assignment of benefits erisa

26 CFR § 1.401(a)-13 - Assignment or alienation of benefits.

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(a) Scope of the regulations. This section applies only to plans to which section 411 applies without regard to section 411(e)(2). Thus, for example , it does not apply to a governmental plan , within the meaning of section 414(d); a church plan , within the meaning of section 414(e), for which there has not been made the election under section 410(a) to have the participation , vesting , funding, etc . requirements apply; or a plan which at no time after September 2, 1974, provided for employer contributions .

(b) No assignment or alienation —(1) General rule. Under section 401(a)(13), a trust will not be qualified unless the plan of which the trust is a part provides that benefits provided under the plan may not be anticipated, assigned (either at law or in equity), alienated or subject to attachment, garnishment, levy, execution or other legal or equitable process.

(2) Federal tax levies and judgments. A plan provision satisfying the requirements of subparagraph (1) of this paragraph shall not preclude the following:

(i) The enforcement of a Federal tax levy made pursuant to section 6331.

(ii) The collection by the United States on a judgment resulting from an unpaid tax assessment.

(c) Definition of assignment and alienation —(1) In general. For purposes of this section, the terms “assignment” and “alienation” include—

(i) Any arrangement providing for the payment to the employer of plan benefits which otherwise would be due the participant under the plan , and

(ii) Any direct or indirect arrangement (whether revocable or irrevocable) whereby a party acquires from a participant or beneficiary a right or interest enforceable against the plan in, or to, all or any part of a plan benefit payment which is, or may become, payable to the participant or beneficiary .

(2) Specific arrangements not considered an assignment or alienation. The terms “assignment” and “alienation” do not include, and paragraph (e) of this section does not apply to, the following arrangements:

(i) Any arrangement for the recovery of amounts described in section 4045(b) of the Employee Retirement Income Security Act of 1974 , 88 Stat. 1027 (relating to the recapture of certain payments),

(ii) Any arrangement for the withholding of Federal, State or local tax from plan benefit payments,

(iii) Any arrangement for the recovery by the plan of overpayments of benefits previously made to a participant ,

(iv) Any arrangement for the transfer of benefit rights from the plan to another plan , or

(v) Any arrangement for the direct deposit of benefit payments to an account in a bank , savings and loan association or credit union, provided such arrangement is not part of an arrangement constituting an assignment or alienation. Thus, for example , such an arrangement could provide for the direct deposit of a participant 's benefit payments to a bank account held by the participant and the participant 's spouse as joint tenants.

(d) Exceptions to general rule prohibiting assignments or alienations —(1) Certain voluntary and revocable assignments or alienations. Not withstanding paragraph (b)(1) of this section, a plan may provide that once a participant or beneficiary begins receiving benefits under the plan , the participant or beneficiary may assign or alienate the right to future benefit payments provided that the provision is limited to assignments or alienations which—

(i) Are voluntary and revocable;

(ii) Do not in the aggregate exceed 10 percent of any benefit payment ; and

(iii) Are neither for the purpose, nor have the effect, of defraying plan administration costs .

(2) Benefits assigned or alienated as security for loans.

(i) Notwithstanding paragraph (b)(1) of this section, a plan may provide for loans from the plan to a participant or a beneficiary to be secured (by whatever means) by the participant 's accrued nonforfeitable benefit provided that the following conditions are met.

(ii) The plan provision providing for the loans must be limited to loans from the plan . A plan may not provide for the use of benefits accrued or to be accrued under the plan as security for a loan from a party other than the plan , regardless of whether these benefits are nonforfeitable within the meaning of section 411 and the regulations thereunder.

(iii) The loan, if made to a participant or beneficiary who is a disqualified person (within the meaning of section 4975(e)(2)), must be exempt from the tax imposed by section 4975 (relating to the tax imposed on prohibited transactions) by reason of section 4975(d)(1). If the loan is made to a participant or beneficiary who is not a disqualified person , the loan must be one which would the exempt from the tax imposed by section 4975 by reason of section 4975(d)(1) if the loan were made to a disqualified person .

(e) Special rule for certain arrangements —(1) In general. For purposes of this section and notwithstanding paragraph (c)(1) of this section, an arrangement whereby a participant or beneficiary directs the plan to pay all, or any portion, of a plan benefit payment to a third party (which includes the participant 's employer) will not constitute an “assignment or alienation” if—

(i) It is revocable at any time by the participant or beneficiary ; and

(ii) The third party files a written acknowledgement with the plan administrator pursuant to subparagraph (2) of this paragraph.

(2) Acknowledgement requirement for third party arrangements. In accordance with paragraph (e)(1)(ii) of this section, the third party is required to file a written acknowledgement with the plan administrator. This acknowledgement must state that the third party has no enforceable right in, or to, any plan benefit payment or portion thereof (except to the extent of payments actually received pursuant to the terms of the arrangement). A blanket written acknowledgement for all participants and beneficiaries who are covered under the arrangement with the third party is sufficient. The written acknowledgement must be filed with the plan administrator no later than the later of—

(i) August 18, 1978; or

(ii) 90 days after the arrangement is entered into.

(f) Effective date. Section 401(a)(13) is applicable as of January 1, 1976, and the plan provision required by this section must be effective as of that date. However, regardless of when the provision is adopted, it will not affect—

(1) Attachments, garnishments, levies, or other legal or equitable process permitted under the plan that are made before January 1, 1976;

(2) Assignments permitted under the plan that are irrevocable on December 31, 1975, including assignments made before January 1, 1976, as security for loans to a participant or beneficiary from a party other than the plan ; and

(3) Renewals or extensions of loans described in subparagraph (2) of this paragraph, if—

(i) The principal amount of the obligation outstanding on December 31, 1975 (or, if less, the principal amount outstanding on the date of renewal or extension), is not increased;

(ii) The loan, as renewed or extended, does not bear a rate of interest in excess of the rate prevailing for similar loans at the time of the renewal or extensions ; and

(iii) With respect to loans that are renewed or extended to bear a variable interest rate, the formula for determining the applicable rate is consistent with the formula for formulae prevailing for similar loans at the time of the renewal or extension. For purposes of subparagraphs (2) and (3) of this paragraph, a loan from a party other than the plan made after December 31, 1975, will be treated as a new loan. This is so even if the lender's security interest for the loan arises from an assignment of the participant 's accrued nonforfeitable benefit made before that date.

(g) Special rules for qualified domestic relations orders —(1) Definition. The term “qualified domestic relations order” (QDRO) has the meaning set forth in section 414(p). For purposes of the Internal Revenue Code , a QDRO also includes any domestic relations order described in section 303(d) of the Retirement Equity Act of 1984 .

(2) Plan amendments. A plan will not fail to satisfy the qualification requirements of section 401(a) or 403(a) merely because it does not include provisions with regard to a QDRO.

(3) Waiver of distribution requirements. A plan shall not be treated as failing to satisfy the requirements of sections 401 (a) and (k) and 409(d) solely because of a payment to an alternate payee pursuant to a QDRO. This is the case even if the plan provides for payments pursuant to a QDRO to an alternate payee prior to the time it may make payments to a participant . Thus, for example , a pension plan may pay an alternate payee even though the participant may not receive a distribution because he continues to be employed by the employer .

(4) Coordination with section 417 —(i) Former spouse.

(A) In general. Under section 414(p)(5), a QDRO may provide that a former spouse shall be treated as the current spouse of a participant for all or some purposes under sections 401(a)(11) and 417.

(B) Consent.

(1) To the extent a former spouse is treated as the current spouse of the participant by reason of a QDRO, any current spouse shall not be treated as the current spouse . For example , assume H is divorced from W, but a QDRO provides that H shall be treated as W's current spouse with respect to all of W's benefits under a plan . H will be treated as the surviving spouse under the QPSA and QJSA unless W obtains H's consent to waive the QPSA or QJSA or both. The fact that W married S after W's divorce from H is disregarded. If, however, the QDRO had provided that H shall be treated as W's current spouse only with respect to benefits that accrued prior to the divorce, then H's consent would be needed by W to waive the QPSA or QJSA with respect to benefits accrued before the divorce. S's consent would be required with respect to the remainder of the benefits .

