Winning The Big Endorsement: How to "ERISAfy" an Employee-Paid Plan

Article originally appeared in DRI: The Voice of the Defense Bar on 08/10/17

Usually it is clear from the outset whether the plan at issue is governed by ERISA. But in some situations – for instance, where the plan is completely voluntary and the employee pays the premiums – there may be a dispute over whether the plan is exempt from ERISA under the "safe harbor exemption." Importantly, the safe harbor exemption cannot apply if the employer endorses the plan.

This article explores the type of information courts find persuasive when deciding endorsement. In other words, this article discusses what information you should have ready before moving for ERISA preemption.

ERISA and the Safe Harbor Exemption

Under ERISA, there are five statutory requirements for a plan to qualify as an "employee welfare benefit plan." There must be: (1) a "plan, fund, or program" (2) established or maintained (3) by any employer (4) to provide employee welfare benefits (5) for the employer's employees.

The terms "employee welfare benefit plan" and "welfare plan" mean any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, ….

29 U.S.C. §1002(1).

Typically, the purchase of a group insurance plan satisfies ERISA's statutory requirements. See, e.g., Donovan v. Dillingham, 688 F.2d 1367, 1374 (11th Cir. 1982) (en banc) (the insurance company's procedures can satisfy the "procedures for receiving benefits" requirement).

In what is commonly known as the "safe harbor" exemption, the Department of Labor has excluded certain insurance arrangements from ERISA. Specifically, the term "employee welfare benefit plan" does not include programs offered by an insurer where:

  1. No contributions are made by an employer or employee organization; 
  2. Participation [in] the program is completely voluntary for employees or members; 

  3. The sole function of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer; and 

  4. The employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.

29 C.F.R. § 2510.3-1(j) (1998) (emphasis added).

For the safe harbor provision to apply, all four factors must be established. Steen v. John Hancock Mut. Life Ins. Co., 106 F.3d 904 (9th Cir. 1997). If just one of the criteria is missing, the plan does not fall within the Safe Harbor exemption and is not automatically excluded from ERISA.

Typically, the first two prongs of safe harbor are easy to determine: who paid for coverage and whether the policy requires some specified percentage (usually 100 percent) participation. This article focuses on the third prong: endorsement.


The Eleventh Circuit succinctly explained why lack of endorsement is difficult to establish: "The regulation explicitly obliges the employer who seeks its safe harbor to refrain from any functions other than permitting the insurer to publicize the program and collecting premiums." Butero v. Royal Maccabees Life Ins. Co., 174 F.3d 1207, 1213 (11th Cir. 1999); accord Casselman v. American Family Life Assur. Co. of Columbus, 143 Fed. Appx. 507, 509, 2005 WL 1492208, *2 (4th Cir. 2005) ("Courts applying the safe harbor exception have emphasized that employers can only assume a very limited role with respect to the plan if the third prong is to be satisfied.").

The First Circuit has provided a more comprehensive explanation of endorsement, synthesizing case law from around the country with Department of Labor opinions.

[R]emaining neutral does not require an employer to build a moat around a program or to separate itself from all aspects of program administration. Thus, as long as the employer merely advises employees of the availability of group insurance, accepts payroll deductions, passes them on to the insurer, and performs other ministerial tasks that assist the insurer in publicizing the program, it will not be deemed to have endorsed the program…. It is only when an employer purposes to do more, and takes substantial steps in that direction, that it offends the ideal of employer neutrality and brings ERISA into the picture.
The Department of Labor has linked endorsement of a program on the part of an employee organization to its engagement in activities that would lead a member reasonably to conclude that the program is part of a benefit arrangement established or maintained by the employee organization. What is sauce for the goose is sauce for the gander. …

[A]n employer will be said to have endorsed a program within the purview of the Secretary's safe harbor regulation if, in light of all the surrounding facts and circumstances, an objectively reasonable employee would conclude on the basis of the employer's actions that the employer had not merely facilitated the program's availability but had exercised control over it or made it appear to be part and parcel of the company's own benefit package.
Johnson v. Watts Regulator Co., 63 F.3d 1129, 1134-35 (1st Cir. 1995) (internal quotations and citations omitted); see also Thompson v. American Home Assur. Co., 95 F.3d 429, 437 (6th Cir. 1996).

