November 2012 Archives

November 30, 2012

ERISA-Seventh Circuit Overturns Cigna's Termination of Long Term Disability Benefits

In Raybourne v. Cigna Life Insurance Company of New York, 11-1295 (7th Cir. 2012), Cigna was appealing the district court's ruling that the plaintiff, Edward Raybourne ("Raybourne"), was disabled under the terms of his employer's welfare benefits plan (the "Plan"), which provided long-term disability ("LTD") benefits, and which was insured and administered by Cigna.

In this case, Raybourne was receiving LTD benefits under the Plan, due to a degenerative joint disease in his right foot. However, after several years of receiving these benefits , Cigna terminated the benefits, on the grounds that Raybourne did not meet the then applicable definition of disability under the Plan (that is, the inability to perform all of the material duties of any occupation for which the claimant is reasonably qualified based on his education, training and experience). Raybourne exhausted all administrative remedies to have the benefits resume, and then sued the Plan for benefits under
section 502(a)(1)(B) of ERISA.

In analyzing the case, the Seventh Circuit Court of Appeals (the "Court") said that Cigna had a conflict of interest, since it was both the claims decider and benefits payor. The Court concluded that this conflict of interest, rather than the facts and terms of the Plan, led Cigna to terminate the LTD benefits. As indication of this conflict, Cigna did not adequately explain why: (1) the Social Security Administration granted Raybourne disability benefits, but Cigna determined that Raybourne was not disabled, despite functionally equivalent definitions of disability in the Plan and for Social Security purposes, or (2) in deciding to terminate the benefits, Cigna had relied on the report of a nontreating physician, instead of the reports of Raybourne's treating physician. As such, the Court affirmed the district court's ruling, thereby overturning Cigna's termination of Raybourne's LTD benefits.

November 29, 2012

Employment-Seventh Circuit Rules That The Medical Information The Employer Discovered Outside Of Any Medical Examination Or Inquiry Is Not Subject To The ADA's Confidentiality Requirements

In Equal Employment Opportunity Commission v. Thrivent Financial for Lutherans, No. 11-2848 (7th Cir. 2012), the Equal Employment Opportunity Commission (the "EEOC") had brought suit against Thrivent Financial for Lutherans ("Thrivent"), on behalf of Gary Messier ("Messier"), alleging a violation of the medical record confidentiality requirements of the Americans with Disabilities Act (the "ADA").

In this case, Omni Resources, Inc. ("Omni"), a technology consulting agency, hired Messier to work as a temporary SAS programmer for Thrivent. When Messier later left Omni and Thrivent, Messier had a difficult time finding a new job and began to suspect that Thrivent was saying negative things about him to prospective employers who called for reference checks. The EEOC alleges that during these reference checks, Thrivent was revealing information about Messier's migraine condition to prospective employers in violation of the ADA's requirement that employee medical information obtained from "medical examinations and inquiries" must be "treated as a confidential medical record." (See 42 U.S.C. § 12112(d)). The district court granted summary judgment to Thrivent, and the EEOC appealed.

The Seventh Circuit Court of Appeals (the "Court") found that Thrivent learned of Messier's migraine condition outside the context of a medical examination or inquiry. Specifically, Thrivent learned about the condition when Messier responded to an email from a supervisor asking why he was not at work-a general job inquiry, which, according to the Court (without-at a minimum- the employer's prior knowledge of a medical condition), is not a medical inquiry for ADA purposes. Therefore, the confidentiality provisions of the ADA (in 42 U.S.C. § 12112(d)(3)) did not apply, and Thrivent had no duty to treat its knowledge of Messier's migraine condition as a confidential medical record. As such, the Court affirmed the district court's decision.

November 28, 2012

ERISA-Eighth Circuit Rules That The Employer Cannot Recoup $548k In Mistaken Contributions

In Greater St. Louis Construction , Et. Al. v. Park-Mark, Inc., No. 11-3746 (8th Cir. 2012), the Greater St. Louis Construction Laborers Welfare Fund, along with several other employee benefit funds and their trustees (collectively, "the Funds"), brought this action under ERISA to recover delinquent payments from Park-Mark, Inc. ("Park-Mark"). Park-Mark contends that it should not be liable for these delinquent payments because it mistakenly made significant overpayments that require a set-off and a refund. The district court granted summary judgment in favor of the Funds.

