PTO Bank run by union - ERISA Plan

[djhpro]

Employer allows union employees to donate unused PTO to a bank from which other union employees can apply for a withdrawal from the bank if they have exhausted their own PTO and have a medical event causing the  need for time off.  Union has a committee that reviews/ approves/disapproves requests which must be supported by a Dr.'s opinion of the length of leave that is needed.

Is this type of plan considered an ERISA plan?  Employer wants to know as a result of the new regs. re: procedures required when an employee of the company makes the determination re: who is disabled.

 

[Chaz]

This is a question that should should ask for advice from an experienced benefits attorney.

In most cases, a leave donation program will not be an ERISA plan but there are circumstances in which a court may (rightly or wrongly) determine it to be so. 

You should also make sure the employer takes into account Internal Revenue Code and state law issues with respect to this program.

[MichaelMinix]

On 5/22/2018 at 11:05 AM, Chaz said:

This is a question that you should should pose to an experienced benefits attorney.

In most cases, a leave donation program will not be an ERISA plan but there are circumstances in which a court may (rightly or wrongly) determine it to be so. 

You should also make sure the employer takes into account Internal Revenue Code and state law issues with respect to this program.

Agree with you.

[jpod]

Donate?  Doesn't it happen automatically?

[leevena]

Chaz brings up a very good point that made me think about it more.  At first glance I would have said it is not an ERISA plan.  Clearly PTO is not covered by ERISA, but disability plans are covered.  For those who withdraw a minimal amount of hours, say 8-40 per year, I would not expect an issue.  But what if someone withdraws a much larger number of hours, because a physician found the employee unable to perform their job?  I can foresee someone interpreting it as a disability plan.    

[jpod]

Why isn't it a "payroll practice" as defined in the DOL's regulation.  That it is administered by the union and triggered by a medical condition would seem to be irrelevant facts, because ultimately it is just the employer that will be paying regular wages for time off.

(b) Payroll practices. For purposes of title I of the Act and this chapter, the terms “employee welfare benefit plan” and “welfare plan” shall not include—

. . .

(2) Payment of an employee's normal compensation, out of the employer's general assets, on account of periods of time during which the employee is physically or mentally unable to perform his or her duties, or is otherwise absent for medical reasons (such as pregnancy, a physical examination or psychiatric treatment); and

[leevena]

2 hours ago, jpod said:

Why isn't it a "payroll practice" as defined in the DOL's regulation.  That it is administered by the union and triggered by a medical condition would seem to be irrelevant facts, because ultimately it is just the employer that will be paying regular wages for time off.

(b) Payroll practices. For purposes of title I of the Act and this chapter, the terms “employee welfare benefit plan” and “welfare plan” shall not include—

. . .

(2) Payment of an employee's normal compensation, out of the employer's general assets, on account of periods of time during which the employee is physically or mentally unable to perform his or her duties, or is otherwise absent for medical reasons (such as pregnancy, a physical examination or psychiatric treatment); and

Assume you are asking me.  I agree with your comments, but imagine a scenario where multiple employees/union members are starting to receive larger amounts of additional PTO, due to a medical reason.  One could argue that it is a de facto short term disability plan.

As I read this post I kept thinking about maternity coverage years ago, prior to 1978.  Health insurance defined eligible expenses as something caused by an accident or illness.  As a result, pregnancy was usually not covered because it was not an accident or illness.  In 1978 the courts ruled maternity to be covered as any other illness.  I bring this up as an example of another situation that most benefits people would have argued it would never happen.

[jpod]

Based on DOL AOs (or at least one AO) and the majority of case law (if not all case law), an unfunded disability plan or program whereby an employer pays no more than the individual's regular wages for the period of disability is a payroll practice not subject to Title I.  I think there is little risk that the program described here would be an ERISA welfare plan.  For what it's worth I think most employers, at least those who've thought about it, would like these plans to be subject to Title I, thereby allowing for preemption of State laws, but I would never advise an employer that such a position is likely to prevail.