Endorsement, consequently, depends on evidence that would lead a reasonable employee to believe the employer was involved in the plan. As discussed in greater detail below, this evidence can take many forms – the plan documents themselves, documents and testimony from the employer, the insurer's underwriting file, and the sales file of the insurance agent who sold the policy.

Similarity of Endorsement to "Established or Maintained"

Although this article with deals endorsement, some of the evidence that will be discussed below was used by courts to determine whether an employer "established or maintained" a plan. Though not technically on point, the "established or maintained" inquiry is instructive in endorsement cases because the tests cover the same general subject: whether the employer played an active role in the plan. See Moorman v. UnumProvident Corp., 464 F.3d 1260, 1267-72 (11th Cir. 2006) (discussing employer's "endorsement" as similar to employer's "establishment" of a plan).

For example, in Anderson v. UNUM Provident Corp., 369 F.3d 1257 (11th Cir. 2004), endorsement was not in dispute on appeal, but the Eleventh Circuit articulated a thorough analysis of the employer's involvement in the plan, concluding that the employer had both established and maintained the plan. Id. at 1265-67. The Anderson analysis, while not discussing endorsement, certainly informs an endorsement inquiry. Consequently, this article occasionally cites to evidence that courts have used to find "established or maintained," but that would also be useful to an endorsement argument as well.

Evidence of Endorsement within Plan Literature

Within the plan documents, you should look for any specified active role to be played by the employer.

Plan Administrator (or Similar) Status

Many plans will designate the employer as the plan administrator, which is often sufficient to show endorsement in combination with other factors or even on its own. As the District of Arizona has explained, "[a]cting as administrator of the benefit plan tends to show that the employer endorsed the plan." Alloco v. Metropolitan Life Ins. Co., 256 F. Supp. 2d 1023, 1028-29 (D. Ariz. 2003); see also Anderson, 369 F.3d at 1266 (among other reasons for finding preemption, employer was the named plan administrator); Arbor Health Care Co. v. Sutphen Corp., 1999 WL 282667, *4 (6th Cir. Apr. 30, 1999) (employer being named as the plan administrator was an independent basis for finding endorsement and, therefore, ERISA preemption).

This may also hold true if a person or entity related to the employer is designated plan administrator. Thies v. Life Ins. Co. of N. Am., 2010 U.S. Dist. LEXIS 96042, at *14-15 (W.D. Ky. Sept. 13, 2010)( executive vice president of human resources was the plan administrator); Burdeshaw v. Sara Lee Corp., 2007 U.S. Dist. LEXIS 44180, at *15 (M.D. Ala. June 15, 2007) (employer's benefits administrative committee was the plan administrator).

In some jurisdictions, however, showing the employer is the plan administrator may not always be sufficient, on its own, to show endorsement. For instance, the Ninth Circuit has warned "an employer can be a plan administrator in name only and still satisfy the four requirements of the safe harbor regulation, even though being a plan administrator is not listed in the safe harbor's third requirement." Stuart v. UNUM Life Ins. Co. of Am., 217 F.3d 1145, 1153 (9th Cir. 2000). It is best, then, to couple plan administrator status with some other proof of endorsement.

Roles beyond plan administrator can show endorsement. For instance, the plan documents may also designate the employer as the plan sponsor or the statutory agent. See, e.g., Singh v. United of Omaha Life Ins. Co., 2011 U.S. Dist. LEXIS 104515, at *5-6 (E.D. Cal. Sept. 14, 2011) (plan administrator, sponsor, and statutory agent); Chase v. Prudential Ins. Co. of Am., 2008 U.S. Dist. LEXIS 20316, at *4 (E.D.N.Y. Mar. 13, 2008) (contract holder, plan sponsor, administrator, and statutory agent); Rist v. Hartford Fin. Servs. Group, 2008 U.S. Dist. LEXIS 123650, at *15-16 (S.D. Ohio Aug. 6, 2008) (plan administrator and statutory agent); May v. Lakeland Reg'l Med. Ctr., 2010 U.S. Dist. LEXIS 5866, at *22-23 (M.D. Fla. Jan. 5, 2010) (plan administrator and statutory agent); Daigle v. Hartford Life & Accident Ins. Co., 2010 U.S. Dist. LEXIS 55358, at *5 (E.D. Ark. May 6, 2010) (plan sponsor, administrator, and statutory agent).

