Opinion ID: 891657
Heading Depth: 1
Heading Rank: 1

Heading: erisa and the parties

Text: {2} This case involves four parties: the plaintiff and former employee Stella Kirby (Kirby); the former employer Adecco (Adecco); the long-term disability plan established by Adecco to provide benefits to eligible employees (the Plan); and the defendant in this appeal (Guardian), who is the insurer and claims fiduciary of the Plan. The present action is one for enforcement of a writ of garnishment, but it follows a lengthy and complex procedural history that originated almost eleven years ago with Kirby's claim for wrongful denial of disability benefits under ERISA. We summarize the procedural history below, but first examine the relationship of the parties under ERISA. {3} Congress enacted ERISA to protect ... the interests of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts. Section 1001(b); see also Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 44, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987) (citing § 1001(b)). The statute was Congress's response to the growing problem of employer-funded pension plans failing to provide promised benefits to employees, most notably in the case of the Studebaker bankruptcy, which left thousands of current and former employees without pension benefits after years of service. Colleen E. Medill, Introduction to Employee Benefits Law: Policy and Practice 15 n. 2 (2d ed. 2007). {4} The statute establishes a legal entity called the employee benefit plan, which is designed to be independent of the employer, and is charged with managing plan funds in the sole interest of plan participants and beneficiaries. See Boggs v. Boggs, 520 U.S. 833, 845-46, 117 S.Ct. 1754, 138 L.Ed.2d 45 (1997); see also § 1001(b) (stating purpose of ERISA). Employee benefit plans are of two types: welfare benefit plans that provide for health, vacation or training, and pension benefit plans that provide retirement income. Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 827 n. 1, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988); § 1002(1)-(3). The Plan in this case is a welfare benefit plan, which is defined under ERISA as a plan established or maintained by an employer... for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, ... benefits in the event of sickness, accident, disability, death or unemployment. Section 1002(1). {5} ERISA allows flexibility in the exact arrangement of welfare benefit plans. For example, under ERISA, a plan may be self-funded or funded by an insurance policy, or by some combination thereof. Id.; see also FMC Corp. v. Holliday, 498 U.S. 52, 54, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990) (providing self-funded benefits to employees and their dependents). A self-funded plan collects premiums and maintains those funds in a trust account, paying benefits from this account to eligible plan beneficiaries. Cent. States, Se. & Sw. Areas Pension Fund v. Cent. Transp., Inc., 472 U.S. 559, 580-82, 105 S.Ct. 2833, 86 L.Ed.2d 447 (1985). Under an insured plan arrangement, the insurance company collects premiums and pays benefits directly to eligible employees. {6} In the present case, the Plan is funded by an insurance policy (hereinafter, the Policy) issued by the Plan's insurer, Guardian. Under the Policy, Guardian is responsible for paying benefits directly to eligible beneficiaries. Under the present plan arrangement, Guardian also serves as the claims fiduciary of the Plan with sole discretion to determine eligibility for disability benefits. ERISA outlines the role of a fiduciary as follows: [A] fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and... for the exclusive purpose of ... providing benefits to participants and their beneficiaries ... with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity ... would use. Section 1104(a)(1)(A)-(B). As fiduciary, Guardian is also responsible for complying with ERISA's fiduciary requirements provisions. See §§ 1002(21)(A), 1144. {7} The employer, now Adecco, [1] purchased the Policy from Guardian, which served to establish the Plan. See Kirby v. TAD Res. Int'l, Inc., 2004-NMCA-095, ¶ 17, 136 N.M. 148, 95 P.3d 1063 ( Kirby I ) (stating that purchase of long-term disability insurance establishes an ERISA plan, and citing § 1002(1)). Adecco is the plan sponsor and administrator with the responsibility to perform various administrative functions on behalf of the Plan, but it does not retain any discretion to make determinations on claims for benefits. Kirby I, 2004-NMCA-095, ¶ 44, 136 N.M. 148, 95 P.3d 1063. Due to its limited role in the ERISA plan arrangement, Adecco has been properly dismissed from this case. At this stage, only Kirby, Guardian and the Plan remain parties to the dispute.