The case of Pharmaceutical Care Management Association v. Gerhart, No.15-3292 (8th Cir. Jan. 11, 2017) involves the question of whether ERISA expressly preempts section 510B.8 of the Iowa Code.  The district court determined that it did not and dismissed Pharmaceutical Care Management Association’s (“PCMA’s”) complaint seeking a declaration of preemption.  Upon review, the Eighth Circuit Court of Appeals (the “Court”) reversed the district court’s decision and remanded the case with direction that judgment be entered for PCMA.

Why did the Court rule that ERISA preempts the part of the Iowa Code in question?

Section 510B.8 of the Iowa Code regulates how pharmacy benefits managers (“PBMs”) establish generic drug pricing, and requires that certain disclosures on their drug pricing methodology be made to their network pharmacies as well as to Iowa’s insurance commissioner.  Shortly after the statute went into effect, PCMA brought this action against Iowa’s insurance commissioner and its attorney general (collectively, “the State”), seeking a declaration that the statute places restrictions and requirements on PBMs that impermissibly reference or are connected with ERISA plans, thus making the statute expressly preempted by ERISA.

I just got this note from the Department of Labor about the new FAQs on the “Conflict of Interest” rules, which basically apply more stringent ERISA requirements to those who provide investment advice to retirement plans and IRAs.  Here is what the note says:

Good Morning,

You have been following the Labor Department’s Conflict of Interest project on retirement investment advice for some time – perhaps even since the original proposal in October of 2010.  The new consumer protections start to go into effect this April and we want to be sure that consumers have the information they need to make use of those new protections.  We also want to answer as many questions as possible about the new rules.  To that end, we are releasing a set of frequently asked questions meant especially for workers and retirement investors.

In Coburn v. Evercore, No.16-7029 (D.C. Cir. Dec. 30, 2016), Donna M. Coburn (“Coburn”), on behalf of herself and all others similarly situated, appeals the district court’s dismissal of her complaint against Evercore Trust Company, N.A. (“Evercore”) under ERISA.  Coburn, a former J.C. Penney employee and investor in a J.C. Penney employee stock ownership plan (ESOP) managed by Evercore, claims that Evercore breached its fiduciary duties of prudence and loyalty when it failed to take preventative action as the value of J.C. Penney common stock tumbled between 2012 and 2013, thereby causing significant losses.

Despite clear factual similarities, Coburn argues, on appeal, that the pleading requirements outlined by the U.S. Supreme Court in Fifth Third Bancorp v. Dudenhoeffer are inapplicable to her allegations because she challenges Evercore’s failure to appreciate the riskiness of J.C. Penney stock rather than Evercore’s valuation of its price.  The D.C. Circuit Court of Appeals said that it disagrees with Coburn’s arguments, therefore it affirms the district court’s judgment.

Continuing the discussion of my previous blogs on FAQs Part 35, one topic covered in these FAQs is a discussion of the new Qualified Small Employer Health Reimbursement Arrangements.  Here is what the FAQs say on this topic:

Background and Prior Guidance.  On September 13, 2013, the U.S. Department of Labor (the “DOL”) published Technical Release 2013-03 addressing the application of the Affordable Care Act market reforms to health reimbursement arrangements (“HRAs”) and employer payment plans (“EPPs”).  The Treasury Department and the Internal Revenue Service (the “IRS”) contemporaneously published parallel guidance in Notice 2013-54.  The U.S. Department of Health and Human Services (the “HHS”) issued guidance stating that it concurred in the application of the laws under its jurisdiction as set forth in the guidance issued by DOL, Treasury, and IRS (the DOL, Treasury, IRS and HHS being referred to below as the “Departments”).  Subsequent guidance reiterated and clarified the application of the market reforms to HRAs and EPPs.

EPPs and HRAs typically consist of an arrangement under which an employer reimburses medical expenses (whether in the form of direct payments or reimbursements for premiums or other medical costs) up to a certain amount.  As explained in Technical Release 2013-03 and Notice 2013-54, EPPs and HRAs are group health plans that are subject to the group market reform provisions of the Affordable Care Act, including the prohibition on annual dollar limits under PHS Act section 2711 and the requirement to provide certain preventive services without cost sharing under PHS Act section 2713.  The 2013 guidance generally provides that EPPs and HRAs will fail to comply with these group market reform requirements because these arrangements, by their definitions, reimburse or pay medical expenses on the employee’s behalf only up to a certain dollar amount each year.

