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Was the Saints’ Bounty Program an ERISA Covered Plan?

Ok.  Well.  Probably not, but this might be a useful (maybe even fun) way to review the factors for determining what is and what is not a “plan” under ERISA.   

So, let’s give it a shot. 

First, the law:

The Saints are operated in Louisiana, so we will look to the law of the 5th Circuit.  In Memorial Hospital System v. Northbrook Life Ins. Co., 904 F.2d 236 (5th Cir. 1990), the 5th Circuit adopted the Donovan v. Dillingham test for whether or not an ERISA covered plan has been established.  688 F.2d 1367 (11th Cir. 1982) (en banc).


The Donovan test outlines five major factors:

1. Can you identify the plan’s intended beneficiaries?

2. Is there a source of financing for the plan?

3. Has the plan been established or maintained?

4. Was the plan established or maintained by an employer or employee organization?

5. Do any legal or regulatory exceptions apply to the plan?


Let’s take each one in order.

The intended beneficiaries are obvious.  The Saints’ players to whom the bounties were offered, presumably defensive and special teams players, were the intended beneficiaries.

There has been plenty of news about the source of financing.  Some say it was Gregg Williams.  Some say it was the Saints organization.  Roger Goodell contends that the bounties were financed, at least in part, by Jonathan Vilma and other players.  In any case, the program had a source of financing.

The question of whether the program has been established or maintained is the most interesting question from my perspective (and it was the impetus for this blog entry.)  We know from news reports that Gregg Williams has supposedly had these bounty programs wherever he has coached, but that does not seem like enough evidence.  We know the Saints organization either knew about or covered up the bounty program.  That is why the Roger Goodell also suspended the highest-ranking members of the Saints organization, including general manager, Mickey Loomis, and the head coach, Sean Peyton.

All of that being said, none of that means that the plan was established or maintained.

Until the ledger.

Once we found out about the ledger, we found out that the plan had recordkeeping.  That sounds a whole lot like maintaining a plan with a specific set of rules and consistent bookkeeping practices.  Now it seems like the Saints established and maintained a plan. 

And, at this point, we don’t need to dwell on the “employer or employee organization” question.  The evidence clearly points to the bounty program coming from the Saints organization.

So we arrive at the fifth factor and, unfortunately, our fun comes to an end.

There are only two broad types of ERISA covered plans: pension plans and welfare plans.

The Saints’ Bounty Program was not a pension plan because it was a bonus program and the funds were not deferred until retirement age.  For a more formal answer, a bonus program is not a pension plan “unless such payments are systematically deferred to the termination of covered employment or beyond, or so as to provide retirement income to employees.”  29 C.F.R. § 2510.3-2(c).

So, was the Saints’ Bounty Program a welfare plan? 

There is one potential regulatory problem and one major problem in the case and statutory law with classifying the Saints bounty program as an ERISA covered welfare plan.

Regardless of how many of the Donovan test’s factors the “plan” might satisfy, the regulations provide a specific exclusion for “payroll practices.” 29 C.F.R. § 2510.3-1(b). Bounties could fall under this exception.  After all, the bounties were earned during work and amounted to extra pay for doing someone’s view of a particularly “good job.”  (Even if we don’t like that version of a good job.)

A payroll practice does not create a “plan” under ERISA.

The larger issue is that in both Donovan and 29 U.S.C. § 1002(1), there is a specific list of benefits that must be the goal of an ERISA covered welfare plan.  These benefits include “medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services…”  Id.

It is safe to say that the Saints’ Bounty Program did not have any of these intended benefits in mind.  It was a bonus program for completing specific tasks.

It was fun to think about (or, I thought it was fun) but the bounty program cannot be a “plan” under ERISA.

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