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April 25, 2016

ERISA-Ninth Circuit Discusses Which Party Has Burden Of Proof In A Case Involving A Claim For Pension Benefits

In Estate of Barton v. ADT, No. 13-56379 (9th Cir. 2016), Bruce Barton appeals from the district court's judgment concluding that the ADT Security Services Pension Plan Administrator did not abuse its discretion in denying Barton's request for pension benefits. In analyzing the case, the Ninth Circuit Court of Appeals (the "Court") concluded that, since the district court did not have the benefit of the Court's analysis regarding the burden of proof in a case such as this, the Court reversed the case and remand it for proceedings consistent with this opinion.

The Court said the following as to the burden of proof. A claimant may bear the burden of proving entitlement to ERISA benefits. This rule makes sense in cases where the claimant has better--or at least equal--access to the evidence needed to prove entitlement. But in other contexts, the defending entity solely controls the information that determines entitlement, leaving the claimant with no meaningful way to meet his burden of proof. This is one of those cases.

The district court had placed the burden of proof on Barton to establish that his various ADT-related employers participated in defendants' Plan, and that he worked the requisite hours per year. There are two problems with this approach. First, defendants are in a far better position to ascertain whether an entity was a participating employer. It should not greatly burden an ERISA-compliant entity to determine what companies were authorized as "participating employers," so the entity, not the claimant, should bear the risk of insufficient records. Second, a shift in the burden of proof follows naturally from ERISA's disclosure requirements. One such requirement, ERISA section 104(b)(4), mandates supplying participants with certain plan information, such as the summary plan description, annual report, or other instruments under which the plan is established or operated. These disclosure requirements, and corresponding penalties for failure to disclose found in ERISA section 502(c)(1), function to ensure that an individual is duly informed of basic information relating to his pension plan.

As such, the Court held that, where a claimant has made a prima facie case that he is entitled to a pension benefit but lacks access to the key information about corporate structure or hours worked needed to substantiate his claim and the defendant controls such information, the burden shifts to the defendant to produce this information.

April 21, 2016

ERISA-District Court Rules That Claim For Intentional Infliction Of Emotional Distress Is Not Preempted By ERISA

In Kresich v. Metropolitan Life Ins. Co., No. 15-cv-05801 (N.D. Cal. Apr. 4, 2016), plaintiff John Kresich (the "Plaintiff") asserted a claim for intentional infliction of emotional distress ("IIED") arising from Defendant Metropolitan Life Insurance Company's (the "Defendant") conduct during the processing of his claim for long-term disability benefits. Defendant moves for judgment on the pleadings, arguing that Plaintiff's complaint is preempted under section 514(a) of ERISA. After reviewing the case, the District Court (the "Court") denied Defendant's motion.

As to ERISA preemption, the Court said that there are two pieces to ERISA's preemption rule. First, ERISA preempts state laws that "relate to" an ERISA plan. 29 U.S.C. § 1144(a). Second, ERISA preemption bars state-law causes of action that fall within the scope of ERISA's comprehensive scheme of civil remedies to enforce ERISA's provisions, even if those causes of action would not necessarily be preempted by § 1144(a). In this case, Defendant's motion is based on the second piece. It argues there can be no dispute that Plaintiff's action is for the alleged improper processing of a claim for benefits under an insured employee benefit plan and that his IIED claim therefore springs from the handling and disposition of his claim.

However, the Court does not accept this argument. The Court noted that there is no allegation in Plaintiff's complaint that his benefits have been granted or denied, and Plaintiff's suit is not based on the processing of his claim. It said that courts have denied preemption where the common law or state law claims are too tangentially related to the administration of the employee benefits plans. To avoid preemption, the Court must determine whether Plaintiff's IIED claim relies on a legal duty that arises independently of ERISA and that would exist whether or not an ERISA plan existed. Reviewing case-law precent, the Court found that Plaintiff's allegations involve harassing and oppressive conduct independent of the duties of administering an ERISA plan and are only tangentially related to the administration of the plan in question. Therefore, no preemption.

April 19, 2016

ERISA-Second Circuit Discusses Results Of Failure To Follow ERISA Claims Procedure

In Halo v. Yale Health Plan, Docket No. 14-4055 (2nd Cir. 2016), the Second Circuit Court of Appeals (the "Court"), faced a failure by a plan to comply with the Department of Labor's claim procedure. In this case, a claims denial letter did not include the information required by the procedure.

