New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel has issued the following informal opinion on January 26, 2000, representing the position of the New York State Insurance Department.

Licensing of ERISA-Covered Benefit Plan Administrator

Question Presented:

Is a corporation that acts as the administrator of a 100% self-funded employee disability benefit plan governed by the Employee Retirement Income and Security Act, 29 U.S.C.A. §1001 et. seq. (West 1999), hereafter "ERISA," or adjusters employed by the administrator, required to obtain licenses under the NY Ins. Law (McKinney 1985 & Supp. 1999-2000).

Conclusion:

Although the plan may be exempted by the preemptive effect of ERISA from licensure as an insurer under the Insurance Law, the administrator and its employees may not be exempted from the other categories of licensure provided by the Insurance Law, depending on the precise nature of the activities it and they engage in. In particular, if the administrator or its employees engage in any activities in New York that bring it or them within the definitions of "broker," "agent," "public adjuster," "independent adjuster," or "consultant," as used in the Insurance Law, then the appropriate license(s) for those classes of persons must be obtained in accordance with the provisions of Article 21 of the N.Y. Ins. Law (McKinney 1985 & Supp. 1999–2000).

Facts:

An entity incorporated in another state (the administrator) has been designated the fiduciary of an ERISA-governed employee benefit plan. It proposes to perform certain services in New York, namely the investigation of claims for disability benefits and making determinations as to the existence and extent of coverage, and the making of benefit payments to claimants. These activities will be conducted by employees of the administrator.

Analysis:

The relevant licensure requirements of the New York Insurance Law are not laws that "relate" to benefit plans. In Benefax Corp. v. Wright, 757 F. Supp. 800, 804(W.D. Ky. 1990) the Court, in determining whether an administrator licensing statute related to ERISA, stated:

The administrator licensing statutes apply to all persons acting as administrators in Kentucky without regard to whether such persons provide services exclusively to ERISA plans or non-ERISA plans or to persons who service both ERISA and non-ERISA plans. These statutes do not "relate to" ERISA employee benefit plans any more than licensing statutes for other individuals such as attorneys, physicians, chiropractors or accountants who may, in the course of their business service ERISA plans or who may service ERISA plans exclusively. The licensing statutes are not directed towards employee benefit plans in general. Instead, the Commonwealth of Kentucky is focusing its regulatory authority towards the conduct of administrators without regard to whether such administrators service ERISA employee benefit plans.

Benefax, 800 F. Supp. at 804 (Court held Kentucky licensing and regulation of third party administrators of health benefit plans not preempted by ERISA). Similarly, a third party administrator would be required to be licensed under Article 21 of the N.Y. Ins. Law (McKinney 1985 & 1999-2000) free from any preemptive suspension of those requirements under 29 U.S.C.A. §1144(a)(West 1999).

While New York Insurance Law does not provide a separate category of license for "third party administrators," it does license some of the activities that such administrators commonly engage in, e.g. adjusting. See §2108 of the Insurance Law. If the administrator or its employees wish to engage in any activities in New York that would bring it or them within the definitions of "broker," "agent," "public adjuster," "independent adjuster," or "consultant" within the meaning of the Insurance Law, then the appropriate license for that activity must be obtained in accordance with the provisions of Article 21 of the Insurance Law.

A case cited by the requester, Self-Insurance Institute of America v. Gallagher, 1989 WL 143288 (N.D.Fla.), does not controvert the position adopted in Benefax Corp. v. Wright. The State law considered in Gallagher imposed a high level of control over a class of entities that necessarily included ERISA-governed benefit plans, and as a result was found to be in direct conflict with ERISA. The licensure provisions of the Insurance Law under discussion here are distinguishable from the law considered in Gallagher.

For further information you may contact Principal Attorney Donald Carroll at the New York City office.