Is It Really a Voluntary Product? (article)
A recent case from the U. S. District Court for Eastern District of California, Bommarito v. Nw. Mut. Life Ins. Co., 2018 WL 3537118 (E.D. Cal. 2018), provides a good reminder of the importance of knowing whether a plan is subject to ERISA.
Generally, all plans sponsored by both for-profit and not for profit entities are subject to ERISA. Plans sponsored by churches and plans sponsored by federal, state or local governments are exempt from ERISA.
Also exempt from ERISA are plans not sponsored by the employer, commonly referred to as “voluntary plans”. Voluntary insurance products offered on an individual basis, or offered as a part of a group health plan, such as dental, vision, supplementary long or short term disability, long term care or cancer policies, are exempt from ERISA as long as:
- There is no direct or indirect contribution by employer or employee organization;
- Participation in the program is strictly voluntary;
- The employer’s involvement is ministerial only and the employer does not endorse the program in any way; and
- The employer receives no consideration.
If the goal is to ensure that the voluntary program is not subject to ERISA, it is imperative to design the program to be independent of the employer’s other benefit package. In all respects, it is essential that the employer’s involvement be limited to a ministerial function.
In this case, the plan did not meet certain of these criteria. And therefore, even though the plans in question were individual policies, there were deemed to be subject to ERISA.