In this case, Park-Mark was required, under a collective bargaining agreement ("the CBA"), to make contributions to the Funds, which are union-sponsored welfare benefit plans subject to ERISA. At one point, it was discovered that Park-Mark had mistakenly over paid contributions due by about $548,000. The overpayments were attributable to contributions for hours of work performed outside to the jurisdiction of the CBA. Park-Mark stopped, for a time, making any contributions to the Funds, since the Funds did not provide credit for the overpayments. The Funds then brought this suit against Park-Mark under ERISA for the delinquent contributions (that is, the contributions due that Park-Mark failed to make after it stopped contributing and at certain other times). The issue for the Eighth Circuit Court of Appeals (the "Court"): Is Park-Mark entitled to a set-off and a refund of the $548,000 in overpayments against the delinquent contributions?

In analyzing the case, the Court noted that, under ERISA, contributions made by a mistake of law or fact may be returned "within 6 months after the plan administrator determines that the contribution was made by such a mistake." (See 29 U.S.C § 1103(c)(2)(A)(ii)). Further, courts have recognized that an employer has a federal common law action for restitution of mistakenly made payments to an ERISA plan. However, (at least in the Eighth Circuit) the employer is not entitled to restitution for mistaken contributions unless it can demonstrate that restitution is equitable under the circumstances. Here, the facts of the case indicate that restitution to Park-Mark would be inequitable to the Funds. These facts include possible extra welfare and pension benefits that Park-Mark employees may have already received due to the overpayments, Park-Mark's failure to earlier assert the set-off and refund, that the Funds' decision to not return the mistaken contributions was not arbitrary and capricious, and no unjust enrichment to the Funds resulted from the mistaken contributions. As such, Park-Mark is not entitled to the set-off and refund. Accordingly, the Court affirmed the district court's decision.

November 27, 2012

Employee Benefits- IRS Extends Deadline For Amending A Defined Benefit Plan To Meet The Requirements Of Section 436

In Notice 2012-70, the Internal Revenue Service (the "IRS") extended the deadline for amending a qualified defined benefit plan to reflect the requirements of section 436 of the Internal Revenue Code (the "Code"). Section 436 contains restrictions on benefit accruals and payouts for underfunded plans. The previous deadline for the section 436 amendment was set forth in Notice 2011-96. That Notice also providing a sample plan amendment.

Under Notice 2012-70, the new deadline for the section 436 amendment is the latest of:

(1) the last day of the first plan year that begins after 2012,

(2) the last day of the plan year for which section 436 is first effective for the plan, or

(3) the due date (including extensions) of the employer's tax return for the tax year
that contains the first day of the plan year for which section 436 is first
effective for the plan.

Note, however, if an application for a determination letter for an individually designed plan is filed on or after February 1, 2013 , the restated plan
submitted with the application must include provisions that comply with section 436. The filing would thus require an earlier amendment for section 436. Plans submitted before February 1, 2013 need not include provisions reflecting section 436 .

Also, a plan amendment which is adopted with respect to section 436, and which eliminates or reduces a section 411(d)(6) protected benefit, does not cause a plan to fail to meet the anti-cutback requirements of section 411(d)(6) if: (a) the amendment is adopted by the deadline described above and (b) the elimination or reduction is made only to the extent necessary to enable the plan to meet the requirements of section 436.


November 26, 2012

ERISA-DOL Provides Relief For Employee Benefit Plans Adversely Affected By Hurricane Sandy

In an Information Release dated November 20, 2012, the Department of Labor (the "DOL") provides the following relief for employee benefit plans adversely impacted by Hurricane Sandy:

Verification Procedures for Plan Loans and Distributions. The IRS, in IRS Announcement 2012-44, provided relief from certain verification procedures that may be required under retirement plans with respect to plan loans to participants and beneficiaries, hardship distributions, and other pension benefit distributions. The DOL will not treat any person as having violated the provisions of title I of ERISA solely because they complied with the provisions of the IRS Announcement.

