Articles Posted in ERISA

In DOL Advisory Opinion 2017-01A, the U.S. Department of Labor (the “DOL”) was asked for an advisory opinion, on behalf of the Health Transformation Alliance (the “HTA”), on whether a program of administrative services created by HTA (the “Program”) is an “employee welfare benefit plan” within the meaning of ERISA section 3(1) or a “multiple employer welfare arrangement” (a “MEWA”) within the meaning of section 3(40).

In the Advisory Opinion, the DOL concluded that the Program is not an employee welfare benefit plan.  It said that such a plan does not include a program maintained by an employer (or group or association of employers) which -like the Program here- has no employee participants and does not provide covered benefits to employees or their dependents.  Rather than being established or maintained for the purpose of providing welfare benefits to participants and beneficiaries, the Program operates so as to facilitate the efficient establishment and operation of employee benefit plans by employer-members.

The DOL concluded, further, that the Program is not a MEWA.  This obtains because no component of the Program “offers or provides” any welfare benefit described in section 3(1) of ERISA to the employees of its member-employers.  In addition, the Program does not operate as a MEWA under ERISA section 3(40) because no component of the Program: (1) underwrites or guarantees welfare benefits, (2) provides welfare benefits through group insurance contracts covering more than one employer, (3) pools welfare benefit risk among participating employers, or (4) provides similar insurance or risk spreading functions.  Thus, although section 3(40), unlike section 3(1), does not condition MEWA status on the arrangement being established or maintained by any particular party, in the DOL’s view, offering employer-members the bundle of administrative services the ATA describes does not result in the Program constituting a MEWA, as defined by the statute.

In Hitchcock v. Cumberland University 403(b) DC Plan, No. 16-5942 (6th Cir. 2017), the Plaintiffs were appealing the order entered by the district court, granting the motion of the Defendants (namely, Cumberland University and its 403(b) plan) to dismiss their ERISA claim.  The Sixth Circuit Court of Appeals reversed the district court’s judgment, and remanded the case back to the district court.

In this case, the Plaintiffs were employees of Cumberland University (the “University”), and were participants in its 403(b) plan (the “Plan”).  The Plan is a defined contribution 403(b) plan.  In 2009, the University adopted a five percent matching contribution, whereby the University would match an employee’s contribution to the Plan, up to five percent of the employee’s salary.  On October 9, 2014, the University amended the Plan, retroactive to January 1, 2013, to replace the five percent match with a discretionary match, whereby the University would determine the amount of the employer’s matching contribution on a yearly basis (the “Amendment”).  The University also announced that the employer matching contribution for the 2013-14 year, and for the 2014-15 year, would be zero percent.

With regard to amending the Plan, the 2009 Summary Plan Description (the “2009 SPD”) states that an Employer cannot amend the Plan to take away or reduce protected benefits under the Plan.  That SPD also promises that all Plan Participants shall be entitled to obtain, upon request to the Employer, copies of documents governing the operations of the Plan, including an updated Summary Plan Description.  As of the date of oral argument in this case, January 25, 2017, the University had not produced a summary plan description subsequent to the 2009 SPD, despite Plaintiffs’ repeated requests, and had not provided formal written notice of the Amendment.  The Plaintiffs filed a class action against the Defendants, alleging among other things, an impermissible cutback of benefits and a breach of fiduciary duty, both in violation of ERISA.

In Tussey v. Abb, Inc., No. 15-2792, No. 16-1127 (8th Cir. 2017), a class of employees who participated in ABB, Inc.’s retirement plans-specifically, the “401(k) defined contribution savings plans”- accuse ABB and its agents (collectively, the “ABB fiduciaries”) of managing the plans for their own benefit, rather than the participants’. In an earlier appeal, the Eighth Circuit Court of Appeals (the “Court”) had directed the district court to “reevaluate” how the participants might have been injured if the ABB fiduciaries breached their fiduciary duties under ERISA when they changed the investment options for the plans.

Because the district court apparently mistook that direction for a definitive ruling on how to measure plan losses, and as a result entered judgment in favor of the ABB fiduciaries despite finding they did breach their duties, on this appeal, the Court vacated the judgment on that claim and remanded the case back to the district court for further consideration regarding whether the participants can prove losses to the plans. Because the Court reopened one of the participants’ substantive claims, the Court also vacated and remanded the district court’s award of attorney fees.