(2) In the preceding examples , if the QDRO ordered that a portion of W's benefit (either through separate accounts or a percentage of the benefit) must be distributed to H rather than ordering that H be treated as W's spouse , the survivor annuity requirements of sections 401(a)(11) and 417 would not apply to the part of W's benefit awarded H. Instead, the terms of the QDRO would determine how H's portion of W's accrued benefit is paid. W is required to obtain S's consent if W elects to waive either the QJSA or QPSA with respect to the remaining portion of W's benefit .

(C) Amount of the QPSA or QJSA.

(1) Where, because of a QDRO, more than one individual is to be treated as the surviving spouse , a plan may provide that the total amount to be paid in the form of a QPSA or survivor portion of a QJSA may not exceed the amount that would be paid if there were only one surviving spouse . The QPSA or survivor portion of the QJSA , as the case may be, payable to each surviving spouse must be paid as an annuity based on the life of each such spouse .

(2) Where the QDRO splits the participant 's accrued benefit between the participant and a former spouse (either through separate accounts or percentage of the benefit), the surviving spouse of the participant is entitled to a QPSA or QJSA based on the participant 's accrued benefit as of the date of death or the annuity starting date , less the separate account or percentage that is payable to the former spouse . The calculation is made as if the separate account or percentage had been distributed to the participant prior to the relevant date.

(ii) Current spouse. Under section 414(p)(5), even if the applicable election periods ( i.e., the first day of the year in which the participant attains age 35 and 90 days before the annuity starting date) have not begun, a QDRO may provide that a current spouse shall not be treated as the current spouse of the participant for all or some purposes under sections 401(a)(11) and 417. A QDRO may provide that the current spouse waives all future rights to a QPSA or QJSA .

(iii) Effects on benefits.

(A) A plan is not required to provide additional vesting or benefits because of a QDRO.

(B) If an alternate payee is treated pursuant to a QDRO as having an interest in the plan benefit , including a separate account or percentage of the participant 's account , then the QDRO cannot provide the alternate payee with a greater right to designate a beneficiary for the alternate payee 's benefit amount than the participant 's right. The QJSA or QPSA provisions of section 417 do not apply to the spouse of an alternate payee .

(C) If the former spouse who is treated as a current spouse dies prior to the participant 's annuity starting date , then any actual current spouse of the participant is treated as the current spouse , except as otherwise provided in a QDRO.

(iv) Section 415 requirements. Even though a participant 's benefits are awarded to an alternate payee pursuant to a QDRO, the benefits are benefits of the participant for purposes of applying the limitations of section 415 to the participant 's benefits .

• Employee Retirement Income Security Act of 1974
• Internal Revenue Code
• Retirement Equity Act of 1984

How To Get Around ERISA Anti-Assignment Provisions

Under the Employee Retirement Income Security Act (“ERISA”), health care providers can file legal actions to recover employee benefits if they obtain a proper assignment of the patient’s benefits. Increasingly, however, ERISA plans are including in plan documents anti-assignment provisions stating that the plans will not honor assignments of benefits by their members. While providers have, in certain circumstances, been successful in avoiding these anti-assignment provisions, most federal courts have held that the anti-assignment provisions are valid and enforceable.

There are three possible ways for providers to avoid application of the anti-assignment provisions in plan documents. One way is for providers to act as the patient’s “authorized representative.” The ERISA regulations expressly provide that the “claims procedures do not preclude an authorized representative of a claimant from acting on behalf of such claimant in pursuing a benefit claim or appeal of an adverse benefit determination.” 29 C.F.R. § 2560.503–1(b)(4).

Recently, the United States Department of Labor (DOL) issued responses to Frequently Asked Questions (FAQs) addressing an entity’s ability to act as an authorized representative for ERISA beneficiaries. In the FAQs, the DOL states that beneficiaries have the right to appoint authorized representatives to act on their behalf in connection with an initial claim, an appeal of an adverse benefit determination, or both. A plan cannot preclude claimants from designating an authorized representative of their own choosing, but may establish reasonable procedures for determining whether an authorized representative has been designated, such as requiring a claimant to complete and file a form identifying any person authorized to act on his or her behalf with respect to a claim. The plan must set forth the procedures for designating an authorized representative in its Summary Plan Description (SPD). If an authorized representative has been designated to act and receive notices on a claimant’s behalf, the plan is required to deal directly with the authorized representative.

Designations of authorized representatives should specify the extent of the authorized representative’s authority. This should include the right to file appeals, receive documents, communicate with the plan, and file legal actions on behalf of the claimant. We have developed model assignment of benefits and authorized representative forms for providers to use.

A second way to avoid application of anti-assignment provisions in ERISA plans is to have the patient sign a limited power of attorney, allowing the hospital to pursue the patient’s rights in the name of the patient. In a recent case in federal court, the judge rejected the provider’s attempt to use their standard assignment of benefits form as a valid power of attorney because the state requirements had not been met. Importantly, the judge did not rule that the provider could not have proceeded on a power of attorney basis if the proper procedures for using a power of attorney form had been met. Each state has their own requirements for valid power of attorney forms. We have developed power of attorney forms for providers to use that comply with state requirements.

A third way to avoid application of an anti-assignment clause in an ERISA plan is when the plan waives the anti-assignment provision by paying the provider directly. In these circumstances, some courts have recognized that the plan cannot simultaneously forbid assignment but at the same time honor the assignment by paying pursuant to it. This route for overcoming assignment language is more unpredictable and after-the-fact than addressing the issue proactively through the authorized representative and power of attorney options mentioned above.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations. Attorney Advertising.

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Understanding ERISA Law: How to Appeal ERISA Claims

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Why would a company or corporation choose to be self-funded? There are several benefits for an employer who self-funds their own insurance plan:

• The employer does not have to follow many individual state health insurance regulations and mandates. They can have the same policy across state lines. In most cases ERISA law supersedes state law, and, as a result, the Illinois Department of Insurance will not investigate complaints that deal with policies under ERISA law.
• The employer can customize their health care plan to fit their employee’s needs, which is more difficult with a purchased insurance policy.
• The company or corporation can control the money in their health care reserves maximizing interest income and improving cash flow since they do not have to pre-pay for coverage.
• The employer can contract with insurance providers to process their claims.  (2)

This includes:

• Access to all documents used in the claims process.
• The right to obtain a copy of the plans SPD at no cost, as well as obtain specific references from the SPD used in claim denials.
• The right to appeal on the patient’s behalf. The appeal cannot be based on previous judgments, and the individual who made the initial denial or any subordinates cannot review the appeal.
• The right to have a qualified health care professional, in the appropriate field, review the claim.
• The right to file suit against the ERISA plan provider in federal court. (This is only done when all proper steps in the appeals process have been exhausted.)

Your appeal should include (if applicable):

• A statement that an appeal is being filed
• A copy of the Authorization Form that states you are authorized to make the appeal
• The provider name, address, phone number, NPI number
• The beneficiary’s name, address, phone number, DOB, plan ID, and group number
• Any documentation that was in question during the initial denial including: • daily SOAP notes,  • a patient treatment plan,  • exam findings and/or a statement of medical necessity.
• A copy of the patient’s EOB.
• The doctor’s signature and the date.

Additional Resources

Letter of appeal post service claim:, letter of appeal pre-service claim:, about author.

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An Alternative Approach to an ERISA Litigation Conundrum

Recently, a three-judge panel in the Court of Appeals for the Ninth Circuit overturned a district court dismissal of an out-of-network provider’s claims against Blue Cross and Blue Shield of Illinois (“BCBSIL”). The unanimous panel found that BCBSIL had waived its right to raise the anti-assignment clauses in the applicable plan documents as a basis for dismissal of the provider’s claims because BCBSIL did not raise the anti-assignment clauses as a defense to the provider’s claims during the administrative appeal of the claims. ( Beverly Oaks Physicians Surgical Ctr., LLC v. Blue Cross and Blue Shield of Illinois, No. 19-55820 (9 th Cir. 12/17/20) (motion for reconsideration and reconsideration en banc currently pending).)

After providing some additional background, this article considers an alternative legal theory that courts could consider in similar cases that would have affirmed the district court’s dismissal of the case, but with no harm to the plan member whose claim was being appealed. This approach may more closely align with the approach taken by most courts in other Circuits when ruling on motions to dismiss provider claims based the existence of a valid anti-assignment provision.

