ERISA Lawyer Blog

The U.S. Department of Labor (the "DOL") has issued final regulations (at 29 CFR § 2550.408-2(c)) on service provider disclosures under section 408(b)(2) of ERISA. These final regulations supercede the interim regulations that were issued on July 16, 2010. In general, they require covered service providers to furnish the plan administrator of a covered plan with information about the providers' services and fees. The DOL discusses the final regulations in a Fact Sheet. Also, a list of the changes made in the final regulations to the interim regulations may be found here.

Importantly, the effective date of rules for service provider disclosures has been postponed from April 1, 2012 to July 1, 2012. Here is what the Fact Sheet says on the new effective date:

The final regulations are effective for both existing and new contracts or arrangements between covered plans and covered service providers as of July 1, 2012. Service providers not in compliance as of July 1, 2012, will be subject to the prohibited transaction rules of ERISA section 406 and Internal Revenue Code section 4975 penalties.

Plan administrators are reminded that the final regulations' new July 1 effective date also will impact when disclosures must first be furnished under DOL's participant-level disclosure regulation (29 CFR § 2550.404a-5). The transitional rule for the participant-level disclosure regulation was revised in July 2011 so that the first disclosures would follow the effective date of the 408(b)(2) regulation. Consequently, for calendar year plans, the initial annual disclosure of "plan-level" and "investment-level" information (including associated fees and expenses) must be furnished no later than August 30, 2012 (i.e., 60 days after the 408(b)(2) regulation's July 1 effective date). The first quarterly statement must then be furnished no later than November 14, 2012 (i.e., 45 days after the end of the third quarter (July through September), during which initial disclosures were first required). This quarterly statement need only reflect the fees and expenses actually deducted from the participant or beneficiary's account during the July through September quarter to which the statement relates.

In Leeson v. Transamerica Disability Income Plan, No. 10-35380 (9th Cir. 2012), the plaintiff, Jack Leeson ("Leeson"), filed this case against the defendant, Transamerica Corporation ("Transamerica"), under ERISA to challenge the termination of his long-term disability ("LTD" ) benefits. The district court held that Leeson was not a plan participant, within the meaning of the plan in question due to a leave of absence from employment at the applicable time. Therefore, Leeson did not have standing to bring the suit, and the district court did not have subject matter jurisdiction over the case. As such, the district court dismissed the case. Leeson appealed.

In this appeal, Leeson argues that, because he alleged a colorable claim for benefits, the district court had subject matter jurisdiction, and it was error to dismiss the case. The Ninth Circuit Court of Appeals (the "Court") agreed with Leeson. It concluded that an individual need not assert anything other than he or she has a colorable claim to benefits in order for the district court to have subject matter jurisdiction over the case. The individual need not be a "participant", as defined in the plan or in ERISA (see 29 U.S.C. section 1002(7) for the ERISA definition), for the court to have such jurisdiction. The issue of whether the individual is actually a participant goes to the merits of the claim, not to the court's jurisdiction. As such, the Court vacated the district court's decision and remanded the case back to the district court.

In Curtis v. Hartford Life and Accident Insurance Company, No. 11 C 24489 (N.D. Illinois, Eastern Division, January 18, 2012), the plaintiff, Cindy Curtis ("Curtis"), had brought suit under ERISA to recover long-term disability ("LTD") benefits. She had been a participant in her employer's Long-Term Disability Benefits Plan (the "Plan"), which is administered by the defendant, Hartford Life and Accident Insurance Company ("Hartford"). Curtis had become disabled, and began to receive LTD benefits from the Plan. However, Hartford later determined that Curtis was not disabled, and terminated the benefits. This suit ensued.

The issue before the Court is the standard of review applicable to Hartford's decision to terminate Curtis's LTD benefits. Curtis argued that Hartford's decision to cut-off her benefits is subject to de novo review under ERISA and, consequently, that she is entitled to take wide-ranging discovery concerning whether Hartford's decision is correct. Hartford contends, on the other hand, that its decision is subject to review under the more limited arbitrary and capricious standard, so that Curtis only is entitled to narrow discovery concerning Hartford's decision.

