Before speaking with an ERISA long term disability lawyer, employees in Chicago and elsewhere in Illinois with employer sponsored long term disability benefits often are not aware either state or federal law may govern their entitlement to benefits, let alone which law will apply. ERISA is a broad statute governing virtually all employee benefit plans. But it has a couple exceptions. Specifically, any employee benefits plan that is a “governmental plan” is excluded from ERISA, as well as those deemed “church” plans. A recent case shows why understanding whether your benefits are covered by ERISA from the outset can help you save time and money as you pursue your claim for benefits.
In Smith v. Reg’l Transit Auth., No. CIV.A. 12-3059, 2015 U.S. Dist. LEXIS 144192 (E.D. La. October 23, 2015), plaintiffs sued the Regional Transit Authority (“RTA”) and alleging that it denied them premium-free medical insurance, quarterly Medicare premiums, and deductible reimbursements as guaranteed under the Plan. Three years, and three court decisions later, they had judgment entered against them on the grounds ERISA did not govern the plan because the court determined the government exemption from ERISA applied. In the earlier appeal, the United States Court of Appeals for the Fifth Circuit determined ERISA coverage is an element of a claim, rather than subject matter jurisdiction, so it is suited for resolution at summary judgment.
The court untangled a contentious issue of who has the burden of proving or disproving the exemption, holding plaintiff bears the burden of proving ERISA coverage, which includes demonstrating an exemption does not apply. To invoke the exemption, employers have to be “political subdivisions, agencies, or instrumentalities of the United States, Louisiana, or any political subdivision of either.” Because ERISA does not define the terms “political subdivision” or government “agency or instrumentality,” the Court had to apply definitions from other sources. See National Labor Relations Board v. Natural Gas Utility District of Hawkins County, Tennessee, 402 U.S. 600 (1971); see also IRS Revenue Ruling 57-128, 1957-1 C.B. 311, 1957 IRB LEXIS 436 (I.R.S. 1957).
The court held the employers met the definitions of a political subdivision, and that of an agency or instrumentality by applying six factors set forth in IRS Revenue Ruling 57-128. Thus, the Court determined that when the Plaintiffs’ cause of action arose in 2006, “the RTA was a political subdivision of Louisiana and TMSEL was an agency or instrumentality of the RTA.” Smith, 2015 U.S. Dist. LEXIS 144192, at *33. Therefore, Plaintiffs’ ERISA claims were dismissed.
ERISA exemptions concern all type of benefit plans, not just disability. An experienced ERISA attorney can help you understand whether your plan is governed by ERISA or not. The answer is not always clear cut, as the case above demonstrates. Knowing this difference at the outset can save you time and money.