Court: Benefit Plans Not Allowed to Discriminate Between Physical and Mental Disabilities

December 15, 2004 (PLANSPONSOR.com) - A federal court has ruled that a long-term disability benefit plan cannot offer higher levels of benefits for physically disabled claimants than it does for mentally disabled ones.

>US District Judge William Young of the US District Court for the District of Massachusetts ruled that although the Employee Retirement Income Security Act (ERISA) does not explicitly state that this is against federal regulations, the law co-exists with others, in this case, the Americans with Disabilities Act (ADA). Since the ADA prohibits discrimination among the disabled in Title I, Young ruled that a mentally disabled woman should receive the same levels of benefits under ERISA as physically disabled claimants.

>The case revolves around Jeanne Iwata, who, after being threatened by a former co-worker, was diagnosed as being mentally disabled. Iwata collected short-term benefits from her employer, Intel, but upon applying for long-term benefits, was informed that only hospitalized mentally disabled employees could receive such benefits. Iwata was then terminated by her employer.

>Iwata then sued her employer and its benefits administrator, Matrix Absence Management, alleging that the two companies unjustly denied her ERISA benefits. She argued that the company violated the ADA by not requiring physically disabled benefactors to be hospitalized but did require her to be, effectively discriminating between disabled people.

>Young dismissed the two companies’ motion to dismiss, asserting that because the denial of benefits was most likely based on stereotypes about mental illness, Iwata had stated a claim under ADA. Because of this, she was allowed to invoke ERISA to provide her with a remedy to the companies’ failure to provide benefits.

>For a full text of Young’s decision in Iwata v. Intel & Matrix, see http://pacer.mad.uscourts.gov/dc/cgi-bin/recentops.pl?filename=young/pdf/iwataopinion.pdf .

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