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Plan Exclusions Ward Off ERISA Claims

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in Human Resources

When determining whether an employee is eligible for benefits, plan exclusions apply.  In theory, the more clearly worded an exclusion, the more likely a worker denied benefits is to understand and accept the decision.  Unfortunately, that's not always the case.

 

Not Employees? No Benefits.

An employer's retirement plan required employees to be classified as eligible and be treated as subject to federal wage withholding by the company.  Its other benefit plans required employees to be on the company's payroll.  All plans excluded individuals classified as leased employees, contract workers, and independent contractors.

 

A group of workers, paid through a third-party staffing firm, sued the company under the Employee Retirement Income Security Act (ERISA), claiming the company wrongfully denied them participation in the company's benefit plans.  The company maintained that the workers were ineligible for benefits because they were employees of the staffing agency, not the company.  The workers countered that they were common-law employees of the company, and therefore, should be entitled to participate.

 

A court sided with the company.  The claim failed because the workers were not on the company's payroll and not subject to wage withholding by the company.  Plus, the workers fell into at least one of the plan's clearly worded exclusion categories.  (Curry v. CTB McGraw-Hill LLC, N.D.CA, No. C 05-04003JW, 2006)

 

Fighting Employees? No Benefits.

An employee saw a doctor about a hand injury.  He told the doctor he injured his hand in a car accident.  He told a second doctor that he injured his hand breaking up a fight at work.  The employee told a third doctor he hurt his hand when he punched someone.

 

An administrative committee, on behalf of his employer's health plans, asked for further explanation of his injury.  The employee again told the "I injured my hand trying to break up a fight" story.  He sued when the committee refused to pay his medical benefits for the injury. 

 

A court found that the company reasonably believed that the injury fell under the plan's violent behavior exclusion.  Noting that the employee told three different stories, the court determined the most consistent one was that he sustained the injury when trying to break up a fight.  The committee had ruled that the employee willingly and knowingly entered into a fight, and the court agreed. 

 

Court: Application of a plan exclusion for injuries caused by violent behavior was not inconsistent with the plain language of the plan.  (Jennings v. Administrative Comm. of Wal-Mart Stores, Inc., Assocs. Health and Welfare Plan, W.D.MO, No. 04-6114-CV-SJ-RED, 2006)

 

Exclusions apply: Both cases highlight the importance of clearly worded plan exclusions.  By having specific provisions excluding certain workers from benefits, whether due to classification or misconduct, you won't be on the hook to provide benefits, and a court won't have to force you into doing so, either.

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