The 5th Circuit , relying on Great-West Life & Annuity Ins. Co. v. Knudson and Sereboff v. Mid Atlantic Medical Services, Inc., recently handed down a decision in ACS Recovery Services, Inc. v. Griffin, holding that an employee benefits plan set up pursuant to the provisions of the Employee Retirement Income and Security Act of 1974 (ERISA) could not recover its’ subrogation interest from a special needs trust established for the benefit of injured employee or from the loss of consortium settlement of the employee’s spouse.
The ACS Recovery case represents a significant departure from the general trend that ERISA plans get whatever they want. At the outset ERISA plans were intended to be a self-funded cost saving device for employers whereby the employer experienced a substantial savings over paying inflated health insurance premiums to traditional health insurance companies. As an added incentive ERISA plans were given the right to recover all of their payments in the event of a third-party liability recovery. The ERISA subrogation interest was not subject to the Made Whole Doctrine, the Common Fund Doctrine, or any other equitable offsets. The rather onerous result was that the injured employee ended up in effect being the free collection agent for the Plan at the employee’s expense. Most ERISA plans have adopted the self-righteous attitude they simply get all the money and that no one nor nothing else matters.
The ACS Recovery Services, Inc. v. Griffin decision is the first step toward putting the proverbial 700 pound gorilla back in its’ cage.
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