Amid the current climate of individuals engaging in protests for racial justice and other causes, some employers are looking for ways to help employees arrested in connection with exercising their first amendment rights to speech and assembly. One way to do so is an ERISA plan for prepaid legal services.
Traditionally, these plans consist of arrangements allowing employees to pay a premium for legal services coverage that they may use as needed. But ERISA, US Department of Labor regulations, and similar guidance do not define "prepaid legal services." Accordingly, employers have more latitude to determine whether a legal benefit falls within the scope of ERISA than with other types of ERISA benefits.
ERISA could cover a plan designed to provide free limited legal support to employees who have been arrested for protesting. For example, an arrangement where the employer is facilitating legal representation for employees could be considered in an ERISA plan. But a referral-only arrangement where the employer has limited involvement would generally not be an ERISA plan. Similarly, employers who already maintain traditional prepaid legal services plans could expand those plans to provide a more limited benefit to employees who have not elected to participate in an existing prepaid legal services plan.
There are advantages to designing benefits to be subject to ERISA. In general, the more comprehensive the proposed legal benefit and more involved the employer is in its offering, the more beneficial ERISA coverage may be. Specifically:
- Preemption. ERISA preempts state law, which allows an employer to have one set of laws to comply with, and under federal law, claims and potential damages are more limited.
- No Jury Trials. ERISA litigation is generally decided by a judge and not a jury.
- More Control over Claims. ERISA plans must include claims and appeals procedures that participants generally must exhaust before filing a lawsuit. If the plan administrator follows the claims and appeals procedures, courts generally defer to the decision of the plan administrator regarding whether benefits are payable under the plan.
- Choice of Law & Venue. The plan document can indicate which state law applies in the event that any portion of a claim is not preempted by ERISA (instead of potentially being subject to multiple state laws). The plan can also specify the venue where litigation may be brought.
- Statute of Limitations. A reasonable statute of limitations provision may be added to the plan to limit the period in which a participant may file a lawsuit after a claim denial.
In exchange, the benefit is subject to the plan document, summary plan description, reporting (i.e., annual Form 5500), claims and appeals, and other fiduciary requirements. These requirements are easiest to satisfy for employers who already maintain a prepaid legal services plan or a wrap plan. Those employers may especially benefit from considering whether to subject any new benefits for protesters to ERISA. For other employers, meeting the requirements need not be overly onerous for a standalone prepaid legal services plan.