ERISA Lawyer Fees

How ERISA lawyers charge: contingency on the benefits recovered

Almost all ERISA benefit work is taken on contingency: nothing up front, and a percentage of whatever the plan is made to pay. The usual band is 25% to 40%, and where a case lands in it depends on how far it has to go rather than on how hard it was. A denial reversed during the plan’s own appeal is a fraction of the work of one litigated to judgment.

A typical ladder runs about 25% if the plan reverses itself on the administrative appeal, a third once suit is filed, and 40% if the case is decided on the record or taken up on appeal. Some firms quote one percentage at every stage, which is cheaper on a case that resolves late and dearer on one that resolves early. Ask which structure is on offer and get it written into the fee agreement.

What the percentage applies to matters as much as the number itself. A disability or pension claim can produce back benefits, reinstated monthly payments and a buyout of future benefits, and agreements differ on whether that future value counts. On a long-tail claim that clause is worth more than a few points on the headline rate.

Hourly billing, commonly $300 to $650 an hour, appears where the money at stake is small or the question is narrow — a plan-document demand, a COBRA notice failure, or advice to an employer running a plan. Fiduciary and excessive-fee cases are usually class actions in which the court sets the fee out of a common fund, so an individual participant is never billed. Flat fees are rare, because the plan rather than the lawyer controls the timetable.

Attorney fees, case costs, and the fee award ERISA allows

The contingency percentage is the fee. Case costs are the third-party expenses of building the record, and in ERISA work they are incurred earlier than in ordinary litigation because the record closes before the lawsuit starts. Most of the spending happens during the administrative appeal.

The usual items are medical and personnel records, treating-physician narrative reports, functional capacity evaluations, vocational opinions and, in a pension or fiduciary matter, an actuary or an investment-fee expert. Total case costs of $1,000 to $8,000 are normal on a benefits claim. Ask whether the firm advances them and whether you owe them if the claim fails.

ERISA carries a fee-shifting provision that has no equivalent in most insurance disputes: the court may order either side to pay the other’s reasonable attorney fees. The threshold is some degree of success on the merits, which is lower than winning outright — a remand sending the claim back to the administrator has been enough. Awards are discretionary and often partial, so nobody should treat one as the plan for paying the lawyer.

Because the plan can ask for its own fees too, a weak case carries a real if uncommon downside, and who pays attorney fees is worth raising at the first meeting. Most agreements provide that the firm keeps the larger of a court-awarded fee or the contingency, not both. Confirm that in writing, along with whether the percentage comes off the gross recovery or the net after costs are repaid.

Which plans ERISA governs, and the documents you are owed

ERISA is the 1974 federal statute that governs employee benefit plans offered by private employers — health coverage, disability and life insurance, severance, pensions and 401(k) accounts alike. If the benefit came through work, the starting assumption is that ERISA applies. That single fact changes the deadlines, the evidence, the court and the remedies.

Three large categories sit outside it. Government and church plans are exempt, so a teacher, a city employee or a worker at a religious hospital system may be under state law instead; a policy you bought yourself is an ordinary contract; and an individual retirement account is not an employer plan at all. Coverage bought through a professional association, or a group policy converted to an individual one after you left the job, is genuinely contestable either way.

Every participant is entitled to the plan documents, and the right is enforceable. The administrator has 30 days from a written request to produce the summary plan description, the plan instrument, the trust agreement and the latest annual report, and a court may impose a penalty of up to $110 a day for each day it is late. The penalty is discretionary and usually turns on prejudice, but the demand letter alone produces documents remarkably often.

Address the request to the plan administrator named in the summary plan description and keep proof of the date. That document is where the appeal deadline, the definition of the benefit, the offsets and any discretionary clause are actually written down. Neither a long-term disability claim nor a denied life insurance claim can be assessed properly without it.

The claims procedure: deadlines, the mandatory appeal, exhaustion

The federal claims-procedure regulation sets a timetable the plan has to keep and one you have to keep. A post-service health claim must be decided within 30 days and a disability claim within 45 days, with limited extensions, and a denial has to state the specific reasons, the plan provisions relied on, what further evidence would help and how to appeal. A denial that does not say those things is itself a defect worth raising.

Your side of the clock is the appeal. Health and disability claims must be given at least 180 days to appeal and life and pension claims at least 60, measured from the denial letter rather than from when you got round to reading it. There is no general good-cause extension, and missing the window usually ends the claim outright.

Exhaustion is the rule: with narrow exceptions you cannot sue until the internal appeal has been decided or the plan has blown its own deadline. Filing suit first gets the case dismissed, and the appeal window may have closed by the time that is sorted out. Where the plan fails to follow the regulation the usual remedy is that the appeal is deemed exhausted, which lets the case proceed but rarely wins it.

A second deadline runs behind the first. Plans routinely impose their own contractual limitations period for filing suit — commonly three years, and sometimes measured from the proof of loss rather than the final denial — and courts enforce those clauses; where the plan is silent the court borrows the most analogous state statute of limitations. Read the limitations clause the same day you read the denial letter.

