A U.S. Court of Appeals rules that an ERISA-regulated employee benefit plan is entitled to reimbursement of medical expenses from settlement funds that had been placed in a special needs trust (SNT). Administrative Committee of the Wal-Mart Stores, Inc., et al., v. James A. Shank, as Trustee, et al. (U.S. 8th Cir., No. 06-3531, Aug. 31, 2007).
Deborah Shank, an employee of Wal-Mart, was severely injured in a car crash and adjudicated incompetent. While she was working for Wal-Mart, Ms. Shank was a member of a self-funded employee benefit plan regulated by the Employee Retirement Income Security Act (ERISA). Under the terms of the plan, the Administrative Committee paid for all of Ms. Shank's medical expenses, totaling $469,216. Ms. Shank eventually obtained a settlement of $700,000 from the parties responsible for her injuries. After attorney's fees and costs, that figure was reduced to $417,477, and the funds were placed into an SNT by the district court for Ms. Shank's benefit.
Upon hearing of the settlement, the Committee sought reimbursement of the medical expenses paid, citing the plan's reimbursement provision. The district court granted the summary judgment and placed the funds into a constructive trust.
Ms. Shank, along with her trust and its trustee, appealed, arguing, inter alia, that the Committee's right of reimbursement is limited to the portion of the settlement covering medical expenses, pursuant to Arkansas Department of Health & Human Services v. Ahlborn (126 S. Ct. 1752 (2006). They claimed that Ms. Shank's damages from the accident were more than $12 million, so her settlement amounted to only 5.4 percent of her total damages and the Committee was likewise entitled to only that percentage of money paid on her behalf.
The United States Court of Appeals for the Eighth Circuit affirms, holding that the "purposes of ERISA are best served by enforcing the plan as written." The court notes that although Ms. Shank would benefit from the settlement monies, "all of the other plan members would bear the cost in the form of higher premiums." The court reasons that reimbursement was in order because the Administrative Committee had delivered on its promise that it would pay all of Ms. Shank's medical bills immediately upon her being injured. The court also holds that Ahlborn does not apply to these facts because it deals with a Medicaid provision, and this case turns on the purposes of ERISA.
For the full text of the decision, go to: https://www.ca8.uscourts.gov/opndir/07/08/063531P.pdf .
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