Background on Provider Rights under ERISA

In all Circuits a federal court may only allow a provider’s claim for benefits under an ERISA plan to proceed if the provider has a valid assignment of plan benefits from the plan member. That is because Section 502 of ERISA, which sets forth the exclusive remedies available under ERISA, expressly identifies plan participants or beneficiaries (jointly “plan members”) as the only persons authorized to bring judicial claims for plan benefits under Section 502(a)(1)(b).

In addition, while ERISA prohibits the assignment of retirement plan benefits, there is no similar restriction on the assignment of welfare plan benefits under ERISA plans to providers. As a result, the courts have generally recognized that a provider with a valid assignment of benefits “steps into the shoes” of a plan member and may seek judicial review of an adverse benefit determination under Section 502(a)(1)(b). In such a case, a federal court would have subject matter jurisdiction under ERISA to hear the provider’s claim.

Background on Anti-Assignment Provisions

The courts also generally hold that anti-assignment provisions in ERISA plans are enforceable and will invalidate a purported assignment of benefits. Where an ERISA plan has a valid anti-assignment provision a court will generally grant a motion to dismiss a provider’s claim for failure to state a claim for relief under Section 12(b)(6) of the Federal Rules of Civil Procedure based on an anti-assignment provision invalidating the assignment. In addition, case law also limits the assignment-based rights that a provider may assert to those rights that were clearly assigned by the member.

An exception may arise when, based on the specific facts in the case, a court finds that the ERISA plan, through its conduct, either waived the anti-assignment provision or should be equitably estopped from raising it under general principles of law. While there is not complete unanimity among the Circuits in how these principles apply in this context, generally the mere fact of direct communication by the ERISA plan with the provider – or even exercising a contractual right to elect to make payment directly to the provider – is not sufficient to result in a waiver of, or estoppel with respect to, the anti-assignment defense.

Background on DOL Claims Regulation

In addition to ERISA Section 502, which identifies the various judicial remedies available under ERISA, Section 503 requires administrators of ERISA plans to (i) provide plan members with adequate and timely notice of any adverse benefit determination (i.e., any determination giving rise to any financial responsibility for the plan member) and (ii) afford plan members a reasonable opportunity for a full and fair review by an appropriate fiduciary of any decision denying a claim.

The DOL in turn has promulgated detail regulations governing what constitutes a reasonable claims procedure for purposes of Section 503. DOL Reg. § 2560.503-1 et seq . One such portion of the regulation expressly provides that the plan’s claims procedure may “not preclude an authorized representative” of a plan member from acting on behalf of the plan member in pursuing an appeal of an adverse benefit determination.

Background on the Case

BCBSIL approved the provider’s claims for payment at issue in Beverly Oaks but reimbursed the provider an amount less than the provider’s billed charges.

The provider unsuccessfully appealed the amount of payments and then sued BCBSIL under Section 502(a)(1)(B) of ERISA in order to recover additional professional fees for the same surgical services.

In its original and multiple amended complaints, the provider argued that BCBSIL either had waived or was equitably estopped from asserting any anti-assignment provisions in the ERISA plans because it had failed to raise the anti-assignment provision either during the provider’s initial coverage confirmation calls or during the appeal of the claims.

After dismissing two prior versions of the complaint based on the anti-assignment provisions in the plans, the district court granted BCBSIL’s motion to dismiss with prejudice citing two recent unpublished opinions from the Ninth Circuit involving a similar pricing dispute and anti-assignment defense. ( Brand Tarzana Surg. Inst. v. Intl. Longshore and Warehouse – Union Pacific Maritime Welfare Plan, 706 F. App’s 442 (9 th Cir. 2017) and Eden Surgical Ctr. v. Cognizant Tech. Solutions Corp. 720 F. App’x 862 (9 th Cir. 2018).) The courts in both cases found that the failure of the plan to notify a provider during the ERISA appeal of the anti-assignment defense did not result in a waiver of the anti-assignment defense. Both cases distinguished their holding from that in Harlick v. Blue Shield of California, 686 F.3d 299 (9th Cir. 2012), in which the Ninth Circuit first indicated that failure to address a potential defense to a plan member’s claim during an administrative appeal could result in waiver of the defense. In distinguishing the case, both panels reasoned that the anti-assignment defense did not go to the merits of the claims being appealed, but rather only to the provider’s right to litigate the claims, which was an appropriate defense to raise for the first time during the litigation.

In Harlick, an actual plan member, not a provider, appealed a denial of her claims for coverage for benefits received while staying in a residential treatment facility. The insurer of the ERISA plan relied on the fact that such services were not covered under the plan when denying the appeal. However, the Ninth Circuit in Harlick determined that to the extent the services were medically necessary the insurer was required to cover them under the California Mental Health Parity Act. When the insurer sought to challenge that finding, the court held that the insurer could not raise a substantive defense based on the lack of medical necessity, as that defense was not raised during the administrative appeal as a defense to the claim.

The Ninth Circuit had also interpreted the scope of Harlick in the context of an anti-assignment clause in Spindex Physical Therapy USA, Inc. v. United Healthcare of Arizona, Inc., 770 F. 3d 1382 (9 th Cir. 2014). The panel in Spindex held that an insurer acting on behalf of an ERISA plan had not waived the anti-assignment provision by paying the provider directly, which it had the discretion to do, notwithstanding the anti-assignment provision. Moreover, the panel held that there was no waiver because there was nothing in the record to prove that the insurer knew that the provider was pursuing an administrative appeal based on an assignment , rather than as an authorized representative of the plan member . As noted above, a properly authorized representative must be allowed to represent the plan member (but not its own interests) under the U.S. Department of Labor’s claims regulations.

In Beverly Oaks , the panel distinguished the holding in Spindex based simply on the fact that a provider had checked the assignment box on its claim form and, therefore, the ERISA plan had notice that the provider had an assignment. However, nothing in the DOL’s claims regulations gives a provider with an assignment the right to step into the shoes of the plan member and represent its own interests, not those of the plan member, during an administrative appeal. Moreover, the DOL’s claims regulations allow a provider to act as the authorized representative of a plan member in pursuing an administrative appeal with or without an assignment.

The panel in Beverly Oaks had before it the actual assignments that in theory were signed by the plan members and the assignment forms clearly listed the provider as the plan member’s “designated authorized representative.” Nevertheless, contrary to the holding in Spindex, the panel held the mere existence of an assignment was determinative.

The Alternative

In the Ninth Circuit, a failure by an ERISA plan to raise a substantive defense during the administrative review process can result in a waiver of the defense at the litigation stage. However, nothing in Spindex or other binding Ninth Circuit authority required the panel in Beverly Oaks to find that the rule should apply to non-substantive defenses that only become relevant at the litigation stage or to apply Harlick just because the ERISA plan knows that the provider has an assignment. The holding in Spindex should be limited to situations where the ERISA plan knows the provider is appealing in its capacity as an assignee of the claim and not as an authorized representative.

From an ERISA perspective, the DOL has concluded that a full and fair review procedure requires that a plan member be able to designate a third party to represent the interests of the plan member in an appeal of a claim denial or other adverse benefit determination. The DOL has not extended that right to a third party who is only taking its own interests into account and not representing the interests of the plan member.

A better approach would be for courts either to limit the holding in Harlick to defenses that apply to the plan member or limit the holding in Spindex to situations, as was the case in Spindex , where the provider has made it clear that it is filing an appeal in its capacity as an assignee (i.e., acting at least in part in its own interest) and not as an authorized representative of the plan member.

In the latter case, the ERISA plan would be free to confirm with the plan member that the plan member is comfortable with allowing the provider to proceed in the capacity as an assignee and not as a representative of the plan member. Further, it would allow the plan member to understand the consequences of the provider’s approach. Finally, this alternative would also create a less subjective and more definitive rule that would protect ERISA plans from unknowingly waiving a non-substantive defense.

There would not appear to be any downside from the plan member’s perspective with this approach, only more knowledgeable decision-making. Even if the provider itself might be precluded from suing the ERISA plan to dispute the amount of the payment received, the plan member would remain free to seek such a remedy and the provider free to assist in the process.