Some courts have given weight to the fact that the employer was the named policyholder. Crabtree v. Life Care Centers of Am., Inc., 2009 WL 734726,*6 (S.D. Ind. Mar. 18, 2009). This alone is probably not dispositive in all jurisdictions, but at least one court has found active endorsement based solely on the employer "listing itself as the [policy] owner and purchasing the plan." Stockstill v. Thomas J. Unik Co., 2010 U.S. Dist. LEXIS 37459, at *9 (N.D. Ohio Apr. 15, 2010); accord Richie v. Hartford Life & Accident Ins. Co., 2010 U.S. Dist. LEXIS 30279, *11 n.6 (S.D. Ohio Mar. 5, 2010) (citing employer's status as policyholder as only basis for finding lack of neutrality).

Employer Name/Logo Is on the Plan

An easy way to find indicia of endorsement is to examine the policy, summary plan description, and the employee benefit booklet for the employer's logo. The Eleventh Circuit found it significant that benefit booklet describing the insurance coverage was "emblazoned with [the employer's] [e]mblem," as were the claim forms. Anderson, 369 F.3d at 1260-61.

The Middle District of Florida was likewise swayed when the employer's "logo and/or name is prominently displayed on each of the plan documents." May, 2010 U.S. Dist. LEXIS 5866, at *22; see also, e.g., Chase, 2008 U.S. Dist. LEXIS 20316, at *9 ("cover page [of the plan document] bears [the employer's] name"); Oliver v. Sun Life Fin. Distribs., 2010 Ky. App. Unpub. LEXIS 298, at *12 (Ky. Ct. App. Apr. 2, 2010); Keith v. Hartford Life and Acc. Ins. Co., 2007 WL 4045629, *4 (N.D. Tex. 2007). While it is useful to have more in your arsenal than the company logo, this is a simple and illustrative means to demonstrate endorsement.

Plan Literature Invokes ERISA

Another useful piece of evidence is the express mention of ERISA in the plan or summary plan description. The Sixth Circuit has looked to whether plan-related documents mention ERISA:

[W]here the employer provides a summary plan description that specifically refers to ERISA in laying out the employee's rights under the policy or that explicitly states that the plan is governed by ERISA, the employee is entitled to presume that the employer's actions indicate involvement sufficient to bring the plan with in the ERISA framework.

Thompson, 95 F.3d at 437.

The Southern District of Ohio relied on Thompson entirely, citing ERISA language in the summary plan description as its sole basis for finding endorsement. Stinson v. Prudential Ins. Co. of Am., 857 F. Supp. 2d 681, 688 (S.D. Ohio 2012). The Western District of Missouri was more conservative in its interpretation of Thompson, explaining that invocation of ERISA in plan documents, while an important factor, was "not conclusive." Shaw v. Prudential Ins. Co. of Am., 2012 U.S. Dist. LEXIS 16208, at *16 (W.D. Mo. Feb. 9, 2012).

An Oregon district court found a summary plan description invoking ERISA "evidence[d] an intent to create, and not merely advertise, an ERISA plan." Toohey v. CIGNA Corp., 2009 U.S. Dist. LEXIS 71034, at *14 (D. Ore. June 24, 2009). The Middle District of Florida has similarly found ERISA language to be indicative of an employer's "intent that the … plan [be] subject to ERISA." May, 2010 U.S. Dist. LEXIS 5866, at *22-23 (plan contained a "Statement of ERISA Rights"); see also, e.g., Anderson, 369 F.3d at 12666 (11th Cir. 2004); Weber v. Hartford Life & Accident Ins. Co., 2008 WL 3932014, *12 (D. Ariz. Aug. 25, 2008) ("[i]nterestingly, the Guide explicitly states that the policy 'may be subject to ERISA'"); Moore v. Life Ins. Co. of N. Am., 708 F. Supp. 2d 597, 608 (N.D.W.V. 2010); Williamson v. Life Ins. Co. of N. Am., 2012 U.S. Dist. LEXIS 111069, at *10 (D. Nev. Aug. 8, 2012).

