ERISA Plan Subrogation Rights
Last updated: August 27, 2026
Subrogation vs. Reimbursement
ERISA plans may assert two types of recovery rights: subrogation and reimbursement. Subrogation allows the plan to step into the participant's shoes and pursue the third-party claim directly. Reimbursement gives the plan a right to recover from the participant's settlement proceeds after the participant has settled with the third party. Most plans assert both rights.
| Right | How It Works | When Used |
|---|---|---|
| Subrogation | Plan steps into participant's shoes; pursues third party directly | When participant has not yet settled; plan wants to control claim |
| Reimbursement | Plan recovers from participant's settlement proceeds | After participant settles with third party |
Plan Document Requirements
ERISA subrogation and reimbursement rights must be established in the plan document. The Supreme Court in U.S. Airways v. McCutchen (2013) held that plan terms control, meaning the plan document's language determines the scope of the plan's rights and whether equitable defenses apply. Clear, specific language may enforce full recovery; ambiguous or missing language limits it.
| Plan Language | Effect | Example |
|---|---|---|
| No subrogation provision | Plan cannot enforce subrogation | Plan has no recovery rights |
| Subrogation without rejection of defenses | Equitable defenses may apply | Participant may invoke made whole or common fund doctrine |
| Subrogation with clear rejection of defenses | Plan recovers full claim | "Plan does not recognize made whole or common fund doctrine" |
| First-dollar reimbursement | Plan has priority over participant | "Plan is entitled to first-dollar reimbursement from any recovery" |
Self-Funded vs. Fully Insured Plans
Self-funded ERISA plans preempt state laws that limit subrogation, including state anti-subrogation statutes and hospital lien priority rules. Fully insured ERISA plans are subject to state insurance law and do not preempt state lien statutes. This distinction is critical when multiple claimants compete for a small settlement.
Equitable Defenses
Even when the plan document establishes subrogation rights, participants may invoke equitable defenses to reduce the plan's recovery. Common equitable defenses include the made whole doctrine (participant must be fully compensated before plan recovers), the common fund doctrine (plan shares attorney fees), and unjust enrichment (plan's recovery would unfairly enrich the plan at participant's expense). ERISA plans can contract around these defenses by explicitly rejecting them in the plan document.
| Equitable Defense | Effect | Can Plan Override? |
|---|---|---|
| Made Whole Doctrine | Plan cannot recover until participant is fully compensated | Yes – if plan document clearly rejects it |
| Common Fund Doctrine | Plan shares proportionally in attorney fees and costs | Yes – if plan document clearly rejects it |
| Unjust Enrichment | Plan's recovery would unfairly enrich plan at participant's expense | Harder to override; fact-specific inquiry |
Enforcement Procedures
ERISA plans enforce subrogation and reimbursement rights by asserting a lien on the settlement proceeds, negotiating with the participant and their attorney, or filing a lawsuit under ERISA section 502(a)(3) for equitable relief. Plans must act promptly; if the participant spends the settlement proceeds, the plan may lose its ability to recover under Montanile v. Board of Trustees (2016).
Can an ERISA plan enforce subrogation if the plan document does not mention it?
No. ERISA subrogation rights must be established in the plan document. If the plan document does not include subrogation or reimbursement provisions, the plan cannot enforce those rights. The Supreme Court in U.S. Airways v. McCutchen held that plan terms control, so ambiguous or missing language limits the plan's recovery.
What is the difference between subrogation and reimbursement in ERISA plans?
Subrogation allows the plan to step into the participant's shoes and pursue the third-party claim directly. Reimbursement gives the plan a right to recover from the participant's settlement after the participant settles with the third party. Most ERISA plans assert both rights in their plan documents.