Is there a bright line test to determine how much an ERISA plan can recover from a third party settlement?



Question: My wife and I have reached a settlement in a legal matter stemming from medical treatment she received in 2001. But, there’s an ERISA lien against the settlement. How much of the settlement could be subject to the ERISA lien?


Answer: Thank you for the question. ERISA plans are those which are offered through private employer based plans. While ERISA plans can have a very strong right to recovery that right is completely dependent on the strength of the plan language. Every ERISA plan is offered in accordance with a plan document (written plan booklet or policy). The provision that you are looking for is probably entitled “Subrogation and Right of Reimbursement” or “Third Party Injuries.” If an ERISA plan has strong language and is well written the plan could make a claim to recover all the expenses it paid up to 100% of your settlement proceeds. In practice however many ERISA plans are willing to compromise their claim and they will do so to effectuate some type of equitable split with you the plan member. For example, many plans will split the available funds 50/50.

The key to ERISA liens is being able to properly determine (1) whether the plan is in fact ERISA, (2) if ERISA, what type of ERISA plan (self-funded or insured – impact on whether or not state law protections apply) and (3) how strong the language is.

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