“Plan Administrator” vs “Claims Administrator” – Who is the Proper Defendant in ERISA Claim for Benefits?

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The issue of who may be a proper defendant in an ERISA claim for benefits has not received consistent treatment in the courts. On the one hand, a federal district court in Minnesota recently concluded that a third party administrator was a proper defendant in a lawsuit seeking benefits on the grounds that Section 502(a)(1)(B), the section of ERISA under which such claims are brought, does not limit the universe of entities that may be sued, and that liability flows from “actual control” over benefit claims. Nystrom v. AmerisourceBergen Drug Corp., 2013 WL 5944254 (D. Minn. Nov. 6, 2013). The First, Fifth, and Ninth Circuits have reached a similar conclusion, according to the court. On the other hand, some courts, including the Second Circuit, have firmly held that only the named plan administrator is a proper defendant in such claims. These courts adhere to a bright-line rule that only an entity formally designated as a ″plan administrator″ under 29 U.S.C. § 1002(16)(A) is a proper defendant in a claim for benefits. See http://www.erisapracticecenter.com/2013/11/25/claims-administrator-not-liable-under-erisa-for-alleged-failure-to-follow-acas-enhanced-benefit-claim-procedures/. The result of the inconsistent decisions among the courts is that plan participants and beneficiaries are likely to continue to name plan administrators as defendants in lawsuits over denied benefits even where those plan administrators have had no involvement in the claims administrative process (because they delegated that authority to a claims administrator or other third-party administrator). As such, in service provider contracts with claims administrators, plans and plan fiduciaries should consider the appropriateness of including a provision that imposes an indemnity or duty to defend obligation on the claims administrator.

Topics:  Employee Benefits, ERISA, Plan Administrators

Published In: Civil Procedure Updates, General Business Updates, Finance & Banking Updates, Labor & Employment Updates

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.

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