Along these lines, though, the failure to include ERISA language in the plan documents does not negate endorsement. Galloway v. Lincoln Nat. Life Ins. Co. 2010 WL 2679894, *14 (W.D. Wash. Jul 2, 2010).

Form 5500s

Similar to including ERISA language in the plan, some courts will consider the fact that an employer files a Form 5500 (the form required by the Internal Revenue Service and Department of Labor for most ERISA plans). Weber, 2008 WL 3932014, *13; Williamson, 2012 U.S. Dist. LEXIS 111069, at *10. Again, however, the failure to file a form 5500 does not preclude endorsement. Gonzales v. Unum Life Ins. Co. of Am., 2010 WL 3702612, *3 (S.D. Cal. Sept. 16, 2010).

Choosing the Terms of the Plan

An employer can endorse a plan from the outset by requesting specific terms be included in the plan, or by modifying the insurer's standard terms. By way of example, the Northern District of West Virginia found endorsement based primarily on the employer's involvement in designing the plan where the employer:

(1) sponsored, established, and maintained a plan which provided various types of insurance coverage, including AD&D group coverage; (2) drafted and prepared master plan documents to implement the plan, which included documents that governed the plan and the options for benefits under the plan; (3) drafted and prepared master plan documents that expressly included within the plan the AD&D benefits sought by the plaintiff; (4) limited participation in the plan's AD&D benefits to certain employees of American Airlines by drafting the plan's AD&D eligibility requirements; (5) decided what type of benefits to make available to its employees under the plan; (6) decided to fund payment of the AD&D benefits and other benefits with group insurance policies; (7) determined to purchase a group policy from LINA to fund the payment of the AD&D benefits; (8) negotiated the terms and purchase of the AD&D policy with LINA; [and] (9) determined the type and levels of coverage that would be available to employees under the plan.

Moore, 708 F.Supp.2d at 607-08.

Sometimes, courts imply employer involvement from the plan language. See Anderson, 369 F.3d at 1265-66 (eligibility was limited to certain types of employees, indicating the employer "decid[ed] eligibility"); see also Lee v. Liberty Nat. Life Ins. Co., 2009 WL 3316371, *7 (S.D. Ga. Oct. 14, 2009) (employer "decided number of hours employees would need to work per week to become eligible for benefits and … plan was the only plan offered … on a tax-advantaged basis").

Employer input in plan design can also be established by declarations, as happened recently in Kansas. The employer submitted a declaration from its chief financial officer establishing that the employer negotiated (1) premium, (2) elimination period, (3) monthly benefit, (4) maximum benefit amount, and (5) eligible classes of employees. Smith v. McCormick-Armstrong Co. 2012 WL 4839918, *4 (D. Kan. Oct. 11, 2012)

Affidavits are equally effective, as demonstrated in Crabtree. 2009 WL 734726, *6-7. The Crabtree court relied on an affidavit submitted by the employer to find that the employer "exercised substantial control and direction over the design of the disability plan." Id. *6 The affidavit showed that the employer "determined the eligibility requirements for its employees … that an employee must be working full time, be active at work, and have completed sixty days of continuous service in order to be eligible for the plan." Id.

Furthermore, "[c]overage end[ed] following the conclusion of an employee's employment … [and the employer] amended the disability plan schedule [after its inception] to exclude coverage for such life events as marriage, divorce, death, and birth within one's family." Id. Finally, the affidavit proved that the employer "establishe[d] minimum benefit levels and maximum monthly payments." Id. *7. The affidavit, then, was pivotal in showing endorsement. See also Burdeshaw, 2007 U.S. Dist. LEXIS 44180, at *15-16 (relying on affidavit of employer's vice president of global benefits).

