The reimbursement letter lands two weeks after you report the policy limits, and it always reads the same way: the health plan claims a first-dollar right to every penny it paid, no reduction for fees, no reduction for a partial recovery, no room to argue. Before you write back conceding anything, answer one question that decides the entire fight — is the plan self-funded or insured? Get that wrong and you either hand over money California law would have let your client keep, or you pick a fight with a federal equitable lien you cannot win.
The distinction is not a matter of who mailed the letter. A third-party administrator with an insurance-company name on the letterhead routinely administers plans the employer funds out of its own general assets. The funding status is a fact, and it is a fact you can confirm yourself, usually within a day, from two documents: the Summary Plan Description and the plan's Form 5500. Pull both before you negotiate, not after.
Why Funding Status Controls the Outcome
ERISA preempts state laws that "relate to" an employee benefit plan under 29 U.S.C. § 1144(a). The saving clause, § 1144(b)(2)(A), pulls back that preemption for state laws regulating insurance. The deemer clause, § 1144(b)(2)(B), then says a self-funded plan cannot be "deemed" an insurer for purposes of that saving clause. The Supreme Court read those three provisions together in FMC Corp. v. Holliday, 498 U.S. 52 (1990): a self-funded ERISA plan is immune from state insurance regulation, while an insured plan — one that buys a group policy — remains subject to it.
For a California plaintiff, that doctrine is the whole game. If the plan is insured, the group policy is regulated by California law, and your client keeps the made-whole rule and the common fund doctrine as defenses to reimbursement. If the plan is self-funded, those state equitable protections are preempted, and the reimbursement question turns entirely on the plan's own written terms. US Airways, Inc. v. McCutchen, 569 U.S. 88 (2013), confirmed that for a self-funded plan, the plan language controls — a clear plan term overrides the made-whole and common fund defaults, and those defaults only fill gaps when the document is silent. Sereboff v. Mid Atlantic Medical Services, 547 U.S. 356 (2006), gives the self-funded plan the enforcement tool: an equitable lien by agreement under § 502(a)(3) on the identifiable settlement fund.
So the same demand letter means two different things depending on a fact the plan rarely volunteers. The money at stake scales with the recovery, and on a serious case it is real money — the kind of seven-figure result behind the $20.6M pedestrian verdict the Michigan Court of Appeals affirmed can carry a six-figure health lien that a made-whole argument would cut in half if the plan is insured.
What the SPD Tells You — and What It Hides
ERISA requires every plan to furnish a Summary Plan Description written for participants, under § 102, 29 U.S.C. § 1022. The SPD must state the plan's funding arrangement and the source of benefit payments. Read the funding section and the subrogation/reimbursement section together. A self-funded plan's SPD typically says benefits are "paid from the general assets of the Employer" or "from a trust established by the Employer," and names a third party only as the "claims administrator" — not the insurer. An insured plan's SPD will reference a group insurance contract or policy number and identify an insurance company as the payor of benefits.
Two traps live here. First, the SPD is a summary, and the controlling document is the plan instrument itself; where they conflict, current Supreme Court doctrine looks to the plan terms rather than the summary, so do not stake everything on SPD language alone. Second, an employer that buys stop-loss coverage is still self-funded. Stop-loss reimburses the employer for catastrophic claims; it does not make the plan an insurer of the participant. SPD language mentioning stop-loss or "excess loss" coverage is not evidence the plan is insured — it is the opposite signal, because only self-funded plans buy it.
Demanding the Documents in Writing
If the administrator stonewalls, the plan administrator must produce the SPD and plan document on written request from a participant or beneficiary under § 104(b)(4), 29 U.S.C. § 1024(b)(4). Failure to produce within 30 days exposes the administrator to penalties of up to $110 per day under § 502(c), 29 U.S.C. § 1132(c), in the court's discretion. Your client is the beneficiary; you make the request on their behalf, in writing, and you date-stamp it. That clock is one of the few pieces of pressure you hold before suit, and it frequently produces the document faster than any phone call.
The Form 5500 as the Independent Check
The SPD is what the plan says about itself. The Form 5500 is what the plan told the federal government under penalty of perjury, and it is public. Welfare plans with 100 or more participants file annually with the Department of Labor; you can pull filings free through the DOL's EFAST2 search or a mirror such as freeerisa.com. The filing usually lags a year, but funding status rarely changes year to year.
On the main Form 5500, the funding and benefit arrangement lines (historically lines 9a and 9b) carry checkboxes: "General assets of the sponsor," "Trust," "Insurance," and a 412(e)(3) box that will not apply to a health plan. A self-funded medical plan checks general assets or trust. An insured plan checks insurance. The presence of a Schedule A — the insurance information schedule — is where attorneys get fooled. A Schedule A appears whenever the plan has any insurance contract, and a self-funded plan files one for its stop-loss policy. So a Schedule A by itself proves nothing. Read what the Schedule A actually covers: a policy paying benefits directly to participants points to an insured plan; a policy labeled stop-loss, excess loss, or aggregate/specific coverage confirms self-funding. Cross-read the Schedule A against the 9a/9b boxes and the SPD funding language, and the three sources will agree.
When they disagree, the disagreement is itself useful. A plan whose Form 5500 reports general-asset funding while its administrator argues it is "insured" to dodge California's made-whole rule has handed you an admission. That kind of documented inconsistency is the same evidentiary use point that decides constructive-notice disputes like Sargenti v. City of Long Beach — the record contradicts the position, and the contradiction is the argument.
What Changes Once You Know
If the documents confirm an insured plan, California equitable doctrine is back in play. The common fund doctrine requires the plan to bear a pro-rata share of your attorney's fees and costs incurred to create the recovery. The made-whole rule bars reimbursement until your client has been fully compensated, and a policy-limits case almost never makes the client whole. Frame the reduction in those terms and document the gap between damages and recovery.
If the documents confirm a self-funded plan, you are litigating the plan's text, not state equity. Read the reimbursement clause for whether it expressly disclaims the made-whole and common fund defaults; many do, and McCutchen enforces clear language. But the clause is the ceiling on the plan's rights, not a blank check. Watch the recovery's path: under Montanile v. Board of Trustees, 577 U.S. 136 (2016), an ERISA equitable lien attaches to a specifically identifiable fund, and once the settlement proceeds are dissipated on non-traceable expenses, the plan cannot reach the participant's general assets. Settlement timing and disbursement sequencing become substantive, not clerical.
Build the Habit Before the Case Needs It
The reimbursement fight rarely turns on a clever argument made at the end. It turns on a fact established at the beginning. Pull the SPD on intake for any client with employer-sponsored coverage, send the § 104(b)(4) demand the day the administrator goes quiet, and download the Form 5500 the same afternoon. Reconcile the funding language, the 9a/9b boxes, and the Schedule A before you concede a dollar. The mass-tort plaintiffs threading the MDL 3047 social-media settlements face the identical question at scale, and the answer is built the same way — one plan, two documents, read against each other.
Funding status is not an argument you make. It is a fact you confirm. Confirm it first, and the reimbursement letter stops being a demand and starts being a negotiation you already understand.