Participant Contributions and Loan Repayments. In accordance with 29 CFR § 2510.3-102, amounts that a participant or beneficiary pays to an employer, or amounts that a participant has withheld from his or her wages by an employer, for contribution or repayment of a participant loan to an employee pension benefit plan constitute plan assets, and thereby are required to be forwarded to the plan, on the earliest date on which such amounts can reasonably be segregated from the employer's general assets, but in no event later than the 15th business day of the month following the month in which the amounts were paid to or withheld by the employer. The DOL recognizes that some employers and service providers acting on employers' behalf, such as payroll processing services, located in designated affected areas will not be able to forward participant payments and withholdings to employee pension benefit plans within the prescribed timeframe. In such instances, the DOL will not, solely on the basis of a failure attributable to Hurricane Sandy, seek to enforce the provisions of title I with respect to a temporary delay in the forwarding of such payments or contributions to an employee pension benefit plan to the extent that affected employers, and service providers, act reasonably, prudently and in the interest of employees to comply as soon as practicable under the circumstances. The IRS has informed the DOL that, subject to the foregoing conditions, it will not seek to assess an excise tax with respect to a prohibited transaction under section 4975 of the Code resulting solely from such a temporary delay.

Blackout Notices. In general, section 101(i) of ERISA and the regulations issued thereunder, at 29 CFR § 2520.101-3, provide that the administrator of an individual account plan is required to provide 30 days advance notice to participants and beneficiaries whose rights under the plan will be temporarily suspended, limited, or restricted by a blackout period (i.e., a period of suspension, limitation or restriction of more than three consecutive business days on a participant's ability to direct investments, obtain loans, or obtain other distributions from the plan). The regulations provide an exception to the advance notice requirement when the inability to provide the advance notice is due to events beyond the reasonable control of the plan administrator and a fiduciary so determines in writing. Natural disasters, by definition, are beyond the control of a plan administrator. With respect to blackout periods related to Hurricane Sandy, the DOL will not allege a violation of the blackout notice requirements solely on the basis that a fiduciary did not make the required written determination.

ERISA Group Health Plan Compliance Guidance. The DOL recognizes that plan participants and beneficiaries may encounter an array of problems due to the Hurricane, such as difficulties meeting certain deadlines for filing benefit claims and COBRA elections. The guiding principle for plans must be to act reasonably, prudently, and in the interest of the workers and their families, who rely on their health plans for their physical and economic well-being. Plan fiduciaries should make reasonable accommodations to prevent the loss of benefits in such cases and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established timeframes. Moreover, the DOL acknowledges that there may be instances when full and timely compliance by group health plans and issuers may not be possible. As stated previously, see www.dol.gov/ebsa/faqs/faq-aca.html, our approach to enforcement continues to be marked by an emphasis on compliance assistance and includes grace periods and other relief, where appropriate, including when physical disruption to a plan or service provider's principal place of business by the Hurricane makes compliance with pre-established timeframes for certain claims decisions or disclosures impossible.

November 21, 2012

Employment-Eighth Circuit Rules That Title VII Discrimination Claims Fail Because Plaintiff Is An Independent Contractor

In Glascock v. Linn County Emergency Medicine, PC, No. 12-1311 (8th Cir. 2012), the plaintiff, Dr. Pooneh Hendi Glascock ("Glascock"), brought suit against Linn County Emergency Medicine, PC ("LCEM"). She claimed violations of Title VII and the Iowa Civil Rights Act, due to discrimination based on sex, pregnancy, and national origin. The district court granted summary judgment to LCEM, concluding that Glascock could not assert a claim under either statute because she was an independent contractor. Glascock appealed.

In this case, Glascock, a female physician of Iranian origin, had entered an "Independent Contractor Physician Service Agreement" (the "Agreement") with LCEM in May 2007 to work as an emergency room physician at Mercy Medical Center in Cedar Rapids, Iowa. The Agreement was to last one year and renew for an additional year unless terminated by either party with 90 days notice. LCEM provided professional liability insurance for Glascock, but no benefits or vacation pay. The agreement guaranteed Glascock 15 shifts per month at an hourly rate of $130. Glascock submitted her monthly availability and scheduling preferences to LCEM, and LCEM assigned shifts. She also remained free to engage in other professional activities. Glascock filed her own self-employment tax returns. The Agreement gave LCEM no control or direction over the method or manner by which Glascock performed her professional services and duties. As the attending physician at Mercy Medical Center, she selected a patient's chart and reviewed it, determined the appropriate course of action, and then met with the patient. She received no instruction on how to examine, treat, or diagnose patients. At the end of Glascock's first year under the Agreement, LCEM terminated her. This suit ensued.