The U.S. Department of Labor (the “DOL”), in conjunction with the U.S. Department of Health and Human Services (the “HHS”) and the Treasury (collectively, the “Departments”), have jointly issued Frequently Asked Questions (“FAQs”) Part 35, regarding implementation of the Affordable Care Act and other matters.  One topic covered in these FAQs is coverage of preventive services under the Affordable Care Act.  Here is what the FAQs say on this topic:

Background.  PHS Act section 2713 and its implementing regulations require non-grandfathered group health plans to cover, without the imposition of any cost-sharing requirements, the following recommended preventive services:

  • evidence-based items or services that have in effect a rating of “A” or “B” in the current recommendations of the United States Preventive Services Task Force (the “USPSTF”) with respect to the individual involved, except for the recommendations of the USPSTF regarding breast cancer screening, mammography, and prevention issued in or around November 2009, which are not considered in effect for this purpose;

The U.S. Department of Labor (the “DOL”), in conjunction with the U.S. Department of Health and Human Services (the “HHS”) and the Treasury (collectively, the “Departments”), have jointly issued Frequently Asked Questions (“FAQs”) Part 35, regarding implementation of the Affordable Care Act and other matters.  One topic covered in these FAQs is special enrollment for group health plans under HIPAA.  Here is what the FAQs say on this topic:

Background.  Group health plans are required to provide special enrollment periods to current employees and dependents, during which otherwise eligible individuals who previously declined health coverage have the option to enroll under the terms of the plan (regardless of any open enrollment period).  Generally, a special enrollment period must be offered for circumstances in which an employee or dependents lose eligibility for any group health plan coverage, or health insurance coverage, in which the employee or their dependents were previously enrolled, and upon certain life events such as when a person becomes a dependent of an eligible employee by birth, marriage, or adoption.

Under these rules, special enrollment periods are available in several circumstances set forth in the Departments’ regulations, including:

In Milby v. MCMC LLC, No. 16-5483 (6th Cir. 2016), Samantha Milby was granted monthly long-term disability benefits through a group insurance policy provided by her employer, University of Louisville Hospital. Her benefits were subsequently terminated after her disability carrier hired defendant MCMC, a third-party medical record reviewer, and MCMC opined that Milby could return to work. Milby brought this state-law claim against MCMC, alleging negligence since it was practicing medicine without a license. MCMC removed the case to federal court alleging complete preemption under ERISA.  Milby appeals the district court’s denial of her motion to remand the case back to state court, and its grant of MCMC’s motion to dismiss her case. The Sixth Circuit Court of Appeals (the “Court”) affirmed the district court’s rulings.

As to the complete preemption issue, the Court said that, in Aetna Health Inc. v. Davila, 542 U.S. 200 (2004),  the Supreme Court articulated a two-prong test to determine whether a state law claim is completely preempted or not.  A state law claim is subject to complete preemption if it satisfies both prongs of the following test: (1) the plaintiff complains about the denial of benefits to which he is entitled only because of the terms of an ERISA-regulated employee benefit plan; and (2) the plaintiff does not allege the violation of any legal duty (state or federal) independent of ERISA or the plan terms.

The Court determined that the state-law claim in this case fits in the category of claims that are completely preempted by ERISA. First, the claim is in essence about the denial of benefits under an ERISA plan. Second, the defendant does not owe an independent duty to the plaintiff because the defendants were not practicing medicine under the specific Kentucky law invoked here as the basis for negligence per se. Accordingly, prong (1) and prong (2) are met.


In Troiano v. Aetna Life Insurance Company, No. 16-1307 (1st Cir. 2016), the lawsuit arose from a dispute between an ERISA disability plan administrator (here, defendant Aetna) and a beneficiary over the amount by which the monthly disability payments made to the beneficiary from the plan should be offset by her other monthly income from Social Security. The administrator maintains that the disability payments must be offset by the gross (pre-tax) amount of Social Security income, while the beneficiary argues that the payments must be offset by the net (post-tax) amount of Social Security income.