Michael H. Woolever

Partner/Retired

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An Assignment of Benefits Includes the Assignment of the Legal Claim to Those Benefits Sufficient to Confer Derivative Standing to Sue Under ERISA

On September 11, 2015, the United States Court of Appeals for the Third Circuit, in   North Jersey Brain & Spine Center v. Aetna, Inc.,   joined five other federal courts of appeals in holding that a patient’s assignment of benefits to his or her health care provider is sufficient to confer standing upon the provider to sue for non-payment of those benefits under §502(a) of the Employee Retirement Income Security Act of 1974 (ERISA). 29 U.S.C. §1132(a).  In so holding, the circuit court reversed the district court’s order dismissing the action filed by North Jersey Brain & Spine Center (NJBSC) against Aetna Life Insurance Company (Aetna) for non-payment of benefits.

The litigation arose out of NJBSC’s provision of medical services to three patients insured under healthcare insurance plans administered by Aetna. The patients had signed “Insurance Authorization and Assignment” forms authorizing NJBSC to appeal to Aetna on their behalf and receive payments for all services rendered.  Thereafter, NJBSC filed suit against Aetna, alleging that the insurer authorized the procedures but failed to pay the related claims, in violation of ERISA.  Aetna moved to dismiss on the basis that NJBSC, which is not a participant and beneficiary of Aetna’s ERISA covered plan, did not have sufficient derivative standing as an assignee under the language of the assignment at issue to assert claims against it for alleged ERISA violations.  The New Jersey district court, finding that “ more   than the right to payment is necessary to confer derivative standing under ERISA” (emphasis added), dismissed the allegations without prejudice to NJBSC’s right to file an amended complaint consistent with its opinion.

On NJBSC’s appeal, the question considered by the circuit court was the type of assignment required to confer derivative standing upon a healthcare provider under ERISA.  The Third Circuit held that “as a matter of federal common law, when a patient assigns payment of insurance benefits to a healthcare provider, that provider gains standing to sue for that payment under ERISA §502(a). An assignment of the right to payment logically entails the right to sue for nonpayment… After all, the assignment is only as good as payment if the provider can enforce it.”  In so deciding, the court noted that it was guided by ERISA’s intent to protect the interests of participants, transferring the burden of payment to the providers who are better situated and financed to pursue unpaid claims, joining the First, Fifth, Sixth, Ninth and Eleventh Circuits   *   in its conclusion.

The opinion does not address whether the plan itself prohibited the assignment of rights and/or benefits under ERISA, and such non-assignment provisions have been held enforceable by the courts.   See Davidowitz v. Delta Dental Plan, Inc. , 946 F. 2d 1476 (9th Cir. 1991). In response to an action filed against Aetna by another provider in an earlier action, a New Jersey district court judge held that the Aetna plan’s anti-assignment provision at issue there trumped the assignment of benefits to the provider, adopting the majority view of federal courts considering the issue.   See Neurological Surgery Associates, P.A. v. Aetna Life Ins. Co. , 2014 U.S. Dist. LEXIS 75906 (D.N.J. June 4, 2014). Moreover, the circuit court’s opinion in   NJBSC v. Aetna   does not address the issue whether the assignment confers the right to seek penalties and attorney’s fees under the statute.

A copy of the Third Circuit’s opinion may be accessed   here .

*   Similar conclusions have been reached by district courts in the remaining circuits.

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INSIGHT: An Ounce of Prevention—The Importance of Early Review of Assignment of Benefits and Powers of Attorney

By Anthony P. La Rocco, George P. Barbatsuly, Stacey A. Hyman, and Alyssa F. Conn

Introduction

One of the most frequently litigated issues in reimbursement cases brought by in- and out-of-network healthcare providers against insurers is provider standing, or a provider’s right to file a lawsuit to recover for services it provided to its patients. This is because the health insurance industry bases the rights and responsibilities that one party owes to another on contract law. While network contracts often dictate that insurers pay in-network providers directly for services, providers who do not participate in the networks have no independent legal right to payment from the insurer as such providers do not share a contractual relationship with the plan.

Accordingly, these providers must ensure that patients assign their rights to benefits under the health insurance plan to the non-participating provider via an assignment of benefits (“AOB”). Under a valid AOB, the provider “steps into the shoes” of the patient with respect to the contract between the patient and the insurer and may pursue the same benefits that the patient would have been able to pursue him or herself. Without a valid AOB, courts have been clear that the provider has no legal standing to sue the health insurer for payment.

Additionally, participating providers should also obtain and maintain irrevocable AOBs from their patients, despite network contractual language directing payment. Possessing a valid AOB is often a legal prerequisite to submitting a claim, even under the participation agreement, and participation status may change. Moreover, providers may not be participating with all insurers and assignments provide an alternative basis for recovery.

However, the road to recovery on claims is not as simple as merely executing an AOB: insurers frequently challenge the scope of AOBs, requiring courts to analyze them and determine whether the language sufficiently confers standing on the provider to assert a claim. The case law on assignments is, therefore, constantly evolving. The following article explores some of the common issues surrounding crafting and obtaining valid AOBs from patients as well as alternative avenues to survive a standing challenge where plans contain anti-assignment clauses.

What Kind of Language Should the Assignment of Benefits Contain?

An AOB should be “broadly specific”: It should be broad enough to cover all conceivable rights and claims the provider could bring under the plan, but specific enough in that it enumerates the rights in order to survive challenges of overbreadth. These enumerated rights should include, but are not limited to: the right to appeal, the right to request plan documents, the right to pursue claims for benefits, and the right to pursue claims for equitable relief/breaches of fiduciary duties.

The below examples provide AOB language ranked in order from least likely to confer standing to most likely.

• Least Likely to Confer Standing : “I authorize insurance payments to be made to [PROVIDER] for services provided at [PROVIDER’S FACILITY].”

This AOB simply authorizes payments to be made, but does not give the provider any right to pursue payment or other remedies. Therefore, this language would likely be insufficient to confer legal standing.

• Improved language : “I authorize [PROVIDER] to appeal to my insurance company on my behalf . . . . I hereby assign to [PROVIDER] all payments for medical services rendered to myself or my dependents.”

This language would, at least, give the provider the right to sue for payment under ERISA Section 502(a). However, the language is still lacking as it does not give the provider the right to pursue claims for equitable relief or for breaches of fiduciary duties.

• An example of even better, (albeit not perfect) language : “I voluntarily consent to the collection and testing of my specimen, and all future testing, performed by [the Laboratories] or [their] affiliated laboratories unless I give written notice that I have revoked my consent. I authorize my insurance company to pay and mail directly to [the Laboratories] or [their] affiliated laboratories all medical benefits for payment of services rendered. I also authorize [the Laboratories] or [their] affiliated laboratories to endorse any checks received on my behalf for payment of services provided. I hereby irrevocably assign to [the Laboratories] or [their] affiliated laboratories all benefits under any policy of insurance, indemnity agreement, or any collateral source as defined by statute for services provided. This assignment includes all rights to collect benefits directly from my insurance company and all rights to proceed against my insurance company in any action, including legal suit, if for any reason my insurance company fails to make payment of benefits due. This assignment also includes all rights to recover attorney’s fees and costs for such action brought by the provider as my assignee.

The language here is “broadly specific” in that it enumerates with specificity a myriad of rights the provider seeks to have the patient assign. One federal appeals court found that similar assignment language clearly applied to claims against fully-insured health insurance plans, and at least arguably applied to self-funded plans. The court sent the case back to the trial court for further discovery on whether this language applied to self-funded plans. Health care providers can remove this uncertainty up front by having their assignment of benefit forms specifically refer to self-funded plans.

When Should the Provider Require the Assignment to Be Executed?

The best time to have a patient execute an assignment of benefits is at or before the time that services are provided. This is because it is often difficult to track down patients later when a provider must submit a large volume of claims that have gone unpaid. Ideally, these forms are executed together with other intake forms, such as consent for treatment and privacy policies/releases.

If the AOB is not obtained prior to the services, courts will still generally permit assignments that are executed after treatment, at least absent a showing of prejudice to the insurer. Furthermore, although logistical challenges may sometimes ensue where a patient is incapacitated or deceased, courts have upheld the validity of AOBs executed by spouses of such patients.