The Eighth Circuit Court of Appeals (the "Court") ruled that Glascock was an independent contractor of LCEM, based on an analysis of whether LCEM controlled Glascock's work, the Supreme Court's "Darden factors" used to distinguish employees from independent contractors and the economic realities of the situation. Therefore, Glascock was not eligible to bring suit under Title VII or the Iowa Civil Rights Act. As such, the Court affirmed the district court's summary judgment for LCEM.

November 19, 2012

Employee Benefits-IRS Announces That Retirement Plans Can Make Loans, Hardship Distributions to Hurricane Sandy Victims

In IR-2012-93, the Internal Revenue Service (the "IRS") announced that 401(k)s and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Sandy and members of their families. The IRS said that, under this relief, 401(k) plan participants, employees of public schools and tax-exempt organizations with 403(b) tax-sheltered annuities, and state and local government employees with 457(b) deferred-compensation plans may be eligible to take advantage of streamlined loan procedures and liberalized hardship distribution rules.

Retirement plans can provide this relief to employees and certain members of their families who live or work in the disaster area (such as Nassau or Suffolk County). To qualify for this relief, hardship withdrawals must be made by Feb. 1, 2013.The IRS is also relaxing procedural and administrative rules that normally apply to retirement plan loans and hardship distributions. The six-month ban on 401(k) and 403(b) contributions that normally affects employees who take hardship distributions will not apply.

This broad-based relief means that a retirement plan can allow a Sandy victim to take a hardship distribution or borrow up to the specified statutory limits from the victim's retirement plan. It also means that a person who lives outside the disaster area can take out a retirement plan loan or hardship distribution and use it to assist a son, daughter, parent, grandparent or other dependent who lived or worked in the disaster area. Plans will be allowed to make loans or hardship distributions before the plan is formally amended to provide for such features. In addition, the plan can ignore the limits that normally apply to hardship distributions, thus allowing them, for example, to be used for food and shelter. If a plan requires certain documentation before a distribution is made, the plan can relax this requirement under certain rules.

Details on this relief may be found in Announcement 2012-44. Relief from certain tax return filings and tax payment deadlines may be found in IR-2012-83.

November 19, 2012

ERISA-Third Circuit Rules That State Law Claims Pertaining To A Plan Are Preempted By ERISA To The Extent Made After The Plan Was Adopted And Are Not Preempted If Made Before Adoption

In Cappello v. Iola, No. 10-4154 (3rd Cir. 2012), the defendant, James Barrett ("Barrett"), a financial planner, induced the plaintiffs, four small New Jersey corporations and their respective owners, to adopt an employee welfare benefit plan known as the Employers Participating Insurance Cooperative ("EPIC"). However, EPIC was a complex tax avoidance scheme. EPIC's advertised tax benefits, the plaintiffs discovered years later, were illusory; the scheme masqueraded as a multiple employer welfare benefit plan, but in fact was a method of deferring compensation. After the Internal Revenue Service audited the plaintiffs' plans and disallowed certain deductions claimed on their federal income tax returns, the plaintiffs initiated this suit against Barrett and other entities involved in the scheme. They asserted, among others, state law claims of misrepresentation of tax advantages and other aspects of EPIC. One question for the Third Circuit Court of Appeals (the "Court"): are these state law claims preempted by ERISA? Here is what the Court said on this question.

To ensure that regulation of employee benefit plans resides exclusively in the federal domain, Congress included in ERISA an expansive preemption provision, codified at section 514(a). This section provides that ERISA shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. The test for whether a state law cause of action "relates to" an employee benefit plan-and is therefore preempted- is whether it has a connection with or reference to such a plan. In this case, the plaintiffs' state law claims are preempted by ERISA to the extent they related to misrepresentations made after the plaintiffs adopted EPIC, and are not preempted otherwise. Post-adoption misrepresentations are premised on the plan's existence and therefore relate to a plan; pre-adoption misrepresentations are not so premised and do not relate to the plan.

November 15, 2012

Employment-First Circuit Rules That ADA Claim Is Time-Barred Due To Failure To File Suit Within 90 Days Of Receiving The Right-To-Sue Letter

In Loubriel v. Fondo Del Seguro Del Estado, No. 11-1555 (1st Cir. 2012), the plaintiff, Advilda Loubriel ("Loubriel"), filed suit against the Puerto Rico State Insurance Fund (the "Fund") under Title I of the Americans with Disabilities Act of 1990 (the "ADA). The district court dismissed the suit, on the grounds that it was time-barred. Loubriel appealed.