The district court found for the administrator, noting that its interpretation of the Plan language to allow for a gross offset was entitled to deference and was, in any event, ultimately reasonable. In addition to contesting this decision, the beneficiary was complaining that the district court abused its discretion when it denied the beneficiary’s broad requests for discovery. Having made a number of assumptions in the beneficiary’s favor, the First Circuit Court of Appeals (the “Court”) affirmed the district court’s rulings, upholding the administrator’s decision on how to compute the offset and denying discovery. The Court noted that, to be clear, the dispute is not about whether the Social Security income may offset the disability payments. It is about whether the administrator may use the simple gross amount of the Social Security payments for offset purposes, with the Court concluding that it may.


In Midwest Operating Engineers Welfare Fund v. Cleveland Quarry, Nos. 15-2628, 15-3221, 15-3861, 16-1870 (7th Cir. 2016), the plaintiffs are certain employee welfare funds.  The defendant is RiverStone Group, Inc., a producer of crushed stone, sand, and gravel (“RiverStone”).

RiverStone had collective bargaining agreements with Local 150 of the International Union of Operating Engineers, AFL-CIO.  The latest agreement, made in 2010, was scheduled to expire in 2015.  It required RiverStone to contribute a specified dollar amount to the welfare funds specified in the agreement for each hour for which an employee receives wages under the terms of the agreement.  But in 2013 employees at RiverStone voted in an election supervised by the National Labor Relations Board to decertify Local 150 as their collective bargaining representative.  Following the vote, RiverStone stopped contributing to the welfare funds, precipitating these suits against it by the welfare funds under 29 U.S. Code § 1145, a provision of ERISA permitting suits for delinquent contributions. The welfare funds were seeking payment of the contributions that would have been due pursuant to the terms of the last collective bargaining agreement  until its 2015 expiration. The question: does the collective bargaining agreement, or “CBA”, expire when the union is decertified as the representative?

The Seventh Circuit Court of Appeals (the “Court”) said No. The CBA at issue states that “the employer’s responsibility to make contributions to the [w]elfare [funds] shall terminate upon expiration of this agreement”. The meaning of this phrase depends on whether “expiration” means the date on which the agreement becomes unenforceable or the date on which it lapses by passage of time. It became unenforceable by the union when the union was decertified, whereby the employer was no longer bound to the promises it had made to the union; but the agreement did not thereby cease to exist—and therefore did not expire—until its five-year term ended. By prematurely ceasing to contribute to the welfare funds, RiverStone became liable under ERISA to make delinquent contributions, the relief sought by the welfare funds. The welfare funds could also prevail as third party beneficiaries of the CBA.

In Tribble v. Edison International, No. 10-56406, No. 10-56415 (9th Cir. 2016), on remand from the Supreme Court, the en banc court of the 9th Circuit Court of Appeals vacated the district court’s judgment in the case, which had been in favor of an employer and its benefits plan administrator on claims of breach of fiduciary duty in the selection and retention of certain mutual funds for a benefit plan governed by ERISA.

The 9th Circuit Court of Appeals (the “Court”) had previously affirmed the district court’s holding that the plan beneficiaries’ claims regarding the selection of mutual funds in 1999 were time-barred under the six-year limit of section 413(1) of ERISA.  The Supreme Court vacated the Court’s decision, observing that federal law imposes on fiduciaries an ongoing duty to monitor investments even absent a change in circumstances, and remanded the case back to the Court. Rejecting defendants’ contention that the beneficiaries waived the ongoing-duty-to-monitor argument, the en banc court held that the beneficiaries did not forfeit the argument either in the district court or on appeal.  Rather, defendants themselves failed to raise the waiver argument in their initial appeal, and thus forfeited this argument.

Section 413 of ERISA states that (absent a case of fraud or concealment) no action may be commenced under ERISA, with respect to a fiduciary’s breach of any responsibility, duty, or obligation under ERISA, or with respect to a violation of ERISA, after the earlier of—