The insurer/defendant in Keith similarly relied on an affidavit to illuminate the employer's role in setting up the plan. 2007 WL 4045629, at *4. Specifically, the defendant submitted an affidavit from the insurer's senior national account manager explaining how the employer "controlled procurement of [long term disability] benefits for its employees." Id. (citing to exhibit from defendant's reply brief). The employer "assumed sole responsibility for the selection and purchase of … insurance for its employees. This included negotiating the premiums, coverages, eligibility requirements, and other terms of the Policy. The Policy 'contain[ed] the terms and conditions negotiated by [the employer].'" Id. All of these employer activities suggested endorsement.

Likewise, when determining whether a voluntary, employee-paid short term disability plan was subject to the safe harbor exemption, the Southern District of California relied heavily on a declaration from the insurer's employee who "was involved in the sale and implementation of products for [the employer], including" the plan at issue. Gonzales, 2010 WL 3702612, *4 n.2. According to the declaration, a vice president of the employer had worked with an account manager of the insurer "to develop a comprehensive benefits package" for the employees. Id. This collaboration included "meetings to discuss the integration of the [voluntary plan at issue] with the other … disability programs" the employer had established (that were indisputably subject to ERISA). Id. In addition, the employer "gave input on the website for the [voluntary plan] and on [the insurer's] call system for benefits." Id. These were important to the court's analysis.

The Eastern District of California also looked to employer involvement to find endorsement where the evidence showed that "[a]fter receiving notice of increased policy premiums under their old insurance plan, [an employer] sought a new provider for an insurance package." Stenson v. Jefferson Pilot Fin. Ins. Co., 2007 U.S. Dist. LEXIS 45067, *9 (E.D. Cal. June 21, 2007). The employer chose the insurer and "established eligibility requirements[,] … benefit amounts, coverages and maximum benefit period." Id. The Stenson court specifically referenced the insurance application, which bore the signature of the employer's authorized representative and was reviewed by the employer's director of administrative services. Id. n.3. The court cited no specific evidence, but the defendant's motion to dismiss cited extensively to an affidavit from somebody familiar with the employer's purchase of insurance. That type of affidavit can come from the employer, the insurance agent, or the insurer.

Courts can consider deposition testimony as well. The Southern District of Ohio considered depositions of the employer's custodian of records (who testified concerning the underwriting file) and the employer's former benefit manager. While disputing endorsement, the former benefit manager agreed with the underlying facts to which the custodian of records testified. Rist, 2008 U.S. Dist. LEXIS 123650, at *14-15 n.2. The court thus found persuasive the custodian's testimony that the employer had been involved in the creation of the plan by choosing "the essential components … including, but not limited to the waiting period …, the elimination period, the actual benefit percentage, and the benefit maximum." Id. at *15. The employer later negotiated changes to the policy with the insurer. Id.

The sales/underwriting file can also be a bountiful source of endorsement evidence. In Weber, the court cited to documents within the sales file (which included communications with the employer's insurance agent) to show that the employer "after negotiation" selected a specific insurer to cover its employees. 2008 WL 3932014, *10. "In addition, [the insurer] deviated from its standard policy in a number of ways to 'customize[ ]' its policy 'to meet the needs of ... [the employer] and their employees.'" Id. (citations to record omitted). The employer's "changes include adding a provision to ensure continuity of coverage from [employer's] previous … insurance provider, as well as creating and defining two different eligible classes of employees." Id.

Many employers negotiate, and thus endorse, in this manner – by bargaining for a lower premium or specifying classes of employees to be covered.

Ongoing Administration of Plan

As with employer input into plan design, evidence of employer involvement in the administration (if not apparent from the plan language itself) can be proven by affidavits or declarations. For instance, in Keith, the court gave considerable weight to a benefit manager's affidavit showing that the employer actively participated in administration and claim management. 2007 WL 4045629, at *4 (citing affidavit attached to insurer's preemption motion). The affidavit established that the employer was "providing insurance certificates to insured employees, conducting enrollment and maintaining enrollment information, obtaining and distributing insurance forms, coordinating other employee benefits with [the insurer], and paying and reporting taxes to the Internal Revenue Service." Id.