In analyzing this issue, the Court said that the standard of review depends on whether the Plan grants Hartford, the plan administrator, discretionary authority to make decisions, and that the standard is the arbitrary and capricious standard if the Plan makes such a grant, and de novo otherwise. In this case, the Plan specifically provides that Hartford has "full discretion and authority to determine eligibility for benefits and to construe and interpret all terms and provisions of the [Plan]." This provision is normally sufficient to result in the use of the arbitrary and capricious standard. However, Curtis challenges this conclusion, based on a regulation promulgated by the Illinois Department of Insurance which bans discretionary clauses in insurance contracts offered or issued in Illinois (the "Illinois Regulation"). Does the Illinois Regulation nullify the Plan provision granting discretion, so that de novo standard of review applies? The Court looked at the particular language of the Illinois Regulation, concluding that it applies to the Plan. The Court also determined that the Illinois Regulation is not displaced by a Delaware choice of law provision. Finally, the Court determined that the Illinois Regulation is not preempted by ERISA, since the Illinois Regulation purports to regulate insurance, and, under its "Savings Clause", ERISA does not preempt insurance regulation. As such, the Court concluded that the Illinois Regulation nullifies the Plan's grant of discretion to Hartford, so that the de novo standard of review applies.

In Fortier v. Principal Life Insurance Company, No. 10-1441 (4th Cir. 2012), the plaintiff, Dr. Kenneth Fortier ("Dr. Fortier"), became disabled, and applied for short- and long-term disability benefits from the defendant, Principal Life Insurance Company ("Principal"), under policies which Principal had issued to Dr. Fortier's medical practice (the "Policies"). The Policies are subject to ERISA. The Policies provide that a disabled insured is entitled to receive 60% of his predisability earnings, capped at $1,500 per week for short-term benefits and $6,000 per month for long-term benefits. This benefit, however, is reduced by the amount that all disability benefits (from the Policies and any other policies) exceed the insured's predisability earnings. Principal determined that Dr. Fortier was disabled within the meaning of the Policies. However, since Dr. Fortier was receiving $15,470 per month in disability benefits on individual disability policies issued by another company, and his predisability earnings are $9,916, he was not entitled to any further benefits under the Policies.

This suit ensued under ERISA. Dr. Fortier claimed that Principal had misconstrued the Policies by calculating his predisability earnings to be $9,916 and that, with a proper calculation, his predisability earnings were far greater, entitling him to the maximum benefits from the Policies, even though he was receiving $15,470 on his individual disability policies. More particularly, he contended that Principal, when calculating his predisability earnings, erroneously deducted from his gross predisability earnings extraordinary and one-time business expenses incurred by him in 2003-04 in starting up his practice and in pursuing litigation with partners in his former medical practice. Without the reductions resulting from these extraordinary, one-time business expenses (the "Extraordinary Expenses"), Fortier's predisability earnings were sufficiently large (being about $48,913) to entitle him to the maximum disability benefits from the Policies. The question for the Fourth Circuit Court of Appeals: was Principal's calculation of Dr. Fortier's predisability earnings correct?

In answering this question, since the Policies gave Principal complete discretion to interpret the policies, Principal's interpretation of the Policies is entitled to a deferential review. The Court concluded that Principal's interpretation of the Policies' provisions dealing with the calculation of predisability earnings was reasonable and must be upheld. Principal had concluded that, because Dr. Fortier claimed the Extraordinary Expenses as deductions on his federal income tax returns, he thereby represented that they were "ordinary and necessary" business expenses, consistent with the Internal Revenue Code provision-section 162(a)-permitting the deduction. Thus, those same expenses were also, in the language of the Policies, "usual and customary," "incurred on a regular basis," and "essential to the established business operation." Therefore, they should be taken into account and subtracted from gross income, as Principal did, in calculating Dr. Fortier's predisability earnings. As such, the Court ruled that Principal's calculation of the predisability earnings, and its ultimate determination that no disability benefits are payable under the Policies, are correct.