Navigating Anti-Assignment Provisions in Plans

Some patient plans contain anti-assignment language that prohibits the patient from assigning his or her benefits. This language is a challenge to a provider’s ability to establish standing. Courts are however, split on the issue. Some courts hold that an unambiguous anti-assignment clause is enforceable and can invalidate a patient’s assignment. In these cases, the courts have focused on the freedom of contracting parties.

Other courts hold that an anti-assignment clause is not, in and of itself, dispositive of whether a provider has standing. Anti-assignment clauses are subject to traditional contract defenses, such as fraud, misrepresentation, and unconscionability. For example, if a clause is buried in illegible “fine print” or if it was plainly neither intended nor likely to be read by the other party, those circumstances might support an inference of fraud. Other considerations include: ambiguity in the clause, the scope of the clause, course of dealing, and waiver or estoppel arguments.

An example of anti-assignment language that is completely prohibitory would be: “The benefits of the Contract or Certificate are personal to the Subscriber and are not assignable by the Subscriber in whole or in part to a Non-Member hospital or provider, or to any other person or entity.”

Another example of language that permits assignment only with consent would be: “You may not assign your Benefits under the Plan to a non-Network provider without our consent.”

Providers may, however, still recover in circumstances where the plans contain valid anti-assignment provisions. Recently, for example, the Third Circuit, in American Orthopedic & Sports Med. v. Indep. Blue Cross Blue Shield , 2018 BL 173478 (3d Cir., No. 17-1663, 5/16/18), recognized an alternative basis under which health care providers may obtain standing to sue in federal court. Where a patient grants a valid power of attorney to a health care provider, the Third Circuit has now recognized that a health care provider may pursue a claim for reimbursement on the patient’s behalf, even if the ERISA plan contains a valid and enforceable anti-assignment clause. The court explained that, whereas a plan can limit a beneficiary’s ability to assign claims as a matter of contract law, an anti-assignment clause does not prevent the beneficiary from assigning the health care provider to act as the beneficiary’s agent, any more than it would strip the beneficiary of his or her own interest in the claim.

In sum, while there is no “one size fits all” approach, a simple direction of payment often does not survive scrutiny and will likely be challenged by insurers. Thus, prudent providers will want to work with experienced healthcare counsel to craft assignment language to encompass all of the patient’s rights under the plan and, if applicable, take advantage of the Third Circuit alternative basis for standing by including language that creates a valid power of attorney.

Anthony P. La Rocco is the Managing Partner of K&L Gates’ Newark office. He leads a national health care team involved in significant reimbursement litigation matters on behalf of health care providers against various insurance companies’ health benefits plans and their third party administrators related to under-payment and non-payment of claims for a variety of covered medical testing procedures conducted across the United States. Tony can be reached at [email protected] .

George P. Barbatsuly is a Partner in K&L Gates’ Newark office. His health care and ERISA disputes experience includes representing health care providers in disputes with payer insurance companies, health benefits plans, and third party administrators. George can be reached at [email protected] .

Stacey A. Hyman is an Associate in K&L Gates’ Newark office. She focuses her practice on commercial disputes and insurance coverage, specifically insurance reimbursement recovery. Stacey can be reached at [email protected] .

Alyssa F. Conn is an Associate in K&L Gates’ Newark office. She focuses her practice on a range of complex commercial litigation and insurance coverage disputes in federal and state courts, including healthcare and ERISA disputes. Alyssa can be reached at [email protected] .

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Employment Law Guide

Health benefits, retirement standards, and workers' compensation: employee benefit plans, related information, dol agency assistance.

• EBSA Compliance Assistance Page
• Who Is Covered

Basic Provisions/Requirements

Employee rights, notices and posters, recordkeeping, penalties/sanctions, relation to state, local, and other federal laws, compliance assistance available, dol contacts.

Return to Table of Contents

Updated: December 2016

Employee Retirement Income Security Act (ERISA), ( 29 USC §1001 et seq., (http://www.law.cornell.edu/uscode/29/1001.html) 29 CFR Part 2509 et seq. (https://www.dol.gov/dol/cfr/Title_29/Chapter_XXV.htm) )

Who is Covered

Title I of the Employee Retirement Income Security Act (ERISA) is administered by the Employee Benefits Security Administration (EBSA). The provisions of Title I of ERISA cover most private sector employee benefit plans. Such plans are voluntarily established or maintained by an employer, an employee organization, or jointly by one or more such employers and an employee organization.

Retirement plans, a type of employee benefit plan, are established or maintained to provide retirement income or to defer income until termination of covered employment or beyond. Other employee benefit plans, called welfare plans, are established or maintained to provide health benefits, disability benefits, death benefits, prepaid legal services, vacation benefits, day care centers, scholarship funds, apprenticeship and training benefits, or other similar benefits.

In general, ERISA does not cover plans established or maintained by government entities or churches for their employees, or plans which are maintained solely to comply with workers' compensation, unemployment, or disability laws. ERISA also does not cover plans maintained outside the United States primarily for the benefit of nonresident aliens or unfunded excess benefit plans.

ERISA sets uniform minimum standards to ensure that employee benefit plans are established or maintained in a fair and financially sound manner. In addition, employers have an obligation to provide promised benefits and satisfy ERISA's requirements for managing and administering private retirement and welfare plans.

EBSA, together with the Department of the Treasury's Internal Revenue Service (IRS), has the statutory and regulatory authority to ensure that workers receive the promised benefits. EBSA has principal jurisdiction over Title I of ERISA, which requires persons and entities that manage and control plan funds to:

• Manage plans for the exclusive benefit of participants and beneficiaries;
• Carry out their duties in a prudent manner and refrain from conflict of interest transactions expressly prohibited by law;
• Comply with limitations on certain plans' investments in employer securities and properties;
• Fund benefits in accordance with the law and plan rules;
• Report and disclose information on the operations and financial condition of plans to the government and participants; and
• Provide documents required in the conduct of investigations to ensure compliance with the law.

The Department of Labor also has jurisdiction over the prohibited transaction provisions of Title II of ERISA. However, the IRS generally administers the rest of Title II of ERISA, as well as the standards of Title I of ERISA that address vesting, participation, nondiscrimination, and funding.

Fiduciary Standards. Part 4 of Title I sets forth standards and rules for the conduct of plan fiduciaries. In general, persons who render investment advice or exercise discretionary authority or control over management of a plan or disposition of its assets are "fiduciaries" for purposes of Title I of ERISA. Fiduciaries are required, among other things, to discharge their duties solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable expenses of administering the plan. In discharging their duties, fiduciaries must act prudently and in accordance with documents governing the plan, to the extent such documents are consistent with ERISA.

ERISA prohibits certain transactions between an employee benefit plan and "parties in interest," which include the employer and others who may be in a position to exercise improper influence over the plan, and such transactions may trigger civil monetary penalties under Title I of ERISA. The Internal Revenue Code ("Code") also prohibits most of these transactions, and it imposes an excise tax on "disqualified persons" (whose definition generally parallels that of parties in interest) who participate in such transactions.

Exemptions. Both ERISA and the Code contain various statutory exemptions from the prohibited transaction rules and give the Departments of Labor and Treasury, respectively, authority to grant administrative exemptions and establish exemption procedures. Reorganization Plan No. 4 of 1978 transferred the Department of Treasury's authority over prohibited transaction exemptions to the Department of Labor, with certain exceptions.

The statutory exemptions generally include loans to participants, the provision of services needed to operate a plan for reasonable compensation, loans to employee stock ownership plans, and investment with certain financial institutions regulated by other state or Federal agencies. (See ERISA Section 408 for the conditions of the exemptions.) The Department of Labor may grant administrative exemptions on a class or individual basis for a wide variety of proposed transactions with a plan. Applications for individual exemptions must include, among other information the following:

• A detailed description of the exemption transaction and the parties for whom an exemption is requested
• The reasons a plan would have for entering into the transaction
• The percentage of assets involved in the exemption transaction
• The names of persons with investment discretion
• The extent of plan assets already invested in loans to, property leased by, and securities issued by parties in interest involved in the transaction
• Copies of all contracts, agreements, instruments, and relevant portions of plan documents and trust agreements bearing on the exemption transaction
• Information about plan participation in pooled funds when the exemption transaction involves such funds
• A declaration by the applicant, under penalty of perjury, attesting to the truth of representations made in such exemption submissions
• Statement of consent by third‑party experts acknowledging that their statement is being submitted to the Department as part of an exemption application

The Department's exemption procedures are set forth at 29 CFR 2570.30 through 2570.51 (/elaws/leave-dol.asp?exiturl=http://www.ecfr.gov/cgi-bin/text-idx^Q^node=sp29.9.2570.b|rgn=div6&exitTitle=29%20CFR%202570.30%20through%202570.51&fedpage=yes) .