In Rodriguez-López  v. Triple-S Vida, Inc., No. 15-2413 (1st Cir. 2017), the plaintiff, Nilda Rodríguez-López (“Rodríguez”), appeals from the district court’s grant of summary judgment in favor of defendant, Triple-S Vida, Inc. (“Triple-S”). The district court reviewed and sustained the denial of Triple-S, the claims administrator, of Rodríguez’s claim for long-term disability (“LTD”) benefits (from an ERISA covered plan) under the deferential arbitrary and capricious standard.  Because the plan contained no clear delegation of authority to Triple-S, the First Circuit Court of Appeals (the “Court”) held that Triple-S’s decision was not entitled to deference. Accordingly, the Court reversed and remanded the case back to the district court to decide the case under the de novo standard of review.

In Williams v. FedEx Corporate Services, No. 16-4032 (10th Cir. 2017), Steven Williams (“Williams”) alleges that his former employer, FedEx Corporate Services (“FedEx”), violated the Americans with Disabilities Act (the “ADA”) by discriminating against him based on his actual and perceived disabilities, and by requiring his enrollment in the company’s substance abuse and drug testing program.  Williams further alleges that Aetna Life Insurance Company (“Aetna”), the administrator of FedEx’s short-term disability plan, breached its fiduciary duty under ERISA when it reported to FedEx that Williams filed a disability claim for substance abuse.  Both FedEx and Aetna filed motions for summary judgment, which the district court granted.

Upon reviewing the case, the Tenth Circuit Court of Appeals (the “Court”) acted as follows. As to the district court’s  grant of summary judgment on the ADA claim, the Court  affirmed the judgment in part, and reversed it in part, thereby remanding the case back to the district court on the matter.  As to the district court’s grant of summary judgment on the ERISA claim, the Court concluded that Williams has not established that Aetna failed to act with the care required by ERISA fiduciaries. Accordingly, the Court affirmed the district court’s judgment in favor of Aetna on the ERISA matter.

In Ohio v. U.S., No.16-3093 (6th Cir. 2017), the Sixth Circuit Court of Appeals (the “Court”) was faced with the question of whether one of the Affordable Care Act’s tax provisions applies to state government employers with the same force that it applies to private employers.  The plaintiffs are the State of Ohio, and several of its political subdivisions and public universities (the “State”).  The plaintiffs filed suit against, inter alia, the United States Department of Health and Human Services (“HHS”), alleging that the Federal Government illegally collected certain monies from the State in order to supplement the Affordable Care Act’s Transitional Reinsurance Program (the “Program”).

Arguing that the Program’s mandatory payment scheme applies only to private employers and not to state and local government employers, the State sought a refund of all payments made on its behalf and a declaration that the Program would not apply to the State in the future.  The State also argued that application of the Program against the State violated the Tenth Amendment to the United States Constitution and principles of intergovernmental tax immunity.  The district court, in a thorough and reasoned opinion, granted a motion to dismiss filed by the United States, and denied a motion for summary judgment filed by the State. The district court ruled that the Program applies to state and local government employers just as it applies to private employers, and that the Program as applied to the State does not violate the Tenth Amendment.  The Court affirmed the district court’s rulings.


In Prime Healthcare Services-Landmark LLC, No. 16-1161(1st 2017), the First Circuit Court of Appeals (the “Court”) had to decide whether a dispute between employees and their successor employer- relating to an alleged violation of the applicable collective bargaining agreement by changing the terms of, and ceasing contributions to, a defined benefit plan- should be resolved in arbitration or in the courts. The parties agreed to arbitrate this dispute. The district court, however, refused to compel arbitration; it found that ERISA preempted arbitration of this dispute, and reasoned that this, in turn, presented an issue of arbitrability properly decided by a judge, not an arbitrator. The Court found that the issue of ERISA preemption in this case is not an issue of arbitrability, but rather one that is squarely for the arbitrator to decide, and therefore reversed the district court’s ruling.