Under a qualified domestic relations order, or a "QDRO", a plan participant's benefit may be assigned to his spouse or other family member. But when does the domestic relations order "qualify"? The Court faced that question in Langston v. Wilson McShane Corporation, as Administrator for the Twin Cities Carpenters and Joiners Pension Fund, Nos. A10-2219, A11-683, A11-684 (Court of Appeals of Minnesota, 1/9/12)

In this case, Patricia Langston had obtained a 2005 domestic relations order (a "DRO") from a state court to enforce her rights to a portion of the retirement benefits of her ex-husband, Gary, based on a 1993 judgment dissolving their marriage. Gary had remarried in 2001. In 2004, he retired, and began receiving benefit payments in the form of a joint and 50% survivor annuity with his extant spouse, Shelley, as the surviving beneficiary. Wilson McShane Corporation, the administrator of the plan at issue, determined that the DRO was not "qualified" under ERISA. Gary soon died and Shelley began receiving the 50% survivor's annuity. Patricia sought a declaratory judgment against McShane, requiring it to treat the DRO as qualified and to pay benefits to her under it. A state court held that the DRO was qualified, and it awarded summary judgment to Patricia. The question for the Court of Appeals of Minnesota (the "Court"): was the state court correct in concluding that the DRO was "qualified"?

The Court noted that, for the DRO to "qualify", it cannot, among other things, require the plan to provide benefits not available, or to provide increased benefits (citing 29 U.S.C. § 1056(d)(3)(D), a provision of ERISA). In this case, the benefits subject to the DRO, issued in 2005, had already irrevocably vested in Shelley upon Gary's retirement in 2004, and were in pay status prior to the end of 2004. As such, the DRO would require the plan to provide a benefit no longer available, and to pay increased benefits because the Plan would have to both pay Shelly her 50% survivor's annuity and pay Patricia the benefits awarded under the DRO. This would violate the ERISA rules in section 1056(d)(3)(D). Thus, the Court concluded that the DRO does not qualify and is not a QDRO, and it reversed the state court's judgment.

Similar to yesterday's blog, the U.S. Department of Labor (the "DOL") has issued Fact Sheet # 77A, which provides general information concerning the prohibition of the Fair Labor Standards Act (the "FLSA") on retaliating against any employee who has filed a complaint or cooperated in an investigation of a matter arising under the FLSA. The DOL's Wage and Hour Division administers and enforces the FLSA. The Division investigates FLSA violations through its complaint-based and directed investigation programs.

Prohibitions. Section 15(a)(3) of the FLSA states that it is a violation for any person to "discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to [the FLSA], or has testified or is about to testify in any such proceeding, or has served or is about to serve on an industry committee." Employees are protected regardless of whether the complaint is made orally or in writing. Complaints made to the Wage and Hour Division are protected, and most courts have ruled that internal complaints to an employer are also protected.

Coverage. Because section 15(a)(3) prohibits "any person" from retaliating against "any employee", the protection applies to all employees of an employer even in those instances in which the employee's work and the employer are not covered by the FLSA. Fact Sheet 14 provides additional information on FLSA coverage. Section 15(a)(3) also applies in situations where there is no current employment relationship between the parties; for example, it protects an employee from retaliation by a former employer.

Enforcement. Any employee who is "discharged or in any other manner discriminated against" because, for instance, he or she has filed a complaint or cooperated in an investigation, may file a retaliation complaint with the Wage and Hour Division or may file a private cause of action seeking appropriate remedies including, but not limited to, employment, reinstatement, lost wages and an additional equal amount as liquidated damages.

In Plan Board of Sunkist Retirement Plan v. Harding & Leggett, Inc., No. 10-55745 (9th Cir. 2011) (Unpublished Opinion), the Court faced the question of whether it should uphold the determination by the plaintiff, Plan Board of Sunkist Retirement Plan (the "Plan Board"), of the liability of the defendant, Harding & Leggett, Inc. (" H&L"), for its withdrawal from a multiple-employer pension plan (the "Plan"). H&L argued that the Plan Board abused its discretion in calculating the withdrawal liability amount. The Court concluded that the Plan Board's determination should be upheld. In doing so, the Court dealt with three issues.

First, H& L had argued that the interest rate assumption utilized to calculate its withdrawal liability was unreasonably low and selected for the purpose of exaggerating its liability. The Court did not agree. It said that the record supports a finding made by the district court that, in this case, the combination of the Pension Benefit Guaranty Corporation's ("PBGC") interest rate assumptions with its mortality rate assumptions approximates insurance annuity market pricing. Thus, the Court upheld the Plan Board's chosen interest rate assumptions.

Second, H&L had contended that-due to the provisions of the Plan- the Plan Board improperly included a job elimination benefit in its calculation. Again, the Court did not agree. It said that testimony at trial established that the omission of the job elimination benefit from the plan document was simply a clerical error, and that the benefit was received by at least one H&L employee during the time the language was missing from the document. Further, the district court had made a factual finding that the benefit was added to the Plan through an amendment in 1997, and was included in the Plan at the time of H&L's withdrawal.

