise incorporated the terms of the SPD. The SPD contained provisions on subrogation, reimbursement, and assignment. The plan administrator argued that this document, though labeled the SPD, was in fact the full plan document.

While the plaintiff’s arguments were based on an earlier U.S. Supreme Court case, the federal court distinguished this case from the Amara ruling and joined with other districts ruling that, absent a formal plan document, the SPD was the plan. The court argued that it would be inequitable if the plaintiff received benefits from the plan, but was not held to the other responsibilities of the plan. Because the SPD was the only written instrument of the benefits plan, the participant plaintiff was bound by its terms, including those of subrogation and reimbursement.

A Summary Plan Document as the Plan

While in theory it is not possible for a plan document to also be a summary of itself, many plans use a combined plan and summary document. This case serves as confirmation that this approach may be viewed as valid under ERISA, so long as the document is written to meet ERISA standards.

The experienced team at Hall Benefits Law views this case as an illustration of the importance of having proper ERISA-compliant documentation in place, even when trying to minimize paperwork. We work with our clients to help them put in processes and procedures to avoid these issues and help them mitigate damages when a problem does occur. Learn more by calling 678-439-6236 or visiting the Hall Benefits Law website.

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