Continuation of Health Coverage. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) included provisions for continuing health care coverage. These provisions, which are codified in Part 6 of Title I of ERISA, apply to group health plans of employers with 20 or more employees on a typical working day in the previous calendar year.

COBRA contains provisions giving certain former employees, retirees, spouses, former spouses, and dependent children ("qualified beneficiaries") the right to temporary continuation of health coverage at group rates.  This coverage, however, is only available when coverage is lost due to certain specific events ("qualifying events") such as termination of employment.  Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves. 

Plans must give covered individuals an initial general notice informing them of their rights under COBRA and describing the law. The law also obliges plan administrators, employers, and qualified beneficiaries to provide notice of certain "qualifying events." In most instances of employee death, termination, reduced hours of employment, entitlement to Medicare, or bankruptcy, the employer must provide a specific notice to the plan administrator. The plan administrator must then advise the qualified beneficiaries of the opportunity to elect continuation coverage.

The Department of Labor's regulatory and interpretive jurisdiction over the COBRA provisions is limited to the COBRA notification and disclosure provisions.

Jurisdiction of the Internal Revenue Service. The IRS has regulatory and interpretive responsibility for all provisions of COBRA not under the Department of Labor's jurisdiction. In addition, the IRS generally administers and interprets the ERISA provisions relating to participation, vesting, funding, and benefit accrual, contained in parts 2 and 3 of Title I.

Health Laws Under Part 7 of ERISA

Many Federal laws have been enacted to amend ERISA to provide important protections for participants and beneficiaries of group health plans and health insurance coverage offered in connection with group health plans. These protections are generally found under Part 7 of Subtitle B of title I of ERISA.

The Patient Protection and Affordable Care Act (the Affordable Care Act or ACA). The Affordable Care Act amended ERISA to incorporate several health coverage market reforms. These provisions are set forth in Public Health Service Act sections 2701 through 2728, which are incorporated by reference in ERISA section 715. These provisions include rules relating to the prohibition of preexisting condition exclusions, the prohibition of lifetime and annual dollar limits for essential health benefits, the prohibition of rescissions, and required coverage of certain preventive services without cost sharing.

Health Insurance Portability and Accountability Act of 1996. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) amended ERISA to provide for improved portability and continuity of health coverage connected with employment, among other things. These provisions include rules relating to special enrollment rights, and prohibition of discrimination against individuals based on health status.

The Newborns' and Mothers' Health Protection Act of 1996 (Newborns' Act) requires plans that offer maternity coverage to pay for at least a 48 hour hospital stay in connection with childbirth (a 96 hour stay in connection with a cesarean section).

The Women's Health and Cancer Rights Act (WHCRA) contains protection for patients who elect breast reconstruction in connection with a mastectomy. For plan participants and beneficiaries receiving benefits in connection with a mastectomy, plans offering coverage for a mastectomy must also cover reconstructive surgery and other benefits related to a mastectomy.

The Mental Health Parity Act of 1996 (MHPA) provides for parity in the application of aggregate lifetime and annual dollar limits on mental health benefits with dollar limits on medical/surgical benefits. Generally, group health plans offering mental health benefits cannot set annual or lifetime dollar limits on mental health benefits that are lower than any such dollar limits for medical and surgical benefits.

The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) expanded the protections of MHPA to financial requirements (e.g., copayments or deductibles)and treatment limitations (e.g., visit limits). Any type of financial requirements or treatment limitations imposed on mental health or substance use disorder benefits in a classification can be no more restrictive than the predominant requirements or limitations applied to substantially all medical and surgical benefits covered by a plan in the classification. In addition, there are rules regarding nonquantitative treatment limitations (such as prior authorization requirements).

The Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits group health plans and group health insurance issuers from discriminating in health coverage based on genetic information. Plans and issuers may not use genetic information to adjust premium or contribution amounts for the group covered under the plan, request or require an individual or their family members to undergo a genetic test, or request, require, or purchase genetic information for underwriting purposes or prior to or in connection with an individual's enrollment in the plan.

Michelle's Law, passed in 2008, prohibits group health plans from terminating coverage for a dependent child who has lost student status as a result of a medically necessary leave of absence. Plans must continue to provide coverage for up to one year, or until coverage would otherwise terminate under the plan. Plans are allowed to require physician certification of the medical necessity for the leave of absence.

The Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA) requires group health plans and group health insurance issuers to permit an employee or dependent that is eligible for but not enrolled in the plan to enroll when the employee or dependent is covered under Medicaid or CHIP and loses that coverage as a result of loss of eligibility or when the employee or dependent becomes eligible for Medicaid or CHIP assistance with respect to coverage under the group health plan. CHIPRA also created new notice requirements related to these special enrollment rights.

The Act grants employees several important rights. Among them are the right to receive information about their pension or health benefit plans, to participate in timely and fair processes for benefit claims, to elect to temporarily continue group health coverage after losing coverage, to receive certificates verifying health coverage under a plan, and to recover benefits due under the plan.

Recordkeeping, Reporting, Notices and Posters (Health Plans)

Posters.   There are no Federal poster requirements.

Notices.   ERISA contains several notice requirements for health plans including, but not limited to, a Summary Plan Description (SPD), special enrollment notice, and certificates of creditable coverage.  Other notices required by COBRA, HIPAA, WHCRA, the Newborns' Act, and Michelle's Law may be required depending on the number of employees and the benefits offered by the plan. The Reporting and Disclosure Guide for Employee Benefit Plans (https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans.pdf) can be used as a quick reference tool for certain basic disclosure requirements under ERISA. 

EBSA has also created several sample and model notices: 

• Notices required under HIPAA (Special Enrollment and Wellness Programs), WHCRA, the Newborns' Act, Internal and External Claims and Appeals, Grandfathered Health Plans and Patient Protections
• COBRA general notice
• COBRA election notice
• COBRA ARRA notices

ERISA contains recordkeeping requirements. An accurate recordkeeping system will track and properly attribute contributions, expenses, and benefit distributions. If a contract administrator or other entity assists in managing the plan, that entity may help keep the required records. In addition, a recordkeeping system will help the plan administrator, or provider prepare the plan's annual return/report that must be filed with the Federal Government. For more information visit the EBSA Compliance Assistance page (https://www.dol.gov/agencies/ebsa/employers-and-advisers/small-business/compliance-assistance) .

EBSA, in conjunction with the IRS and the Pension Benefit Guaranty Corporation (PBGC), publishes the Form 5500 Annual Return/Report (https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500) forms used by plan administrators to satisfy various annual reporting obligations under ERISA and the Internal Revenue Code. Many health and welfare benefit plans that meet certain conditions do not have to file the Form 5500 Annual Return/Report. However, for those that do, EBSA publishes the forms used by plan administrators to satisfy various annual reporting obligations under ERISA and the Internal Revenue Code. The Form 5500 is filed and processed under the ERISA Filing Acceptance System (EFAST) . Beginning with the 2009 plan year filings, there are changes to the Form 5500 and required electronic filing using the modernized EFAST2 System. For more information, see the EFAST Web site.

In addition, the Reporting and Disclosure Guide for Employee Benefit Plans (https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans.pdf) can be used as a quick reference tool for certain basic reporting requirements under ERISA.

Recordkeeping, Reporting, Notices and Posters (Retirement Plans)

Notices .  ERISA contains several notice requirements for retirement plans, such as the summary plan description, individual benefit statements, and the summary annual report.  The Reporting and Disclosure Guide for Employee Benefit Plans (https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/reporting-and-disclosure-guide-for-employee-benefit-plans.pdf) has been prepared by EBSA with assistance from PBGC. It is intended to be used as a quick reference tool for certain basic disclosure requirements under ERISA.  Not all ERISA disclosure requirements are reflected in this guide. For example, the guide, as a general matter, does not focus on disclosures required by the Internal Revenue Code or the provisions of ERISA for which the IRS has regulatory and interpretive authority. 

