Blog 7/25/2017

Employer’s Treatment of Health Plan’s SPD as Plan Document Didn’t Justify Participant’s Refusal to Reimburse Plan for Medical Expenses Following Favorable Malpractice Settlement

The Fifth Circuit has held that a plan sponsor was permitted to treat a group health plan’s summary plan description (SPD) as the plan’s official plan document, where there was no alternative plan document in the record. Thus, the court rejected a plan participant’s argument that she was not required to reimburse the plan for medical expenses paid by the plan, after she had received a malpractice settlement. It didn’t matter that the plan did not have an ERISA-compliant written instrument in place. (Rhea, Donna v. Alan Ritchey, Inc Welfare Benefit Plan, (2017, CA5) 2017 WL 233253)


Alan Ritchey, Inc. (Ritchey) was the sponsor and administrator of the Ritchey Welfare Benefit Plan. Donna Rhea, the wife of an Ritchey employee, was a beneficiary of the plan.

In November 2011, Donna underwent surgery and alleged injury from malpractice. The plan covered $71,645 of her medical expenses. After Donna settled the malpractice claim, the plan sought reimbursement of the medical expenses the plan had covered on Donna’s behalf.

As a plan beneficiary, Donna had received a copy of the plan’s SPD, which provided that “if a third party causes a Sickness or Injury for which you receive a settlement, judgment, or other recovery, you must use those proceeds to fully return to the Plan 100% of any Benefits you received for that Sickness or Injury.”

The SPD also alluded to the existence of a separate “official Plan Document,” but when the plan paid Donna’s medical expenses, the SPD was the only document describing a beneficiary’s rights and obligations under the plan.

When Donna’s attorneys asked to see the “official Plan Document,” Ritchey produced an affidavit signed by plan administrator, stating that the SPD was the official plan document.

Donna refused to reimburse the plan for the $71,645.00, claiming that Ritchey did not have an ERISA-compliant written instrument in place when the plan paid her medical expenses. Ritchey claimed that the plan was ERISA-compliant at all relevant times, and that the SPD established a right to be reimbursed for Donna’s medical expenses.

In September 2013, Donna sued Ritchey and the plan for a declaratory judgment that she was not required to reimburse the plan. The district court ruled in favor of Ritchey and the plan.

SPD served as written instrument.

On appeal, the Fifth Circuit affirmed the district court decision, holding that plan sponsors commonly use a singe document to satisfy the ERISA requirement for an SPD and written instrument. Thus, it was appropriate for Ritchey to treat the SPD as the plan’s written instrument when there was no alternative plan document in the record.

Relying on Cigna Corp. v. Amara (2011, S.Ct.) 563 US 421 (see Pension and Benefits Week ¶  9  5/23/2011), Donna argued that a plan’s SPD and written instrument must be separate documents. The Fifth Circuit rejected Donna’s argument, concluding that Amara was factually distinguishable because that case involved a conflict that arose between the written plan document and an SPD. Here, Donna’s claim addressed whether an SPD can function as the written instrument in the absence of a separate written instrument.

The court also noted that Donna was correct that the SPD had not laid out a complex amendment or funding procedures, but ERISA did not require that the written instrument set forth complex procedures.

Finally, the Fifth Circuit held that even though the SPD referred to a nonexistent plan document, the SPD could still be enforced as the plan’s document.

(Foley Hoag LLP)

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