Finally, H & L argued that the Plan Board erroneously included missing and deceased participants in its withdrawal liability calculation. Disagreeing again, the Court said that the ERISA regulations require that, "[i]n the absence of proof of death, individuals not located are presumed living." (citing 29 C.F.R. § 4050.2 (definition of "missing participant")). This refutes H&L's assertion that certain missing participants should be presumed dead and not included in the withdrawal liability calculation. Moreover, the Plan Board regularly conducted mortality audits and utilized a commercial locator service to search for missing participants, as required by the ERISA regulations (citing 29 C.F.R. § 4050.4(b)(3)).

In Central States, Southeast and Southwest Areas Pension Fund v. SCOFBP, LLC, No. 10-3633 (7th Cir. 2011), the issue raised was whether two solvent business entities can be held responsible under ERISA for the withdrawal liability of an insolvent affiliate. The insolvent employer is defendant SCOFBP, LLC ("SCOFBP"), which incurred withdrawal liability when it stopped operating and paying into a union's pension fund, the plaintiff Central States, Southeast and Southwest Areas Pension Fund (the "Fund"). The solvent affiliates are defendants MCRI/Illinois, LLC ("MCRI") and MCOF/Missouri, LLC ("MCOF"). They and SCOFBP were part of a group of entities under the control of Michael Cappy, a businessman who went through personal bankruptcy.

Under ERISA, for purposes of computing withdrawal liability, all "trades or businesses" under "common control" are treated as constituting a single employer. Each such trade or business is jointly and severally liable for any withdrawal liability of any other. The district court held here that the solvent MCRI and MCOF were both trades or businesses that were under common control with insolvent SCOFBP at the relevant times, so that both MCRI and MCOF are liable for SCOFBP's withdrawal liability. The defendants appealed. The Seventh Circuit Court of Appeals (the "Court") faced two arguments from the defendants: (1) MCRI and MCOF were only passive investment vehicles, rather than trades or businesses, and (2) that Cappy's personal bankruptcy disrupted what had been common control of the three entities. The Court rejected both arguments, and upheld the district court's decision.

As to argument (1), the Court said that MCRI and MCOF are each a "trade or business". MCOF owned the lumberyard in O'Fallon, Missouri that was used and leased by SCOFBP. MCRI held and continues to hold parcels of land in Rock Island, Illinois, which it leases to a third-party company. Both MCRI and MCOF are for-profit limited liability companies. Each has an operating agreement detailing the type of business the company intends to conduct, initially "to hold real estate and investments approved by the Manager." Payments on triple-net leases held by MCRI and MCOF were paid into their bank accounts and mortgage payments on properties they owned were withdrawn from them. Both applied for and were issued federal employer identification numbers. Both maintained offices, elected officers, and kept formal records of activities and expenditures. Both employed professionals to provide legal, management, and accounting services on a contract basis, although neither admitted to having any permanent employees. To constitute a"trade or business," an entity must be engaged in an activity with continuity and regularity, and for the primary purpose of income or profit. This test is intended to distinguish a trade or business from a passive investment. Under the facts here and this test, both MCRI and MCOF constitute a trade or business. MCOF leased property directly to SCOFBP, the withdrawing employer. MCRI, also a formal business organization, engaged in regular and continuous activity for the purpose of generating income or profit.

As to argument (2), the Court found that, while the facts were complicated, MCRI, MCOF and SCOFBP were under common control at the relevant time, namely when SCOFBP withdrew from the Fund. At that time, the three entities formed a parent-subsidiary group, with Cappy's bankruptcy estate being the common parent with a 100% controlling interest in each of the three entities. Having rejected arguments (1) and (2), the Court upheld the district court's decision, and ruled that MCRI and MCOF were responsible for the withdrawal liability incurred by SCOFBP.

In Announcement 2011-81, the Internal Revenue Service (the "IRS") provides temporary relief to owners of Individual Retirement Accounts ("IRAs") in circumstances in which the owners have signed certain indemnification agreements, or granted certain security interests in accounts, that may have an effect on the IRAs.