ERISA contains recordkeeping requirements. An accurate recordkeeping system will track and properly attribute contributions, earnings and losses, plan investments, expenses, and benefit distributions. If a contract administrator or financial institution assists in managing the plan, that entity typically will help keep the required records. In addition, a recordkeeping system will help you, your plan administrator, or financial provider prepare the plan's annual return/report that must be filed with the Federal Government. For more information visit the Compliance Assistance page (https://www.dol.gov/agencies/ebsa/employers-and-advisers/small-business/compliance-assistance) .

EBSA, in conjunction with the IRS (http://www.irs.gov/) and the Pension Benefit Guaranty Corporation (http://www.pbgc.gov/) (PBGC) publishes the Form 5500 Annual Return/Report (https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500) . The Form 5500 Annual Return/Report is used by plan administrators to satisfy annual reporting obligations under ERISA and the Internal Revenue Code.  Each year, pension plans are required to file the Form 5500 Annual Return/Report regarding their financial condition, investments, and operations. The instructions for the Form 5500 provide helpful information regarding the filing requirements.  The Form 5500 is filed and processed under the ERISA Filing Acceptance System (EFAST) (http://www.efast.dol.gov/) .

ERISA confers substantial law enforcement responsibilities on the Department of Labor. Part 5 of Title I of ERISA gives the Department of Labor authority to bring a civil action to correct violations of the law, provides investigative authority to determine whether any person has violated Title I, and imposes criminal penalties on any person who willfully violates any provision of Part 1 of Title I.

EBSA has authority under ERISA Section 502 to assess civil penalties for a number of different violations. For instance, EBSA has authority under ERISA Section 502(c)(2) to assess civil penalties for reporting violations. A penalty of up to $1,100 per day may be assessed against plan administrators who fail or refuse to comply with annual reporting requirements. Section 502(i) gives the agency authority to assess civil penalties against parties in interest who engage in prohibited transactions with welfare and nonqualified retirement plans. The penalty can range from five percent to 100 percent of the amount involved in a transaction.

A parallel provision of the Code directly imposes an excise tax against disqualified persons, including employee benefit plan sponsors and service providers, who engage in prohibited transactions with tax‑qualified retirement plans.

Finally, Section 502(l) requires the Department of Labor to assess mandatory civil penalties equal to 20 percent of any amount recovered with respect to fiduciary breaches resulting from either a settlement agreement with the Department of Labor or a court order as the result of a lawsuit by the Department of Labor.

Part 5 of Title I states that the provisions of ERISA Titles I and IV supersede state and local laws which "relate to" an employee benefit plan. ERISA, however, does not preempt certain state and local insurance, banking or securities laws, including state insurance regulation of multiple employer welfare arrangements (MEWAs). MEWAs generally constitute employee welfare benefit plans or other arrangements providing welfare benefits to employees of more than one employer, not pursuant to a collective bargaining agreement.

In addition, ERISA's general prohibitions against assignment or alienation of retirement benefits do not apply to qualified domestic relations orders. Plan administrators must comply with the terms of qualifying orders made pursuant to state domestic relations laws that award all or part of a participant's benefit in the form of child support, alimony, or marital property rights to an alternative payee (spouse, former spouse, child, or other dependent). Finally, group health plans covered by ERISA must provide benefits in accordance with the requirements of qualified medical child support orders issued under state domestic relations laws.

EBSA has numerous general publications designed to help employers and employees understand their obligations and rights under ERISA. A list of EBSA booklets and pamphlets is available from EBSA's Home Page (https://www.dol.gov/ebsa) and through EBSA's toll-free publications line at 1-866-444-EBSA (1-866-444-3272).

EBSA's national offices (https://www.dol.gov/agencies/ebsa/about-ebsa/about-us/organization-chart) and field offices (https://www.dol.gov/agencies/ebsa/about-ebsa/about-us/organization-chart#section13) offer individualized assistance for persons seeking information and assistance on benefits and rights under employee benefit plans. EBSA also issues advisory opinions and information letters in response to requests from individuals and organizations. Advisory opinions apply the law to a specific set of facts, while information letters merely call attention to well-established principles or interpretations. Further information about these programs is contained in EBSA's booklet on "Customer Service Standards."

In addition, employee benefit plan documents and other materials are available from the EBSA Public Disclosure Room. This facility may be used to view and to obtain copies of materials on file. Materials include: Form 5500 Series reports, Apprentice and Other Training Plans notices, "Top Hat" plan statements, advisory opinions, exemptions, announcements, and transcripts of public hearings and proceedings. The EBSA Public Disclosure Room is open to the public Monday through Friday, from 8:30 a.m. to 4:30 p.m., except Federal holidays. Copies of materials are available at a cost of 15 cents per page by ordering in person or writing to: U.S. Department of Labor EBSA Public Disclosure Room 200 Constitution Avenue NW, Room N 1515 Washington, D.C. 20210. Fax requests can be sent to 202-501-4098. Requests should include pertinent information to help find documents, such as titles and dates. For 5500 and report searches, the name of the company/entity, the type of plan, the nine-digit EIN and three-digit Plan Number, state, and year(s) requested should be provided. Also include the requestor's name, address, and contact information. Summary Plan Descriptions (SPD) are no longer filed with EBSA. The 1977-1998 collection of SPD records have been transferred to the Pension Benefit Guaranty Corporation (PBGC) and can be requested by submitting a request to [email protected] . Given the complexity of ERISA requirements, employers may wish to seek the assistance of an attorney, CPA firm, investment or brokerage firm, and other employee benefit consultants.

The Department of Labor provides employers and others with clear and easy-to-access information and assistance on how to comply with the Employee Retirement Income Security Act. Compliance assistance related to the Act, includes:

• Small Business Retirement Savings Advisor : The Advisor provides answers to a variety of questions about retirement savings options for small business employers and determines which program is most appropriate for a business.
• ERISA Fiduciary Advisor : The Advisor provides information and answers to a variety of questions about who is a fiduciary and their responsibilities under ERISA.
• Health Benefits Advisor : The Advisor helps workers and their families better understand employer and employee organization provided group health benefits and the laws that govern them, especially when they experience changes in their life and work situations.
• COBRA Continuation Coverage
• An Employer's Guide to Group Health Continuation Coverage Under COBRA (PDF) Compliance Assistance Guide - Health Benefits Coverage Under Federal Law (PDF) : Includes general descriptions of the four health care laws and FAQs.
• Understanding Your Fiduciary Responsibilities Under a Group Health Plan - This publication provides an overview of the basic fiduciary responsibilities applicable to health plans under ERISA.
• Meeting Your Fiduciary Responsibilities - This publication provides an overview of the basic fiduciary responsibilities applicable to retirement plans under the law.
• Understanding Retirement Plan Fees and Expenses - This booklet will help retirement plan sponsors better understand and evaluate their plan's fees and expenses. 
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Publications

The erisa edit: ninth and eleventh circuits issue mixed decisions on assignments of erisa claims.

Employee Benefits Alert

Ninth Circuit Finds Assignment of Benefits to Surgery Center "Clearly and Necessarily" Included the Right to Sue for Non-Payment

On January 10, 2024, the U.S. Court of Appeals for the Ninth Circuit determined that a district court erred in dismissing an ERISA action brought by South Coast Specialty Surgery Center, Inc. (South Coast), an ambulatory surgery center, against Blue Cross of California, d/b/a Anthem Blue Cross (Anthem), as insurer and claims administrator, for Anthem's alleged failure to fully reimburse the costs of medical services provided to South Coast's patients. The district court had reasoned that South Coast's "Assignment of Benefits" form conveyed only "the right to receive direct payment from Anthem" and not the right to sue for nonpayment of plan benefits, and that South Coast lacked independent authority to sue under ERISA. The Ninth Circuit reversed and remanded, holding that the patients' assignments of rights to South Coast were valid and included the right to sue. South Coast Specialty Surgery Ctr., Inc. v. Blue Cross of California , No. 22-55717, __F.4th__, 2024 WL 105317 (9th Cir. Jan. 10, 2024). 

