Disability Insurance & Pension
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COBRA, HIPAA, and SPD are a few of the acronyms under ERISA which address issues that arise in relation to the rights and duties of beneficiaries and participants, and employers, insurers and benefit plan administrators regarding health insurance.
ERISA addresses funding, vesting, reporting, disclosure and distribution issues regarding pension plans. Employers who establish pension plans are required to report information about the plan to the Department of Labor and provide this information to participants upon request. If a participant requests, the employer must provide a calculation of accrued and vested pension benefits. This federal law requires pension plans to provide vesting to a participating employee after a specified number of years. Typically, a pension plan must become vested at 100% either after three years or under a two to six year graded schedule (20% a year for each year of service beginning with the end of the second year and ending with 100% after six years).
ERISA also regulates the manner in which pension plans pay benefits. For example, a defined benefit plan must pay a married participant’s pension as a joint and survivor annuity that provides benefits to the surviving spouse unless both the participant and spouse waive the survivor coverage. Issues that have been resolved through court cases regarding pensions include: Failure to pay a surviving spouse their survivor annuity due to a mistaken belief there had been a waiver of coverage; misrepresentations to participants as to the amount of benefits at the time of a merger of two companies; miscalculations as to benefits which resulted in either an underpayment or overpayment; and claims by terminated employees believing their termination was intentional and for the purpose of interfering with their attainment of vesting (ERISA has anti-retaliation and anti-discrimination provisions).
COBRA, Consolidated Omnibus Budget Reconciliation Act, is the law which requires that beneficiaries under a employer provided health insurance plan be provided notice of their right to continue coverage. The extended coverage period is 18 months from the end of health benefits upon termination of employment(including resignation) and 36 months from divorce or legal separation of the covered employee from the employee’s spouse. There are other extensions available in the event of death or SSA disability of the covered employee. Notice of rights to continue coverage, which must explain the premium amount, the election deadline and the duration of coverage, must be provided within 44 days of the qualifying event, termination of employment or divorce.
HIPAA, Health Insurance Portability and Accountability Act, is a law which provides various duties to health insurers and health service providers. The most practical application of this law is the provision that one who was an insured under a group health insurance plan for at least a year will not be subject to a pre-existing condition exclusion provided they obtain group coverage within 63 days of the end of their prior coverage. For purposes of considering whether one has met the required coverage period and not had their insurance lapse for greater than 63 days insurance obtained under COBRA is considered.
SPD, Summary Plan Description, is a required written document which is required to contain an intelligible description of all circumstances which may result in disqualification, ineligibility, or denial or loss of benefits. An employee benefits handbook may not satisfy the requirements of ERISA depending on its contents. An SPD must be provided within 90 days of commencement of benefit coverage and must contain COBRA rights information. Further, an SPD must be provided to a participant or beneficiary who requests an SPD in writing to the plan administrator. Civil penalties of up to $110.00 per day may be assessed for failure to provide the required information.
In addition to COBRA, HIPAA, and SPD a beneficiary has a right to challenge a denial of a claim for health benefits. First, a denial must be appealed to the appeal entity provided for in the plan. Thereafter, a formal lawsuit in federal court is available to address ERISA issues.
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