By way of background, according to the Announcement, on October 20, 2011, the Department of Labor (the "DOL") issued Advisory Opinion 2011-09A, which indicated that an IRA owner's agreement to indemnify a broker in order to cover indebtedness of, or arising from, the IRA with the broker would be an impermissible "extension of credit," as described in § 4975(c)(1)(B) of the Internal Revenue Code (the "Code"), and that DOL class exemption PTE 80-26 would not provide any relief from this prohibited transaction. Subsequent to the issuance of Advisory Opinion 2011-09A, similar issues have been raised regarding the IRA owner's grant of a security interest among the non-IRA accounts and the IRA (referred to collectively as cross-collateralization agreements) with a broker or other financial institution. Previously, on October 27, 2009, the DOL issued Advisory Opinion 2009-03A, which held that the grant by an individual to a broker of a security interest in the individual's non-IRA accounts with the broker would be an impermissible extension of credit to the individual's IRA, as described in § 4975(c)(1)(B) of the Code. Under Advisory Opinion 2011-09A, PTE 80-26 does not provide relief for the prohibited transaction arising from such extensions of credit.

The Announcement said that the DOL has advised the IRS that it is considering further action with respect to the issues described above, including the consideration of a new class exemption to provide relief. Pending further action by the DOL, and until issuance of further guidance from the IRS, the IRS will determine the tax consequences relating to an IRA, without taking into account the consequences that might otherwise result from a prohibited transaction under § 4975 resulting from entering into any indemnification agreement or any cross-collateralization agreement similar to the agreements described in DOL Advisory Opinions 2009-03A and 2011-09A. This will obtain so long as there has been no execution or other enforcement pursuant to the indemnification or cross-collateralization agreement against the assets of the IRA account which is the subject of the agreement.

The Department of Labor (the "DOL") has issued Technical Release 2011-03R (the "New Release"), which clarifies the guidance it provided earlier on the use of electronic media to meet the new participant fee disclosure rules (found at 29 CFR section 2550.404a-5) (the "Rules").

According to the New Release, on September 13, 2011, the DOL issued Technical Release 2011-03, which sets forth an interim enforcement policy regarding the use of electronic media to satisfy the disclosure requirements under the Rules. The New Release revises Technical Release 2011-03 to permit:

--disclosure through continuous access Web sites, if certain conditions of the New Release are met; and

--investment-related information, specifically the comparative chart information required by the Rules (in section 2550.404a-5(d), to be furnished-in electronic or paper form- as part of, or along with, a pension benefit statement described in section 105 of ERISA.

In U.S. Airways Inc. v. McCutchen, No. 10-3836 (3rd Cir. 2012), the defendant, James McCutchen ("McCutchen"), had suffered a serious automobile accident. An employee benefit plan (the "Plan") administered by the plaintiff, U.S. Airways ("Airways"), paid $66,866 for his medical expenses. McCutchen then recovered $110,000 from third parties, with the assistance of counsel. Airways, which had not sought to enforce its subrogation rights, demanded reimbursement of the entire $66,866 it had paid without allowance for McCutchen's legal costs, which had reduced his net recovery to less than the $66,866 that amount that Airways demanded. Airways filed this suit against McCutchen for "appropriate equitable relief" to collect the $66,866 amount, pursuant to section 502(a)(3) of ERISA. The district court granted judgment to Airways for the $66,866 amount .The issue for the Third Circuit Court of Appeals (the "Court"): may McCutchen assert certain equitable defenses, such as unjust enrichment, against Airways' claim.

The Court concluded that McCutchen may assert equitable defenses against Airway's claim. The Plan's summary plan description requires a participant to reimburse the Plan for any amounts that the Plan has paid out of any monies the participant recovers from a third party. There is no limitation based on the lawyer's fees the participant incurs to collect those monies. However, the Court said that it must exercise its discretion to limit a plan's equitable relief to what is "appropriate" under traditional equitable principles, in particular, in view of the unjust enrichment of Airways without the offset for lawyer's fees. Applying the traditional equitable principle of unjust enrichment, the Court found that the district court's judgment requiring McCutchen to provide full reimbursement to Airways constitutes inappropriate and inequitable relief. Because the amount of the judgment exceeds the net amount of McCutchen's third-party recovery, it leaves him with less than full payment for his emergency medical bills, thus undermining the entire purpose of the Plan. At the same time, it amounts to a windfall for Airways, which did not exercise its subrogation rights or contribute to the cost of obtaining the third-party recovery. Equity abhors a windfall. As such, the Court vacated the district court's order, and remanded the case for the district court to fashion "appropriate equitable relief."