The dispute arose after Anthem instituted a new "pre-payment review" process that, according to South Coast, significantly reduced coverage of South Coast's services to patients – resulting in a potential shortfall exceeding $5.4 million. Previously, Anthem had processed and paid hundreds of claims submitted by South Coast on behalf of its patients without dispute. By instituting the new process, Anthem allegedly ignored ERISA plan documents; improperly required "full medical records" to evaluate the "appropriateness," "accuracy," and "correctness" of submitted claims; and rejected South Coast's claims for payment "without proper reference to the terms and conditions of the controlling ERISA plan." South Coast sued Anthem under section 502(a) of ERISA, 29 U.S.C. § 1132(a)(1)(B), for "fail[ing] to follow [p]lan terms and conditions with respect to the processing and payment of [submitted] claims."   

Section 502(a) of ERISA permits a plan participant or beneficiary to bring suit to recover benefits due to them. South Coast asserted that although it could not bring a direct enforcement action under § 502(a) because it was not a plan participant or beneficiary, it could still enforce ERISA's protections because its patients had assigned to South Coast their rights to sue for non-payment of plan benefits. 

The Ninth Circuit agreed. The court noted that "under ERISA's clear terms, South Coast lacks direct authority to enforce its protections" because healthcare providers are not plan participants or beneficiaries. The court held, and the parties did not dispute, however, that ERISA beneficiaries may assign their rights to reimbursement under a health plan to a healthcare provider and that assignees may bring derivative actions to enforce these rights. Thus, the true question before the court was whether the language in South Coast's "Assignment of Benefits" form created a valid assignment. The form stated:

I hereby authorize my Insurance Company to pay by check made payable and mailed directly to: [South Coast] for the medical and surgical benefits allowable, and otherwise payable to me under my current insurance policy, as payment toward the total charges for the services rendered. I understand that as a courtesy to me, the South Coast Specialty Surgery Center will file a claim with my insurance company on my behalf. However, I am financially responsible for, and hereby do agree to pay, in a current manner, any charges not covered by the insurance payment. If it is necessary to file a formal collection action, I agree to pay all costs, including reasonable attorney's fees incurred by the outpatient medical center in the collection of the outstanding fees.  Actual Plan Benefits cannot be determined until the claim is received by your insurance company and is based upon their determination of medical necessity. The information received from the above stated is not a guarantee of payment.

The court applied traditional principles of contract law and relied on the "intent of the parties" to determine "what rights and remedies pass with a given assignment." It stated that the "explicit presence [of the word assignment ] in the title of a document certainly helps . . . to divine whether the parties intend that the form operate as a valid assignment." And it observed that South Coast's form used wording that "track[ed] text" the court had previously concluded "conveys a valid assignment."

Having found the assignment itself valid, the court then held that the scope of the assignment "clearly and necessarily" included the associated right to sue for non-payment. Although South Coast's form did not expressly state that it could sue insurers on its patients' behalf, the court concluded that a contrary conclusion would "make[] neither textual nor practical sense" as Anthem could deny reimbursement, which could then force South Coast to file individual collection actions against hundreds of patients, who in turn could then "pay South Coast; refuse to pay; or seek coverage from Anthem, likely resulting in potential individual actions against the insurer." Such an outcome would "stymie" the purpose of ERISA, which was meant to "protect . . . the interests of participants in employee benefit plans."

The court cautioned that not " all assignments of the right to benefits—regardless of who made the assignment and who received it— necessarily confer the right to sue under ERISA" and expressly limited its decision to "whether section 502(a) of ERISA permits a healthcare provider to bring a derivative suit, seeking the payment of benefits, when it has been given a valid assignment to do so."

In a Pair of Decisions, Eleventh Circuit Finds Assignments to Dermatologist Invalid 

The Ninth Circuit's decision in the South Coast case came on the heels of pair of appeals before the Eleventh Circuit that also raised questions regarding the assignment of ERISA claims. In those cases, a dermatologist, W.A. Griffin, asserted that her patients assigned to her the right to bring ERISA claims on their behalf. In both cases, the Eleventh Circuit held that Dr. Griffin, whom the district court characterized as "a frequent pro se filer," lacked standing under ERISA.

The first appeal involved § 502(c)(1)(B) of ERISA, which provides that an administrator of an ERISA-governed health plan who fails to comply with a request for information that the administrator is required to furnish to a plan participant "may in the court's discretion be personally liable" to the participant "in an amount of up to $100 a day from the date of such failure or refusal." Invoking § 502(c)(1)(B) and asserting that she had been assigned the right to bring claims on her patient's behalf, Dr. Griffin sued Blue Cross Blue Shield Healthcare Plan of Georgia (BCBSHP) seeking to recover statutory penalties for BCBSHP's alleged failure to timely comply with her requests for plan documents. The district court dismissed Dr. Griffin's complaint and the Eleventh Circuit affirmed. Griffin v. Blue Cross Blue Shield Healthcare Plan of Georgia, Inc. , No. 23-11414, 2023 WL 8743387 (11th Cir. Dec. 19, 2023). The court noted that to have standing to bring an ERISA claim, under ERISA § 502(a)(1) the plaintiff must be either a participant or beneficiary of an ERISA plan, although a healthcare provider may obtain derivative standing for payment of medical benefits through a written assignment from the participant or beneficiary. According to the court, however, an assignment of rights does not necessarily encompass the right to pursue non-payment claims ( i.e ., those for statutory penalties), as opposed to payment claims ( i.e ., to recover benefits provided by an ERISA plan). The court therefore examined the pertinent language of the written agreement between Dr. Griffin and her patient, which stated that the patient assigned to Dr. Griffin her "rights and benefits." According to the court, this language was not "sufficiently explicit" to give Dr. Griffin the right to seek statutory penalties under ERISA.

In the second case, Griffin v. AT&T Services, Inc . , No. 23-11408, 2023 WL 8852925 (11th Cir. Dec. 21, 2023), Dr. Griffin had brought claims for breach of fiduciary duty against AT&T Services, Inc., again based on a patient's assignment of rights. But because the plan at issue contained an express anti-assignment provision, the district court concluded that the plan participant was "prohibited from assigning her rights and benefits to Griffin" and it dismissed the case. On appeal, the Eleventh Circuit observed that "[a]lthough assignments are generally recognized, an 'unambiguous anti-assignment provision in an ERISA-governed welfare benefit plan is valid and enforceable.'" Thus, "[i]f there is an unambiguous anti-assignment provision, the healthcare provider will lack derivative standing and cannot maintain the ERISA action." The district court had, in fact, found the anti-assignment provision to be unambiguous, and Dr. Griffin did not challenge that finding on appeal. Because Dr. Griffin abandoned that issue before the Eleventh Circuit, the court was "compelled to affirm."  

Comment Period Extended for No Surprises Act IDR Operations Proposed Rule 

On January 17, 2024, the Departments of Health and Human Services, Labor, and the Treasury (collectively, the Departments) and the Office of Personnel Management (OPM) issued a notice reopening the period for submitting comments on the proposed rule, " Federal Independent Dispute Resolution (IDR) Operations ." That rulemaking, published on November 3, 2023, proposed requirements related to the IDR process established under the No Surprises Act (NSA), including new requirements for disclosing information along with the initial payment or notice of denial of payment for certain items and services subject to the surprise billing protections in the NSA and when initiating the IDR process and the provision of certain Claim Adjustment Reason Codes (CARCs) and Remittance Advice Remark Codes (RARCs) with paper or electronic remittances. Additionally, the proposed rule would define bundled payment arrangements and would amend certain requirements related to the open negotiation period, initiation of the IDR process, eligibility determinations, batched disputes, extensions due to extenuating circumstances, selection of the certified IDR entity, and the collection of administrative fees and certified IDR entity fees. Lastly, the proposed rule would require plans and issuers to register in the IDR portal. The comment period for that proposed rule, which closed on January 2, 2024, is being reopened to allow interested parties to submit comments on how that proposal is impacted by the final rule on IDR fees, "Federal Independent Dispute Resolution Process Administrative Fee and Certified IDR Entity Fee Ranges," issued on December 21, 2023. The new comment deadline is 14 days after publication of the extension notice in the Federal Register, which is scheduled to take place January 22, 2023, so the new comment deadline is expected to be February 5, 2024.

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