The Ninth Circuit Weighs In On ERISA's Plan Document And Summary Plan Description Requirements: Mull v. Motion Picture Ind. Health Plan

Mull v. Motion Picture Ind. Health Plan educates employers on the basics of the requirements of the Employee Retirement Income Security Act (ERISA) governing plan documents and summary plan descriptions. The lessons are sobering, particularly as they relate to group health plans. Although compliance with these requirements is neither difficult nor expensive, many employers nevertheless ignore them. The decision in this case might—and, in our view, should—encourage them to reconsider.

In Mull v. Motion Picture Ind. Health Plan, No. 15-56246 (9th Cir. Aug. 1, 2017), the Ninth Circuit Court of Appeals held that a summary plan description and trust agreement, when read together, constitute a written plan document for purposes of complying with the requirements of ERISA. At issue was the ability of the Motion Picture Industry Health Plan to enforce reimbursement/recoupment rights set out in the plan's summary plan description (there was no separate plan document designated as such) against a plan participant who recovered damages from a third-party as a consequence of injuries sustained in a motor vehicle accident. The court below ruled that the plan could not enforce its subrogation rights because the reimbursement/recoupment rights were found only in the summary plan description. On appeal, the Ninth Circuit Court demurred, finding that the plan's trust agreement, when read together with the summary plan description, constituted an ERISA plan document. Had the plan had a compliant ERISA plan document in the first instance, it might well have avoided litigation altogether.

This post reviews Mull and examines an anomaly in its larger context, i.e., the widespread failure of employers of all sizes to adhere to the relatively simple and straightforward ERISA rules governing plan documents and summary plan descriptions. We are of the view that risks of failing to adopt and maintain compliant ERISA plan documents pale in comparison to the modest costs of compliance.

Background

ERISA basics

ERISA does not require employers to offer their employees any employee benefit plans (such as group health plans or 401(k) retirement plans), but when an employer chooses to do so ERISA imposes certain documentation, notice and reporting and other formal requirements. An ERISA-covered plan must be established and maintained according to a written plan document, the material terms of which are reflected in a simplified summary document called a "summary plan description." While these requirements are generally followed in the case of retirement plans, the opposite is true for many welfare plans including, most notably, group health plans. All too often, employers simply assume that the materials provided by a carrier or third-party-administrator, such as glossy brochures or benefits highlights, satisfy their ERISA obligations. In the...