Legal Definitions - Atwood doctrine

ERISA stands for the Employee Retirement Income Security Act. It is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.

The Atwood doctrine is a legal principle that applies specifically to employee benefit plans governed by ERISA. It states that if there is a conflict or inconsistency between the detailed, comprehensive plan document and the simpler, more accessible summary-plan description regarding the circumstances under which an employee's benefits may be denied, the summary-plan description takes precedence. In essence, if the summary-plan description offers more favorable terms or fewer restrictions on benefit denial than the full plan document, the employee can rely on the summary-plan description.

• Example 1: Health Insurance Coverage for Specific Treatments

  A company's health insurance plan, governed by ERISA, has a comprehensive plan document that explicitly states certain advanced diagnostic tests are "never covered under any circumstances." However, the summary-plan description provided to all employees indicates that these tests "may be covered if deemed medically necessary by a physician and pre-approved by the plan." An employee's doctor recommends one of these tests, which is pre-approved by the plan based on medical necessity. The plan then denies coverage, citing the blanket exclusion in the full plan document.

  How it illustrates the Atwood doctrine: This situation presents a clear conflict regarding when benefits (coverage for the diagnostic test) can be denied. Because the summary-plan description offered a pathway for coverage under specific conditions, the Atwood doctrine dictates that the terms of the summary-plan description control, and the employee's claim for coverage should be honored.

• Example 2: Life Insurance Eligibility for New Employees

  A company's ERISA-governed life insurance plan's master policy document specifies that new employees are eligible for coverage only after completing 120 days of continuous employment. However, the summary-plan description distributed during onboarding states that life insurance coverage begins "on the first day of the month following 30 days of employment." A new employee passes away after 45 days of employment. The insurance provider denies the beneficiary's claim, citing the 120-day waiting period in the master policy.

  How it illustrates the Atwood doctrine: Here, the conflict is about the eligibility criteria, which directly impacts whether benefits can be denied. Since the summary-plan description, which the employee would have relied upon, indicated a shorter waiting period for eligibility, the Atwood doctrine would require the plan to honor the terms of the summary-plan description, meaning the beneficiary's claim should be paid.

• Example 3: Retirement Plan Withdrawal Penalties

  The detailed document for an ERISA-covered 401(k) retirement plan states that early withdrawals (before age 59½) are subject to a 10% plan penalty in addition to any IRS penalties, unless the withdrawal is for a "qualified medical expense." The summary-plan description, however, lists "qualified medical expenses or higher education expenses" as exceptions to the plan's 10% penalty. An employee under 59½ takes an early withdrawal to pay for their child's college tuition and is assessed the 10% plan penalty.

  How it illustrates the Atwood doctrine: This scenario involves a conflict over the conditions under which a benefit (the full withdrawal amount without penalty) can be denied. The summary-plan description offered a broader exception to the penalty. Under the Atwood doctrine, the employee can rely on the more favorable terms presented in the summary-plan description, and the plan's 10% penalty should not have been applied for the higher education expense.