The Court held that, when denying a claim for benefits, a plan's failure to comply with the Department of Labor's claims-procedure regulation, 29 C.F.R. § 2560.503-1, will result in that claim being reviewed de novo in federal court, unless the plan has otherwise established procedures in full conformity with the regulation and can show that its failure to comply with the regulation in the processing of a particular claim was inadvertent and harmless. The Court further held that civil penalties are not available to a participant or beneficiary for a plan's failure to comply with the claims-procedure regulation. Finally, the Court held that a plan's failure to comply with the claims-procedure regulation may, in the district court's discretion, constitute good cause warranting the introduction of additional evidence outside the administrative record.

April 18, 2016

ERISA-Fifth Circuit Upholds Administrator's Denial Of Claim For Long-Term Disability Benefits

In Burell v. Prudential Ins. Co., No. 15-50035 (5th Cir. 2016), plaintiff Patrick Burell ("Burell") filed a claim for long-term disability benefits with defendant Prudential Insurance Company of America ("Prudential"). Prudential denied Burell's initial claim and two subsequent appeals. Burell then filed suit against Prudential under ERISA, alleging that its denial of his long-term disability-benefits claim was in error. The district court granted summary judgment in favor of Prudential, and Burell appeals.

In this case, Burell was diagnosed with multiple sclerosis ("MS") in 2008. Citing worsening symptoms of MS, in September 2011, Burell went on medical leave and filed for long-term disability benefits with Prudential under a plan covering him at work (the "Plan"), claiming that he qualified for benefits under the Plan due to MS, headaches, depression, and anxiety. In January 2012, he stopped working altogether. However, Prudential, who is the administrator and insurer under the Plan, denied his claim and the two appeals which followed.

In analyzing the case, the Fifth Circuit Court of Appeals (the "Court") said, first, that the denial by Prudential is entitled to review under the abuse of discretion standard because the Plan grants Prudential the authority to interpret the Plan and make benefits decisions. The Court then said that it found no such abuse on the facts of this this case. Under the terms of the Plan, to qualify for the benefits claimed, Burell's MS must render him unable to perform the material and substantial duties of his regular occupation. None of the health care providers consulted by Prudential found that Burell had physical or cognitive impairments. Therefore, Prudential was allowed to base its decision on the reports of its independent medical consultants, who found no such inability to perform, as opposed to Burell's own physicians. Also, while Prudential has a conflict of interest since it is both administrator and insurer (payor), Burell has not shown how this affects the abuse of discretion analysis in this case.

Based on the above, the Court upheld Prudential's denial of Burell's claim for benefits, and affirmed the district court's decision.

April 12, 2016

ERISA-DOL Finalizes New Definition Of Fiduciary

The Department of Labor (the "DOL") has now issued final regulations, which revises the definition on who is considered to be a "fiduciary", for ERISA purposes, by providing "investment advice". The DOL has also issued two new prohibited transaction exemptions, and amended others, to help implement the revised definition. To introduce the revised definition, and the new and amended exemptions, the DOL has released a Fact Sheet. Here is a summary of what the Fact Sheet says:

I. What Is Covered Investment Advice Under the Revised Definition?

The revised definition describes the kinds of communications that would constitute investment advice, and then describes the types of relationships in which those communications would give rise to fiduciary investment advice responsibilities.

Covered investment advice is defined as a recommendation to a plan, plan fiduciary, plan participant or beneficiary or IRA owner for a fee or other compensation, direct or indirect, as to the advisability of buying, holding, selling or exchanging securities or other investment property, including recommendations as to the investment of securities or other property after the securities or other property are rolled over or distributed from a plan or IRA.

Covered investment advice also includes recommendations as to the management of securities or other investment property, including, among other things, recommendations on investment policies or strategies, portfolio composition, selection of other persons to provide investment advice or investment management services, and selection of investment account arrangements (e.g., brokerage versus advisory). It also includes recommendations with respect to rollovers, transfers, or distributions from a plan or IRA, including whether, in what amount, in what form, and to what destination such a rollover, transfer, or distribution should be made.

Under the revised definition, the fundamental threshold element in establishing the existence of fiduciary investment advice is whether a "recommendation" occurred. A "recommendation" is a communication that, based on its content, context, and presentation, would reasonably be viewed as a suggestion that the advice recipient engage in or refrain from taking a particular course of action. The more individually tailored the communication is to a specific advice recipient or recipients, the more likely the communication will be viewed as a recommendation.

