Must a Participant Be “Made Whole” Before a Plan May Exercise Its Right to Reimbursement?

Most ERISA welfare benefit plans have provisions that allow the plan to recoup amounts of medical expenses it paid to participants or beneficiaries for injuries or illnesses caused by third parties (such as those sustained in automobile accidents), where the participant obtains a recovery from the third party. Often, an ERISA plan member will argue that such reimbursement is not required unless the member was “made whole” by the third-party recovery, that is, where the recovery fully compensates the member for his or her injuries, after all deductions are made (including for attorneys’ fees). Plans often draft around such arguments by requiring reimbursement regardless of whether the plan member was made whole.

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