ERISA Welfare Insurance Definition

ERISA welfare benefits cover many benefits outside of health benefits.

The Employee Retirement Income Security Act of 1974, as amended, establishes minimum standards for the operation of certain social welfare plans. There are two types of plans under ERISA: pension and welfare plans. ERISA is designed to protect the participants of these types of plans.

ERISA Definition of Welfare Plans

Section 3(1) of ERISA defines an employee welfare benefit plan or welfare benefit plan as a plan, fund or program that is established or maintained by an employer or employee organization. The purpose of this plan, fund or program must be to provide its participants and their beneficiaries with welfare benefits through the purchase of insurance.

What Constitutes Welfare Benefits Under ERISA

Typically one thinks of health insurance as a welfare benefit, but ERISA defines welfare benefits much more broadly. Welfare benefits include accident, disability, death or unemployment benefits. Some welfare benefits are designed as vacation programs, training programs, scholarship funds or legal services.

ERISA-Covered Plans

The case, Donovan v. Dillingham, developed a five-part test to determine whether a plan is covered by ERISA. The first requirement is that there must be a plan, fund or program. This plan, fund or program must provide listed benefits. The plan, fund or program must be established or maintained by an employer or employee organization. Finally, no regulatory exceptions can apply for the plan to fall within ERISA's domain.

What is a Plan, Fund or Program?

The first step in determining whether a plan is covered by ERISA is to determine whether it exists. The Supreme Court looked at this issue in Fort Halifax Packing Co. v. Coyne and developed a framework of factors to review in order to determine what constitutes a plan, fund or program. You must look at whether it is a one-time payment or an ongoing payment scheme, whether the employer prefunds the benefits or whether the employer established any sort of administrative process to operate the benefits. Typically a plan would need some administrative activity.

References

• Cornell University Law School: Legal Information Institute: U.S. Code § 3(1)
• Open Jurist: Donovan v. Dillingham, 688 F.2d 1196 (11th Cir. 1982)
• U.S. Supreme Court Center: Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987)