State law requires notice of conversion right when exiting group life plan

[Guest mjb]

I also know of 18 to 32 states taking action in 3 to 5 out-of-state cases.

And as a famous student of the game once said "90% of baseball is half mental".

[GBurns]

In some of the cases 32 states took action, in some of the cases only 18 took action. Not all states took action on all the cases. Some took action on all, some took action on a few.

As for baseball, it is quite conceivable that 10% is physical and the remaining 90% is split with half of the 90% mental and half luck. Maybe that's what that baseball student meant.

[Guest Tauriffic]

FYI..Howard v. Gleason Corp., 901 F.2d 1154 (9th Cir. 1990) held state notice of continuation rights were preempted by ERISA in the context of an ERISA Group Life and Disability Plan

[GBurns]

Note the wording of the Conclusion, "We hold that ERISA preempts New York Insurance Law § 4216(d) as applied in this case .... ". In this case.

The facts and circumstances, in this case, led to this particular conclusion by this Court. Another Court in a different case might come to a different conclusion based on the facts and circumstances of that case.

[Don Levit]

George:

Can you provide a few of the facts and circumstances, and how a bit of a difference could have swung the decision the other way?

Or, better yet, can you or tauriffic provide us the link for the case?

Don Levit

[GBurns]

Go to Google or the search engine of your choice and enter a search term such as " Howard Gleason Corp ERISA " (without the "" of course.

[Don Levit]

George:

Thanks for the tip.

This is a very interesting case.

It went into great detail, including whether this particular law was one regulating insurance, and, thus, preempt from ERISA.

The court decided this was not a law regulating insurance, even though it was part of the insurance code of New York.

On a different topic of ERISA preemption, I found these excerpts interesting:

"New York life insurance law 4216(d) is preempted when applied to employers who provide group insurance with a conversion privilege as part of an ERISA benefit plan. (it seems to suggest that insurers may have to do this).

Notice must be given by either the insurer or the policyholder - here the employer."

"But ERISA also contains elaborate provisions setting forth the contents and timing of notice of such information to be given to plan participants. 29USC Sections 1022, 1024(b)."

Don Levit

[J Simmons]

It seems, in trying to harmonize and make sense of what the courts have said on this topic, is that legal obligations of the ER to provide notices regarding an ERISA benefit are only as set forth in ERISA and any state law that attempts to define those notice obligations is preempted. Aucoin v RSW Holdings LLC, 476 FSupp2d 608, 615 (MD La 2007) and Howard v. Gleason Corporation, 901 F2d 1145 (2d Cir 1990). (As mjb pointed out, this is consistent with the notion of Engelhoff v Egelhoff, 121 S.Ct 1322, to promote uniform administration of multi-state plans.)

However, another court (the 9th Circuit in Miller v Rite Aid, 504 F3d 1102 (9th Cir 2007)) first concluded that an individual conversion right incident to a group (ERISA) policy is not itself an ERISA benefit. Therefore, ERISA did not preempt the state law that dictated what notice rights must be given to the individual regarding those conversion rights. I don't recall whether it was raised or separately discussed as an issue in Aucoin or Gleason whether the individual conversion right under the group policy was or was not an ERISA benefit--those courts might simply have assumed that the individual conversion rights were ERISA benefits and thus not analyzed for whether they are or are not.

[Guest Tauriffic]

It seems, in trying to harmonize and make sense of what the courts have said on this topic, is that legal obligations of the ER to provide notices regarding an ERISA benefit are only as set forth in ERISA and any state law that attempts to define those notice obligations is preempted. Aucoin v RSW Holdings LLC, 476 FSupp2d 608, 615 (MD La 2007) and Howard v. Gleason Corporation, 901 F2d 1145 (2d Cir 1990). (As mjb pointed out, this is consistent with the notion of Engelhoff v Egelhoff, 121 S.Ct 1322, to promote uniform administration of multi-state plans.)

However, another court (the 9th Circuit in Miller v Rite Aid, 504 F3d 1102 (9th Cir 2007)) first concluded that an individual conversion right incident to a group (ERISA) policy is not itself an ERISA benefit. Therefore, ERISA did not preempt the state law that dictated what notice rights must be given to the individual regarding those conversion rights. I don't recall whether it was raised or separately discussed as an issue in Aucoin or Gleason whether the individual conversion right under the group policy was or was not an ERISA benefit--those courts might simply have assumed that the individual conversion rights were ERISA benefits and thus not analyzed for whether they are or are not.

You are all confusing benefits with regulated benefit plans. The relevant inquiry of whether aplan is regulated under ERISA is found in the Fort Halifax case and centers on whether the employer must engage in an "ongoing administrative scheme" to facilitate the benefits. Also, whether the group policy is self-funded by the employer will affect the preemption analysis.

EDIT: GBurns, you are correct. The individual conversion right is not an ERISA benefit plan because there is no ongoing administrative scheme and the rigth is provided by the insurer in a non-funded plan, as opposed to the employer.