March 11, 2019

Follow the Plan and Keep it Legal (article)

A recent Eighth Circuit Court of Appeals decision provides a good reminder about the importance of complying with ERISA. 

In the matter of Louis J. Peterson, D.C., et al. v. UnitedHealth Group Inc., et al., [Case No. 17-1744 (8th Cir. Jan. 15, 2019)], UnitedHealth Group, Inc., in its capacity as third party administrator of multiple self-funded health plans, had engaged in the process of using overpayments from one plan to offset underpayments of another plan.  The Court ruled that this process of offsetting was not contemplated in the agreement and the governing plan instrument. The Court goes on to imply, though does not rule on, the fact that this practice might violate ERISA.  The Department of Labor in its Amicus Curiae submitted to the Court in support of the Plaintiffs-Appellees, also expressed its view in cross-plan activity in violation of ERISA. 

Following the Eighth Circuit Court’s decision, UnitedHealth Group retains its argument that its practice of cross-plan setting is not violative of ERISA, and requested a delay in enforcement of the Court’s decision.  The insurer has indicated its intent to appeal the ruling to the Supreme Court.

As a general rule, ERISA requires that plan assets be used for the exclusive benefit of plan participants, i.e., participants in the plan from which assets are derived.  The concept of exclusive benefit can come up in many contexts for example, use of rebates, including medical loss ratio standards, as well as use of plan assets in mergers and acquisitions situations. 

The specifics of this case notwithstanding, several points are important for plan sponsors to bear in mind to ensure compliance with ERISA:

  1. A written plan document is required.  The primary purpose of plan document is to set forth the rules and requirements governing the plan.  Further, it is necessary to follow the terms of the plan document; 
  2. It is necessary to use plan assets for the exclusive benefit of participants in that plan; and 
  3. It is necessary for the plan sponsor, in its role as plan fiduciary, to act with the care, skill, prudence, and diligence as a prudent person would in a similar circumstance.


The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.

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