Opinion
Civil Action No. SA-04-CA-0841-XR.
December 22, 2005
ORDER
On this day, the Court considered Cigna Life Insurance Company of New York's (CLICNY) motion for summary judgment (docket no. 30). The motion is GRANTED.
BACKGROUND
Plaintiff is a former employee of Salomon Smith Barney, a subsidiary of Citigroup Inc. and worked there as a financial consultant. He worked at Salomon Smith Barney for eleven years before he resigned his employment. He alleges that he became disabled due to Multiple Sclerosis, psoriatic arthritis, anxiety and depression.
While employed at Salomon Smith Barney, Plaintiff enrolled in a long-term disability insurance plan. Plaintiff alleges that he applied for, but was denied the LTD benefits.
On June 9, 2004, Plaintiff filed this suit in the 45th Judicial District of Bexar County, Texas. In that Petition the Plaintiff alleged that through his employer he purchased a disability insurance plan, that CLICNY represented that the disability plan would provide certain benefits, that he subsequently became permanently disabled, and that CLICNY refuses to provide him with benefits. He alleged a claim for breach of contract and claims under the Texas Deceptive Trade Practices Act (DTPA) and the Texas Insurance Code.
Defendant removed the suit to this Court arguing that Plaintiff's claims were wholly preempted by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001, et seq.
On January 14, 2005, Plaintiff filed a Second Amended Complaint wherein Plaintiff reasserts his claims of breach of contract and violations of the Texas Insurance Code and the DTPA. Plaintiff also alleges that his claims fall within ERISA's safe harbor provision because Plaintiff's participation in the disability plan was voluntary, the employer did not contribute any monies to the policy premiums, and the employer merely collected premiums through a payroll deduction.
CLICNY now moves for summary judgment seeking a declaration that Plaintiff's claims are wholly preempted by ERISA and the safe harbor exemption does not apply.
ANALYSIS
A. ERISA Preemption Generally
ERISA preemption analysis involves two central questions: (1) whether the plan at issue is an "employee benefit plan" and (2) whether the cause of action "relates to" this employee benefit plan. McMahon v. Digital Equip. Corp., 162 F.3d 28, 36 (1st Cir. 1998). A law "relates to" a covered employee benefit plan if it (1) has a connection with or (2) reference to such a plan. California Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 324 (1997). A common-law cause of action premised on the existence of an ERISA plan is preempted. Id. "[A] state law cause of action is expressly preempted by ERISA where a plaintiff, in order to prevail, must prove the existence of, or specific terms of, an ERISA plan." McMahon, 162 F.3d at 38.
B. Is the Plan at issue an employee benefit plan?
This issue does not appear to be seriously disputed by Plaintiff. The true contested issue appears to be whether the safe harbor exemption applies in this case. However, Plaintiff in his response brief makes various arguments appearing to challenge whether a plan exists. Accordingly, the Court addresses the question whether the Citigroup Salary Continuation and Long Term Disability Plan is an employee benefit plan.
Effective January 1, 2002, Citigroup Inc. published its Salary Continuation and Long Term Disability Plan and Summary Plan Description (SPD). A Statement of ERISA rights was included in the SPD. A Plan Administrator was designated (Plans Administration Committee of Citigroup Inc.). Plan funding was noted as being provided by employer and employee contributions.
ERISA governs employee pension and welfare plans which meet the specific criteria set forth in the Act and as further explained by the decisional law interpreting ERISA. An employee welfare benefit plan is defined at 29 U.S.C. § 1002(1) as: "any plan, fund, or program . . . established or maintained by an employer . . ., to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits. . . ."
The Fifth Circuit has further stated that an ERISA plan has been established if "from the surrounding circumstances a reasonable person could ascertain the intended benefits, beneficiaries, source of financing, and procedures for receiving benefits." Hansen v. Continental Ins. Co., 940 F.2d 971 (5th Cir. 1991); Memorial Hospital System v. Northbrook Life Ins. Co., 904 F.2d 236, 240 (5th Cir. 1990). In this case, each of the above elements are met. The intended benefits are for disability, and the beneficiaries are Citigroup employees. The plan is funded by the purchase of a group insurance policy paid for by both employer and employee contributions. Finally, the procedure for filing claims is detailed in the SPD. See also McNeil v. Time Ins. Co., 205 F.3d 179, 189 (5th Cir. 2000), cert. denied, 531 U.S. 1191 (2001).
C. Whether the causes of action "relate to" the employee benefit plan.
As stated above, a law "relates to" a covered employee benefit plan if it (1) has a connection with or (2) reference to such a plan. It is uncontested in this case that if a Plan is found to exist, the causes of action "relate to" the Plan.
