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Motion for Declaratory Judgement to Declare Plan "Non-ERISA"- D.D. Miss.

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  • Motion for Declaratory Judgement to Declare Plan "Non-ERISA"- D.D. Miss.

    In a recent case out of Mississippi, the court handles a Motion for Declaratory Judgement to Assert Exceptions to Pre-emption and to Declare Plan "Non-ERISA" and a Motion for Partial Summary Judgement. The case was originally filed in the Circuit Court, but was removed by the Defendants alleging federal question. In ruling on these motions, the court walks through a three part test:

    The Fifth Circuit has “devised a comprehensive test for determining whether a particular plan qualifies as an ‘employee welfare benefit plan’” subject to ERISA. Meredith v. Time Ins. Co., 980 F.2d 352, 355 (5th Cir. 1993). Under this test, the Court must “ask whether a plan: (1) exists; (2) falls within the safe-harbor provision established by the Department of Labor; and (3) satisfies the primary elements of an ERISA ‘employee benefit plan’—establishment or maintenance by an employer intending to benefit employees.” Id. If a plan meets all of these requirements, it is an ERISA employee welfare benefit plan and therefore subject to preemption.
    The court then walked through each prong as follows:

    To determine if a plan exists, the Court “must determine whether from the surrounding circumstances a reasonable person could ascertain the intended benefits, beneficiaries, source of financing, and procedures for receiving benefits.” Meredith, 980 F.2d at 355 (quoting Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir. 1993)). In this case, it is readily apparent that the circumstances indicate that a plan exists. The “intended benefits” are the disability insurance benefits under the policies, the “beneficiaries” are the eligible Clinic employees, the “source of financing” is the premiums paid by the Clinic, and the “procedures for receiving benefits” are the procedures under the policies. See id. Despite Plaintiffs’ assertions, the fact that Dr. Meadows received an individual policy does not mean that a plan did not exist. The Fifth Circuit has held that an individual policy issued to a beneficiary can still be part of an overarching ERISA employee welfare benefit plan. Hollis v. Provident Life and Accident Ins. Co., 259 F.3d 410, 414 (5th Cir. 2001). Because the surrounding circumstances indicate that a plan did in fact exist, the Court finds that this prong of the test has been met.

    Under the safe-harbor provision, a plan can only be exempt from ERISA if it meets four criteria: “(1) the employer does not contribute to the plan; (2) participation is voluntary; (3) the
    employer's role is limited to collecting premiums and remitting them to the insurer; and (4) the employer received no profit from the plan.” Meredith, 980 F.2d at 355 (emphasis in original). All four criteria must be met for a plan to be exempt. Id. Here, the first criterion is not met. Plaintiffs do not and cannot dispute that the Clinic paid all premiums under the plan. Plaintiffs’ only argument under this criterion is that the plan “did not exist as a going concern.” (Response [31] at p. 2.) This argument does not defeat the fact that the Clinic indisputably contributed to the plan by paying premiums. (See Hamer Affidavit [30] at ¶ 5.) As such, the plan falls within the safe-harbor provision as it does not meet all the criteria2 for exemption. The second prong of the test for application of ERISA is therefore met.

    The final prong of the test require the Court to consider whether the plan meets the two primary elements of an ERISA employee welfare benefit plan: “(1) whether an employer established or maintained the plan; and (2) whether the employer intended to provide benefits to its employees.” Meredith, 980 F.2d at 355 (quoting MDPhysicians & Assoc., Inc. v. State Bd. of Ins., 957 F.2d 173, 183 (5th Cir. 1992)). Here, the Plan unquestionably meets these elements. The Plan was established and repeatedly renewed by the Clinic to offer income protection to its eligible employees. (See Supplemental Income Protection Plan [30-1][30-2][30-3].) In fact, the Plan documents themselves state that it was “developed specifically for” the Clinic and meant “to provide a Supplemental Income Protection for [the Clinic’s] employees.” (Id.) The third prong of the test for the application of ERISA is therefore met, and the Court finds that the Plan is an employee welfare benefit plan under ERISA subject to preemption.
    Ultimately, the court found that the plan was governed by ERISA and denied the Motion for Declaratory Judgement while granting the Motion for Partial Summary Judgement. The opinion is attached.
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