Proposed Congressional Changes to Make ERISA More Reasonable

During this 110th Congress, there have been two proposed bills intended to amend the Employee Retirement Income Security Act of 1974 (“ERISA”) to improve the protection of employee benefits, such as a employee’s long-term disability (LTD) claim.

The first is a bill proposed by Congresswoman Carolyn McCarthy, of the Fourth District of New York, titled the “Equality for Workers under ERISA Act of 2007.” HR2622. This very short amendment to the ERISA statute would simply add a paragraph to Section 502(e) to clarify that any civil action commenced in court shall be decided by the court as a “de novo” proceeding without any deference to any claim determination made prior to commencement of such actions. In other words, the judge reviewing a denial of a benefit would be required to look at the case from a new perspective without granting any deference to the insurance company’s decision under what has presently come to be known as the “arbitrary and capricious” standard of review. The insurance company would no longer have the unfair advantage in court over a disabled person.

A far more extensive bill has been proposed by Senator Harkin in the United States Senate. In addition to mandating that all judges review an insurance company’s denial of benefits under the “de novo” standard of review, the court would also be required to review all evidence presented. Currently, the insurance company argues, and the judge typically agrees, that the court is only permitted to review the ERISA record (a.k.a the insurance company’s claim file). In addition, Senator Harkin’s amendment will allow for an award of reasonably foreseeable economic and non-economic damages. Presently, only the denied employee benefit at issue is recoverable. While some courts will award a reasonable interest on withheld benefits, if the Plantiff is successful, the new bill by Senator Harkin mandates that all interest be awarded. The present version of ERISA Section 502(g) permits a court to award reasonable attorney’s fees to a prevailing Plaintiff. However, most courts will only allow an award of attorney’s fees incurred during the litigation process and not for the attorney’s fees incurred by the participant during the required pre-litigation appeal, which must be submitted to the insurance company prior to the filing of a lawsuit. This amendment would allow a court to award all attorney’s fees, and not just those incurred during the litigation process. Such an amendment would be eminently fair to the participant, as it is the only way for him or her to be made whole after a court has determined that the insurance company’s denial of benefits was unreasonable.

My office encourages any employee who is presently or may become entitled to claim an employee benefit, especially those relating to disability payments, to contact his or her representative or senator to become a co-sponsor of the bill or at least vote favorably for the bill if and when it comes up for a vote.

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