Time to Review Plan Subrogation Procedures, Part 2
I blogged a few days ago about the U.S. Supreme Court decision making it harder for plans to recover from a third-party settlement fund for the amount the plan paid when a participant is injured by that third-party. A recent federal district court decision highlights the need to provide appropriate notice of the plan’s reimbursement/subrogation provisions. The case involved a health plan maintained under a master plan document which incorporated the summary plan description. Only the summary plan description contained the subrogation provision. The master plan document did not. The court held that although the summary plan description was incorporated into the master plan document and therefore was part of it, the subrogation provision was not enforceable because the plan document itself did not repeat the subrogation provision. The court said that the presence of the subrogation provision in the summary plan description, but not in the plan document, created a conflict between the two documents. Since the plan document said that in the event of a conflict, the plan document controlled, the summary plan description provisions on subrogation were not unenforceable.
It may be that this problem could be overcome by stating in both the plan document and in the summary plan description that provisions contained only in the summary plan description are enforceable as if stated in the plan document. Nevertheless, like the U.S. Supreme Court case on which I previously blogged, this case also makes it more difficult for plans to enforce reimbursement obligations. In light of these cases, plan sponsors should review their plan and summary plan description language around reimbursement and subrogation and make any changes necessary to bolster their enforceability.
Contact Benefits Notes for more information.