Retirement Heist: how companies plunder and profit from the nest eggs of American workers

One would think that awarding the benefits would be a simple call. But league officials, though agreeing that Washington had a disability, deemed that it wasn’t football-related, so his benefit would be $750 a month instead of $4,000.¹⁸ Washington appealed, and after more medical reviews, league doctors again concluded that Washington was disabled totally by football injuries. The determination went to the trustees for a vote, and they deadlocked: Three trustees representing players agreed his disability was caused by football; team-owner trustees said that Washington’s problems were the result of a crummy childhood, a failed marriage, and money troubles. It was all in his head—but not the result of a concussion. In 1986, three years after Washington first applied for benefits, the decision went to an arbitrator, who noted that the plan defined a football-related disability as being the result of “a football injury.” Focusing on the word “a,” the arbitrator said this meant a former player had to have a single injury to be eligible for football-related disability benefits. Because Washington had several injuries, he was out of luck.

TIME OUT

Based on this creative interpretation, the NFL plan denied the claims of many other former players that were pending at the time. If Washington’s claim had been brought before a state court, it would have come under state insurance laws regarding unfair claims denials, where a judge may have concluded that the arbitrator’s decision was “arbitrary and capricious,” a legal standard referring to a decision that has no reasonable basis.

But employees benefits cases fall under ERISA, which “preempts,” or overrides, state laws, including insurance laws about fairness. Where does that leave plaintiffs? In a black hole.

When Congress created ERISA in 1974, it assumed that the law would apply to pension plans, so it granted trustees of a pension plan broad “discretion” to make decisions, such as how to invest money and how to determine who is eligible for benefits. When it comes to pensions, this can be a straightforward decision: If the rules say that a person who works five years is eligible for a pension, then he’s eligible.

But in 1987, the Supreme Court ruled that ERISA covers not only pensions but other benefits, such as medical and disability plans. Suddenly, trustees were deciding what constitutes a disability. But few players have disabilities as clear-cut as those of wide receiver Darryl Stingley, who was paralyzed during a preseason game in 1978. The more common injuries cited in disability claims—cervical-spine injuries, osteoarthritis, and knee, hip, and other joint injuries—can’t be as easily measured. Debilitating problems may not show up for years and can be exacerbated by the use of painkillers and steroids, along with substance abuse.

And when it comes to depression or head injuries, determinations can be especially subjective. For years, the NFL steadfastly maintained that there was little credible research linking football with developing health problems, such as arthritis, heart disease, or cognitive impairment, in later life. This was like the tobacco industry insisting that smoking doesn’t cause lung damage.

Though Congress didn’t intend trustees to have so much power to decide who gets benefits, employers have blocked and tackled every effort to create rules similar to those existing in state courts. The wellpublicized medical-claims denial cases in the 1990s weren’t really about rogue behavior by HMOs; rather, they were merely examples of what employers and insurers could do when unfettered by state insurance laws. Benefits provided in the workplace are all shielded by ERISA, which is why the employer-plan market has been so lucrative for insurers. Disability, long-term care, life insurance—if it’s provided in the workplace, even if the employee pays 100 percent of the cost, it falls under ERISA, and has no state-law protections for unfair denials or for compensatory or punitive damages.

Ironically, the very people who decided that benefits would fall under ERISA are themselves exempt from that federal law: Congress. All government employees are exempt from ERISA, which means that judges, lawmakers, police, and municipal meter readers have access to state courts to ensure their benefits, while their neighbors who are employed by private businesses do not.¹⁹