In Scott v. Eaton Corporation Long Term Disability Plan, No. 10-2124 (4th Cir. 2011)(Unpublished), the plaintiff, Statia Scott ("Scott"), brought suit under ERISA against the defendant, the Eaton Corporation Long Term Disability Plan (the "Plan"), for revoking Scott's long-term disability ("LTD") benefits from the Plan. The district court reversed the Plan's decision and awarded LTD benefits to Scott. The Plan appealed. The issue for the Fourth Circuit Court of Appeals: was the Plan's decision to revoke the LTD benefits, made by the plan administrator of the Plan, an abuse of discretion? If not, the decision must stand.

In this case, the plan administrator of the Plan was the employer, Eaton Corporation ("Eaton"). Scott's disability arose from right arm pain and rheumatism, coupled with anxiety and depression. After initially being awarded LTD benefits by the Plan, Scott's LTD benefits were later revoked and terminated by Eaton as plan administrator. Eaton's decision to revoke the benefits was based on the medical reports of seven physicians, solicited by the Plan, all of which concluded that Scott could work. Only Scott's own physician-one Dr. Riley- had concluded that Scott was disabled. Eaton discounted Dr. Riley's conclusions, based on the various inconsistencies among his diagnoses, his lack of objective findings, and his conclusions being contradicted by the Plan's seven reviewing physicians.

In analyzing the case, the Court noted that Eaton had discretion to interpret and apply the Plan's provisions, and to determine eligibility for benefits. As such, Eaton's decision to revoke the LTD benefits must be reviewed under an abuse of discretion standard. The Court concluded that Eaton did not abuse its discretion, because its decision-making process was sound and its ultimate decision was supported by substantial evidence. The record is clear that Eaton thoughtfully considered but rejected the views of Dr. Riley. Eaton had also taken into account the side effects of Scott's medicines. Also, the evidence in the record-primarily lack of objective evidence of disability-supports Eaton's decision. As such, the Court ruled to uphold Eaton's decision to revoke Scott's LTD benefits, and reversed the district court's judgment.

In Milgram v. Orthopedic Associates Defined Contribution Pension Plan, Nos. 10-1862-cv (L), 10-1893 (con) (2nd Cir. 2011), the plaintiff, Robert Milgram ("Milgram"), sought to recover, under section 502(a)(1) of ERISA, $763,847.93 that the defendant, the Orthopedic Associates Defined Contribution Pension Plan ("the Plan"), erroneously transferred from Milgram's account under the Plan to his ex-wife, Norah Breen ("Breen"), under a divorce settlement, plus interest on that amount from the time of transfer.

The district court had granted Milgram judgment against the Plan for the $763,847.93 amount plus interest, and also granted the Plan an equivalent judgment against Breen. On appeal, the Plan challenged the enforceability of the judgment against it, on the ground that requiring its payment before the Plan has fully recovered from Breen would violate, among other law, ERISA's anti-alienation provision, found in section 206(d)(1) of ERISA. After reviewing the case, the Second Circuit Court of Appeals (the "Court"), affirmed the district court's judgments, thereby ruling against the Plan's challenge. Morever, the Plan would have to pay the funds to Milgram, even if it could not collect any funds from Breen.

In upholding the enforceability of the judgment against the Plan, the Court noted that, under section 502(d)(1)-(2) of ERISA, an employee benefit plan may be sued, and that any resulting money judgment is enforceable against the plan. ERISA's anti-alienation provision, found in section 206(d)(1) of ERISA, under which plan benefits may not be assigned or alienated, does not change this result. The anti-alienation provision protects participants' benefits. However, the Court said that the undistributed assets of a plan-even a defined contribution plan as here- are not participants' benefits and therefore do not receive anti-alienation protection. A plan is required to pay its own debts, even if the payment comes out of plan assets, and reduces participants' accounts. The Court found the remaining arguments against the enforceability of the judgment against the Plan unpersuasive. As to the interest on the $763,847.93 principal amount, the Court said that Milgram's right to be compensated for the time value of the misdirected funds is a question of contract interpretation, to be decided under federal common law. The Court concluded that Milgram's entitlement to the interest is implicit in the Plan's terms, as so interpreted.