D. Are Plaintiffs' claims exempted from ERISA by virtue of the Safe Harbor Regulations?
Plaintiff asserts that the Salary Continuation and Long Term Disability Plan is exempt from ERISA because the plan falls within safe harbor provisions adopted by the Department of Labor. For purposes of Title I of ERISA, "the terms `employee welfare benefit plan' and `welfare plan' shall not include a group or group-type insurance program offered by an insurer to employees or members of an employee organization, under which (1) No contributions are made by an employer or employee organization; (2) Participation in the program is completely voluntary for employees or members; (3) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer; and (4) The employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs." 29 CFR § 2510.3-1(j).
Unless all four of the above requirements are met, the employer's involvement in a group insurance plan is significant enough to constitute an "employee benefit plan" subject to ERISA. Kanne v. Connecticut General Life Insurance, 867 F.2d 489, 492 (9th Cir. 1988) (state law claims against insurer preempted by ERISA where only one of the above mentioned conditions was not met; the failure of any one of the conditions "would prevent the exclusion of the insurance plan from ERISA coverage"), cert. denied, 492 U.S. 906 (1989). See also McNeil v. Time Ins. Co., 205 F.3d at 190.
CLICNY concedes that participation in the program was completely voluntary. It also concedes that the employer received no consideration in the form of cash or otherwise in connection with the program. Accordingly, only items (1) and (3) are at issue.
1. Are contributions made by the employer?
Plaintiff argues that Plaintiff was required to pay the full cost of any LTD premiums. Accordingly, he argues that no contributions were made by the employer to the Plan. Defendant responds that although Plaintiff was required to pay the full costs of his premium, the employer paid the LTD premiums for employees earning less that $50,000, and accordingly the employer made contributions to the plan. The Court concludes that Plaintiff's argument is misplaced. Citigroup made contributions to the Plan even though it did not contribute to Plaintiff's individual premium amounts. Further, basic life insurance and short term disability insurance was provided to certain employees at no cost. As stated in the SPD, the employer funded the Plan through insurance contracts, a trust and general assets of the company. The fact that Plaintiff (and employees whose salary exceeded $50,000) were required to pay the full costs of their premiums does not negate the fact that other employer contributions were made. See McNeil v. Time Ins. Co., 205 F.3d at 190.
2. Was the employer's sole function to permit the insurer to publicize the program to employees, to collect premiums through payroll deductions and to remit them to the insurer?
Plaintiff argues that the employer's role was limited to collecting the LTD premiums and remitting them to Defendant. Otherwise, it argues that administration of the LTD policy was left entirely to Defendant. Defendant argues that the employer designated its own Plan Administration Committee as the Plan Administrator, that the employer retained ERISA obligations such as sending information about the Plan and benefits to all plan participants, and filing annual reports and plan descriptions with the Department of Labor.
From the standpoint of a reasonable employee, this was an employer-endorsed, sponsored, or managed plan. This is not a case where an employer separates itself from the plan, making it reasonably clear that the plan is a third-party offering. Further, the employer did not merely advise employees of the availability of group insurance, accept payroll deductions, and pass them on to the insurer. Citigroup created a Plan, had that Plan reviewed by their group insurance department and legal counsel, treated the Plan as an ERISA plan and complied with all Department of Labor regulations regarding filing and reporting. Once employees enrolled in the Plan, the employer internally managed the data. During annual and open enrollments periods, the employer sent reminders to the employees that they should review their options. Courts have rejected arguments similar to Plaintiff's on much less. See e.g. Shah v. Connecticut General Life Ins. Co., 1993 WL 376131 (N.D. Ill. 1993) ("[e]ven if [the employer] makes no financial contribution, [the employer] performs a significant function in tracking the insurance expiration of departing employees, timely informing them of their conversion option, and assisting in their conversion to an individual policy if they so choose. Based upon these functions, the court found that the employer is part of an administrative scheme and plays a role in `establishing' the individual plan within the meaning of ERISA.").
This Plan is distinguishable from Metoyer v. American Intern. Life Assur. Co. of New York, 296 F.Supp.2d 745 (S.D. Tex. 2003) that is relied upon by Plaintiff. In Metoyer, the question was whether the policy was part of an overall benefits package provided to Itochu employees or whether it was a wholly separate insurance policy with which the company was minimally involved. As noted above, this was not a case where the employer merely made known to their employees the existence of a wholly separate insurance policy. The instant case involves a group insurance plan secured by the employer for the benefit of its employees. See Deposition of Phyllis Wade, attached as Exhibit A to Plaintiff's Response (docket no. 33).
CONCLUSION
Defendant's motion for summary judgment is GRANTED. The Plan at issue is an employee benefit plan and the safe harbor exclusion is not applicable. Plaintiff's state law claims are wholly preempted by ERISA and accordingly are DISMISSED. The Court makes no ruling as to whether Plaintiff's ERISA claim survives inasmuch as no motion or evidence has been submitted on that issue.