Loubriel had been employed by the Fund. In January of 2008, Loubriel requested 45 days of sick leave to deal with certain medical problems. The Fund denied her request. On May 8, 2009, the Equal Employment Opportunity Commission (the "EEOC"), without resolving the merits of the claim, issued Loubriel a right-to-sue letter, and mailed copies of it to the Loubriel, her attorney, and the Fund. The notice clearly stated that Loubriel's Title I/ADA action against her employer had to be filed within 90 days of receipt. Loubriel asserts that she did not receive her copy of the letter until September 10, 2009. Loubriel filed her suit against the Fund on September 29, 2009 , which is 144 days after the EEOC sent the letter. The question for the First Circuit Court of Appeals (the "Court"): Is Loubriel's suit against the Fund time-barred?

In analyzing the case, the Court noted that, although Loubriel's discrimination claim is brought under the ADA, it is nonetheless governed by the procedural requirements of Title VII of the Civil Rights Act of 1964. One such requirement contemplates that, upon a claimant's exhaustion of administrative remedies, the EEOC will inform the claimant, in the form of a right-to-sue letter that she has 90 days within which to bring a civil action. If the claimant does not bring suit within the prescribed 90-day period, the action is time-barred.

Here, the EEOC mailed the right-to-sue letter on May 8, 2009, yet Loubriel did not file her suit until September 29 of that year. To explain this delay, Loubriel suggests that she did not receive the right-to-sue letter until September 10, so she met the 90-day filing deadline. But the right-to-sue letter was sent to Loubriel's attorney. By law, receipt of the letter by the attorney is treated as receipt by Loubriel. Although the record does not show the actual date the attorney received the letter, there is a presumption that, in the absence of evidence to the contrary (and there was none here), a notice provided by a government agency is deemed to have been placed in the mail on the date shown on the notice and received within a reasonable time thereafter, e.g., within 3 to 5 days after the mailing date. Thus, receipt of the letter in this case is deemed to be no later than mid-May, and Loubriel's filing the case on September 29 would not be within the 90-day filing period. Therefore, the Court concluded that Loubriel's suit was time-barred, and it affirmed the district court's dismissal of the case.

November 14, 2012

Employment-Sixth Circuit Rules That Failure To Follow Company Call-In Procedures Causes Plaintiff's FMLA Claims To Fail

Been gone for a while due to major flood, no power, etc. Let's get started again:

In Ritenour v. State of Tennessee Department of Human Services, No. 10-6366 (6th Cir. 2012), the plaintiff, Amy Ritenour ("Ritenour"), sued her employer, the State of Tennessee Department of Human Services ("TDHS"), for interference with her right to take leave under the Family Medical Leave Act (the "FMLA"), and for retaliatory termination in violation of the FMLA. The district court granted summary judgment in favor of TDHS, and Ritenour appealed.

In this case, due to the need to facilitate medical treatment for her eldest son , take her children to doctor's appointments, and look for new housing, Ritenour sought to take FMLA leave from work. TDHS did not grant the FMLA leave, or authorize any other type of leave. Nevertheless, Ritenour began to take absences from work. In particular, Ritenour did not report to work on September 22, 23, 24, or 25, and she also failed to call in her absence-as required by TDHS absenteeism policies- on (at least) those dates. As a result, Ritenour had been absent from work without approval for leave and without calling in for more than three consecutive days, which allowed TDHS to terminate her under its absenteeism policies. TDHS did terminate Ritenour, and this suit ensued.

In analyzing the case, the Court said that, even assuming Ritenour could establish a prima facie case of FMLA violations, the burden shifts to TDHS to present a legitimate non-discriminatory reason for Ritenour's termination. TDHS met its burden by introducing evidence that Ritenour's supervisors terminated her for her failure to comply with the absenteeism policies by failing to make contact with TDHS and call in her absences for four days in a row. Ritenour must then carry her burden of demonstrating that TDHS's proffered reason for her termination is pretextual. She failed to do that. As a result, her FMLA claims fail. As such, the Court affirmed the district court's decision.