Thought: Unless something changes, like the Plan collects from Breen or the employer makes a compensating contribution, the judgment against the Plan will be paid out of, and correspondingly reduce, other participants' accounts in the Plan. They won't be too happy about that.

According to a News Release dated 12/5/11, the Employee Benefits Security Administration (the "EBSA") has issued two proposed rules, under the Affordable Care Act, to protect businesses and workers whose health benefits are provided through a multiple employer welfare arrangement, often called a "MEWA".

The problem? According to the News Release, MEWAs frequently have been used by scam artists and criminals to defraud consumers, resulting in an inability to pay medical claims. When such MEWAs become insolvent, they may leave consumers with substantial unpaid medical bills. For employers or employee organizations that have paid premiums or made contributions to a MEWA, and thought they were doing the right thing for their workers and their families, the impact also can be significant. MEWA sponsors make the arrangement attractive by offering low premiums. However, they have often have taken advantage of gaps in the law to avoid state insurance regulations, such as a requirement to maintain sufficient funding and adequate reserves to pay the health care claims of workers and their families. In the worst situations, the sponsors have drained their assets through excessive administrative fees or outright embezzlement.

The News Release says that the proposed rules call for MEWAs to adhere to enhanced reporting requirements, so that employers, workers and their families will not unexpectedly be cut off from needed health care services. The rules also will increase the enforcement authority of the Department of Labor (the "DOL") to protect participants in such plans and allow the DOL to shut down MEWAs engaged in fraud or other activities that present an immediate danger to the public safety or welfare. According to the News Release, under the proposed rules:

• MEWAs must register with the DOL prior to operating in a state or be subject to substantial penalties. This step will allow the DOL to track MEWAs as they move from state to state and to identify their principals, which will provide the DOL with important information regarding potentially fraudulent MEWAs.
• The secretary of labor will be able to issue a cease and desist order when it appears that fraud is taking place or an arrangement is causing immediate danger to the public safety or welfare.
• The secretary of labor could seize assets from a MEWA when there is probable cause that the plan is in a financially hazardous condition.

In Epstein v. Hartford Life and Accident Insurance Company, No. 10-3852-cv. (2nd Cir. 2011) (Summary Order), the plaintiff, Howard Epstein ("Epstein") was appealing the district court's grant of summary judgment for the defendant , Hartford Life and Accident Insurance Company ("Hartford"), on Epstein's claim for long-term disability ("LTD") benefits. Hartford had denied Epstein's claim for the benefits, and this suit ensued. The issue for appeal is whether Epstein's claim for the LTD benefits, which challenged the denial by Hartford, was time-barred by a limitation-of-actions clause in Hartford's long-term disability plan (the "Plan").

In analyzing the case, the Court noted that ERISA does not prescribe a limitations period within which claimants can challenge benefit denials in federal court. The applicable limitations period is that specified in the most nearly analogous state limitations statute, which in this case is New York's six-year limitations period for contract actions. However, New York permits contracting parties to shorten a limitations period if, as here, their agreement is memorialized in writing. In this case, the Plan provides that a claimant may not bring a legal action more than three years after the time written Proof of Loss is required to be furnished. Further, the Plan states that Proof of Loss must be sent to Hartford within 90 days after the start of the period for which Hartford owes payment. Also, the Plan provides for an "Elimination Period" of 182 consecutive days, which is the period for which a claimant must be disabled before benefits become payable.

In this case, Hartford calculated that Epstein exhausted the Plan's Elimination Period on October 22, 2005. That is the same date that Epstein, in his complaint, said that he originally became eligible for LTD benefits. Under the terms of the Plan, then, Proof of Loss for Epstein's LTD benefits claim was due on January 20, 2006, ninety days after the end of the Elimination Period on October 22, 2005. Thus, the limitations period would normally have begun to run on January 20, 2006. However, on November 20, 2006, Hartford made a post-denial request for additional Proof of Loss regarding Epstein's LTD benefits claim. This request extended the starting date of the limitations period to December 20, 2006, when-according to the request- such Proof of Loss was due. Epstein filed suit in the district court on June 18, 2009. That date was within 3 years of December 20, 2006. As such, the Court concluded that Epstein's claim was timely filed under the Plan's provisions, and it overturned the summary judgment granted by the district court to Hartford.