The Crabtree court relied on the same affidavit it considered for plan design to find that the employer "also played a significant role in the administration of the disability plan." 2009 WL 734726, at *7. The employer showed employees a video about the policy and subsequently "coordinate[d] the filing of claims, facilitate[d] appeals, collect[ed] missed deductions and reconcile[d] payroll deductions for employees who have elected to have coverage." Id.

In Gonzales, the court relied on a declaration from the insurer establishing that the employer and insurer "executed a Performance Agreement," which "was essentially a quality-control mechanism" requiring the insurer "to meet certain targets regarding their handling of" the employees' claims. Gonzales, 2010 WL 3702612, at *5.
Finally, in Weber, the court considered a policy worksheet in the sales file that specified various administrative duties to be performed by the employer as well as an administrator's guide provided by the insurer to assist the employer in its administrative duties under the plan. 2008 WL 3932014, at *11-12 (rejecting conclusory affidavit from employer that it did not endorse the plan); see also Williamson, 2012 U.S. Dist. LEXIS 111069, at *9-10 (noting that the employer "provided data on claims and coverage to" the insurer).

Employer Involvement in Claims

The employer may be involved with, and thereby endorse, the plan through its involvement in processing claims. The group policy or the employee handbook may expressly call for claims to be submitted by the employer. See, e.g., Weber, 2008 WL 3932014, *11 ("[e]mployee [h]andbook direct[ed] employees to obtain claim forms from" the employer); Shaw, 2012 U.S. Dist. LEXIS 16208, *11 (though not expressly a basis for endorsement, court observed that the employee handbook directed employees to call employer to submit a claim).

Even if not expressly in plan language, courts may look to employer involvement as a matter of practice. For instance, the Eleventh Circuit found it important that the employer was "responsible for submitting [an employee's] completed claim form to [the insurer]" and maintained a supply of claim forms for its employees and required employees to submit claims through the employer. Anderson, 369 F.3d at 1260. The court also noted that when employees submitted claims, the employer completed an "employer section" of the claim form and verified eligibility to the insurer. Id. By taking all these actions, the court reasoned that the employer "insured the [plan] was fixed in a more stable form and that its employees actually received the intended benefits." Id.

Other courts have been similarly persuaded where the employer is the initial point of contact for a claim. Arbor Health, 1999 U.S. App. LEXIS 8565, at *13 (employee submitted his claim through employer's personnel); Crabtree, 2009 WL 734726,*7 (employer "coordinat[ed] the filing of claims [and] facilitate[d] appeals" of adverse benefit determination).

The Kentucky Court of Appeals, dismissing state law claims as preempted, found it "most important[]" that the employer "assist[ed] employees in collecting paperwork necessary to file a claim and call[ed] the insurer on their behalf to discuss claim status, though it may not have done so in [that plaintiff's] case." Oliver, 2010 Ky. App. Unpub. LEXIS 298, at *12.

Endorsement in Practice

The cases illustrate that proving endorsement is an art, not a science. It is best to be armed with multiple indicia of endorsement when filing a motion for ERISA applicability and preemption. One factor may sometimes be enough, but the vast majority of cases rely on multiple factors to find endorsement.

To that end, you should seek evidence from as many sources as you can find: certainly the policy and related documents, the broker's file, the sales file, and the underwriting file. You should talk to the employer and get an affidavit about the employer's involvement. If you can't obtain Form 5500s from the employer, you can usually find them online.

Look at the employer's other plans that are unquestionably governed by ERISA. There is a good argument that varied benefits must be considered as a whole plan and not individually. See, e.g., Postma v. Paul Revere Life Ins. Co., 223 F.3d 533, 538 (7th Cir. 2000). Initial discovery may even include a limited deposition of the plaintiff to determine how the employer presented the insurance coverage to him. See, e.g., May, 2010 U.S. Dist. LEXIS 5866 at *22 (employee booklet says employer "believe[s] [the] Program provides worthwhile protection for you and your family").

To compile evidence sufficient to prove endorsement, you may need a short discovery period (limited to ERISA applicability) or you may be able to file a motion based solely on the plan literature. Every case is different, with different evidence and different requirements for endorsement. But the cases cited in this article show that endorsement is an achievable standard.

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