Why the appeal decides the case: the closed record and the standard of review

An ERISA benefits lawsuit is not a trial. There is no jury, usually no discovery and no live testimony; a judge reads the administrative record — everything the plan had in front of it when it decided the final appeal — and rules on written briefs. Evidence created after that decision is generally shut out.

That is why the appeal rather than the lawsuit is where the case is won. Every treating-physician opinion, every functional test, every rebuttal to the plan’s file reviewer and every document the plan relied on has to be in the file before the final decision issues. Hiring a lawyer after the final denial is the most common and most expensive mistake in this area.

The second half of the problem is the standard of review. Where the plan document grants the administrator discretion to interpret the plan and decide eligibility — a discretionary clause — the court asks only whether the decision was reasonable, not whether it was right. A defensible but wrong denial survives that test, which is how a case can be lost on paperwork the claimant never saw.

Without a discretionary clause the judge decides the question afresh, and the difference in outcome is large. Many states now prohibit those clauses in insured policies, and because such bans regulate insurance they survive preemption and reach the plans funded by an insurance policy. A self-funded plan, where the employer pays claims from its own assets and an insurer only administers them, is beyond the reach of any state rule of that kind.

Fiduciary breach, 401(k) fees and COBRA: a different kind of ERISA case

A fiduciary case is a different animal from a denied claim. Whoever controls plan assets or plan administration owes duties of loyalty and prudence, and the remedy runs to the plan rather than to the individual — losses restored, profits disgorged, and in serious cases the fiduciary removed. It is not an argument about whether your benefit was payable.

The largest group of these is the excessive-fee case over a 401(k): recordkeeping charged per participant at a multiple of the market rate, retail share classes held where an identical institutional class was available, or revenue sharing that quietly paid plan expenses out of returns. For one participant the loss is often a few hundred dollars a year, which is why this work is almost always a class action. The fee there comes out of a common fund and is set by the judge, so no participant is billed.

The deadline is unusual too. A fiduciary-breach claim must generally be brought within six years of the breach, cut to three years from the date you had actual knowledge of it, with no limit at all where there was fraud or concealment. Having been sent the disclosure documents is not automatically knowledge of the breach.

COBRA sits inside ERISA and generates its own claims. After a qualifying event the employer has 30 days to notify the plan administrator and the administrator 14 days to send the election notice; you then have 60 days to elect and 45 days to pay. A notice never sent can expose the administrator to the same $110-a-day penalty and to the medical bills incurred meanwhile, and such small discrete matters are often handled hourly or by the employment lawyer running the separation.

Why your state matters: preemption, insured plans and bad faith

ERISA preempts state laws that relate to an employee benefit plan, and that one clause is why your state matters less here than almost anywhere else. The state bad-faith remedy, the unfair-claims statute, the consumer-protection count, the claim for emotional distress and the jury that would have heard them are all displaced. What replaces them is a short federal menu: the benefit itself, clarification of future rights, equitable relief, and sometimes fees.

The practical consequence is a large difference in value on identical facts. A Texas policyholder with an individually bought policy can pursue statutory penalties and fees under the state insurance code, while the same person denied under an employer plan gets the benefit and interest. A California claimant loses the state bad-faith tort the same way.

Two kinds of state rule do survive. Laws that regulate the business of insurance are saved from preemption, which is why state bans on discretionary clauses bite — and why restrictions of that kind in New York and California can restore a fresh judicial review of a denial. The deemer clause then takes it back for self-funded plans, which are treated as not being insurance at all.

So the question that decides how much your state matters is how the plan is funded. An insured plan picks up whatever your state does to insurance policies; a self-funded plan is federal law end to end, wherever you live. An ordinary state-law insurance claim is a materially different and usually more valuable case than the same dispute inside a plan.

Choosing an ERISA lawyer and keeping the cost down

Firstly, find out today whether ERISA governs your benefit and what the appeal deadline is, because 60 days is a realistic floor and nothing restarts it. Ask the employer in writing for the summary plan description and the full plan document. If you bought the policy yourself rather than receiving it at work, most of this page does not apply to you.

Secondly, demand the claim file before you argue anything. You are entitled to every document the plan relied on, including its internal medical reviews and the reviewer’s credentials, and the denial letter is a summary written to be defensible rather than an account of what happened. Arguing against the letter instead of against the file is how appeals get lost.

Thirdly, spend on evidence at the appeal stage rather than saving it for court. A functional capacity evaluation, a vocational report or a treating specialist’s narrative is worth far more in the file than any brief filed afterwards, because the judge will not look past the record. Where a disability benefit is offset by SSDI, run both claims together rather than one after the other.

Finally, shop the fee. Nearly every firm in this area offers a free consultation and will read a denial letter at no charge, and a claim likely to be reversed on the administrative appeal should not carry a litigation-stage percentage. Ask what the percentage applies to, what happens to a court-awarded fee, and who absorbs the case costs if the claim fails.