In Prince v. Sears Holdings Corporation, No. 16-1075 (4th Cir. 2017), alleging that his employer improperly administered life insurance benefits, an employee brought suit for misrepresentation, constructive fraud, and infliction of emotional distress. The district court dismissed the employee’s case, and the employee appealed.  The Fourth Circuit Court of Appeals (the “Court”) ruled that, because, ERISA completely preempts these state law claims, the Court affirms the district court’s dismissal of the complaint.

In this case, in November 2010, Billy E. Prince (“Prince”) submitted an application to his employer for $150,000 in life insurance coverage for his wife, Judith Prince. The employer, Sears, sponsored and administered the life insurance program through The Prudential Insurance Company of America. In May 2011, Sears sent an acknowledgment letter to Prince and began withholding premiums from his pay shortly thereafter. Later in 2011, Mrs. Prince learned she had Stage IV liver cancer. Almost a year after Mrs. Prince’s initial diagnosis, Prince checked his online benefits summary, which confirmed his election to purchase life insurance coverage for his wife in the amount of $150,000. Another year passed, and Sears sent Prince a letter advising him that Mrs. Prince’s coverage had never become effective because no “evidence of insurability questionnaire” had been submitted. Sears explained that Prudential had sent a notice to Prince in January 2011 advising that unless a completed insurability questionnaire was submitted, Prudential would terminate his application for the life insurance coverage. Prince claims that he has no record of receipt of that notice but does not dispute that Prudential sent it to him.

On May 26, 2014, Mrs. Prince died. Because Prince did not receive the $150,000 in life insurance, he filed a complaint against Sears in the Circuit Court of Marion County, West Virginia. The complaint asserted one count of “constructive fraud/negligent misrepresentation” and one count of “intentional/reckless infliction of emotional distress,” based on Sears’s alleged misrepresentations regarding the life insurance policy and the harm thereby inflicted on Mr. and Mrs. Prince. Sears removed the case to federal district court, which dismissed the case on the basis of complete ERISA preemption.

Further to my blog of January 13, the DOL has now issued an additional set of FAQs discussing the “Conflict of Interest” rules.  These rules basically apply more stringent ERISA requirements to those who provide investment advice to retirement plans and IRAs.  Here is the DOL’s introduction to the new FAQs:

Set out below are a number of Frequently Asked Questions (FAQs) regarding implementation of the conflict of interest (COI) final rule (Rule) on fiduciary investment advice. Since the publication of the Rule last April, the Department has held many meetings with stakeholders to assist in their compliance efforts. Many of the questions they raised related to the various Rule provisions that draw lines between fiduciary and non-fiduciary communications. Like the FAQs the Department issued on October 27, 2016, on the Prohibited Transaction Exemptions, these FAQs focus particularly on specific technical questions raised by financial service providers. These FAQs are generally limited to investment advice concerning ERISA-covered plans, IRAs, and other plans covered by section 4975(e)(1) of the Internal Revenue Code (Code).

There are now three sets of FAQs on the Conflict of Interest rules:

The appeal in Vendura v. Boxer, No. 15-2387 (1st Cir. 2017), involves a suit for pension benefits that George Vendura (“Vendura”) brings against Northrop Grumman Corp. (“Northrop”) and a number of related entities and individuals (all, the “Defendants”).  The key point of contention concerns the number of “Years of Benefit Service” that should be credited to Vendura in calculating his pension benefits under his pension plan.

In this case, Vendura was hired by TRW Inc. (“TRW”) in 1993 and became a participant in the TRW Salaried Pension Plan (“TRW Plan”).  In 2002, Northrop acquired TRW and renamed the company Northrup Grumman Space and Mission Systems Corp. (“NGSMSC”), and the pension plan became the NGSMSC Plan.  Soon thereafter, NGSMSC attempted to terminate Vendura’s employment.  Vendura, however, challenged the attempt to lay him off, and, in 2003, Vendura and NGSMSC signed a settlement agreement that kept Vendura on board at NGSMSC, subject to certain conditions.

In April of 2013, Vendura filed a claim for pension benefits with the “Administrative Committee” for the NGSMSC Plan.  In making his pension benefits claim to the Administrative Committee, Vendura argued that he is entitled to twenty years of benefit service.  However, the Administrative Committee determined that Vendura was entitled to only 12 years of benefit service when calculating the pension benefits.  Eventually, Vendura filed this suit.  The district court granted summary judgment for the Defendants, and he appeals.