ERISA lien

What is an ERISA lien?

An ERISA lien is a reimbursement claim asserted by an employee benefit plan governed by the federal Employee Retirement Income Security Act.

Most employer sponsored health coverage falls under that statute, which means a large share of working people have plans in this category.

The significance is that federal law governs these claims rather than state law, and federal law can displace protections a state would otherwise provide.

That single feature makes these liens materially different from an ordinary health insurer's claim.

It is among the least visible obstacles in an injury claim and among the most consequential when it appears.

Why does the plan type matter?

The distinction between self funded and insured plans drives the analysis.

• A self funded plan pays claims from employer assets and is administered by an insurer
• An insured plan transfers the risk to an insurance company
• Self funded plans can be shielded from state law limits on reimbursement
• Insured plans are generally subject to state insurance regulation
• The plan document rather than the insurer's name determines which applies

What makes these liens strong?

Self funded plans frequently include language asserting a first priority right to full reimbursement regardless of whether you were made whole.

Courts have enforced clear plan language of that kind, so equitable arguments that would succeed against an ordinary insurer may not succeed here.

The practical consequence is that a plan can sometimes claim a very substantial share of a limited recovery.

How is an ERISA lien handled?

By obtaining the actual plan document rather than relying on a letter from the administrator, since the document determines what rights exist.

Auditing the claimed charges matters here as with any lien, since unrelated treatment is frequently included.

Negotiation is still possible and frequently productive, particularly where the recovery is limited by policy limits and full reimbursement would leave the injured person with nothing.

Obtaining the plan document early, rather than at settlement, avoids discovering a serious problem at the worst moment.

Common questions

How do I know if my plan is ERISA governed?

Most employer sponsored plans are. Whether it is self funded is the more consequential question, and the plan document answers it.

Can an ERISA lien take my entire settlement?

In principle a strongly worded self funded plan can claim a very large share. Negotiation is nonetheless common and frequently reduces the figure.

Does the make whole doctrine protect me?

It may not where plan language clearly disclaims it. This is one of the main respects in which these liens differ from ordinary insurer claims.