The types of relationships that must exist for such recommendations to give rise to fiduciary investment advice responsibilities include recommendations made either directly or indirectly (e.g. through or together with any affiliate) by a person who:

• represents or acknowledges that they are acting as a fiduciary within the meaning of ERISA or the Internal Revenue Code (Code);
• renders advice pursuant to a written or verbal agreement, arrangement or understanding that the advice is based on the particular investment needs of the advice recipient; or
• directs the advice to a specific recipient or recipients regarding the advisability of a particular investment or management decision with respect to securities or other investment property of the plan or IRA.

The recommendation must be provided in exchange for a fee or other compensation.

II. What Is Not Covered Investment Advice Under the Revised Definition?

The following is NOT treated as covered investment advice:

--general communications that a reasonable person would not view as an investment recommendation;
--providing a platform of investment alternatives to plan fiduciaries;
--communication by advisors to independent plan fiduciaries with financial expertise;
--communications and activities by advisers in swap transactions if certain conditions are met; and
--normal communications from company employees.

III. The Best Interest Contract Exemption

In order to ensure retirement investors receive advice that is in their best interest while also allowing advisers to continue receiving commission-based compensation, the DOL is issuing the Best Interest Contract Exemption (the "BICE"). Under ERISA and the Code, individuals providing fiduciary investment advice to plan sponsors, plan participants, and IRA owners are not permitted to receive payments creating conflicts of interest without a prohibited transaction exemption (a "PTE").

BICE requires a financial institution providing advice to acknowledge fiduciary status for itself and its advisers. The financial institution and advisers must adhere to basic standards of impartial conduct, including giving prudent advice that is in the customer's best interest, avoiding making misleading statements, and receiving no more than reasonable compensation. The financial institution also must have policies and procedures designed to mitigate harmful impacts of conflicts of interest and must disclose basic information about their conflicts of interest and the cost of their advice.
BICE includes disclosure requirements, including descriptions of material conflicts of interest, fees or charges paid by the retirement investor, and a statement of the types of compensation the firm expects to receive from third parties in connection with recommended investments. Investors also have the right to obtain specific disclosure of costs, fees, and other compensation upon request. In addition, a website must be maintained and updated regularly that includes information about the financial institution's business model and associated material conflicts of interest, a written description of the financial institution's policies and procedures that mitigate conflicts of interest, and disclosure of compensation and incentive arrangements with advisers, among other information.

BICE provides for enforcement of the standards it establishes.

IV. Additional Exemptive Relief

In addition to the BICE, the DOL is issuing a Principal Transactions Exemption, which permits investment advice fiduciaries to sell or purchase certain recommended debt securities and other investments out of their own inventories to or from plans and IRAs. As with the BICE, this requires, among other things, that investment advice fiduciaries adhere to certain impartial conduct standards, including obligations to act in the customer's best interest, avoid misleading statements, and seek to obtain the best execution reasonably available under the circumstances for the transaction.

The DOL is also finalizing an amendment to an existing exemption, PTE 84-24, which provides relief for insurance agents and brokers, and insurance companies, who receive compensation for recommending fixed rate annuity contracts to plans and IRAs. As amended, PTE 84-24 contains increased safeguards for the protection of retirement investors. This exemption has more streamlined conditions than the BICE, which will facilitate access by plans and IRAs to these relatively simple lifetime income products.

The DOL is amending other existing exemptions, as well, to ensure that plan and IRA investors receiving investment advice are consistently protected by impartial conduct standards, regardless of the particular exemption upon which the adviser relies.

V. Applicability Date

Compliance with the revised definition of fiduciary and the new and amended PTEs is required as of the date which is one year after the day on which the final regulations are published in the Federal Register. (that one year anniversary being April 8, 2017). However, the new and amended PTEs are subject to a phased-in implementation approach, with full compliance required by January 1, 2018 .

VI. Links

The final regulation, the BICE, the Principal Transactions Exemptions and amendments to the other PCEs are here.

April 6, 2016

ERISA-District Court Rules That Retiree Health Benefits Are Not Vested And May Be Altered By The Employer

In Grove, Sr. v. Johnson Controls, Inc., Civil No. 1:12-CV-02622 (M.D. Pa. March 31, 2016), in an action brought under ERISA and the LMRA, the plaintiffs allege that the defendants violated their rights to retiree health benefits. After reviewing the case, the District Court (the "Court") granted summary judgment for the defendants.

In this case, every few years since 1973, the Union in question has negotiated a collective-bargaining agreement ("CBA") with Johnson Controls, Inc. ("Johnson Controls" ) or its predecessors relating to, among other things, active and retiree health insurance benefits for both employees and former employees of the York Plant. Each CBA incorporated by reference a separate booklet, the "Group Insurance Program" ("GIP"), that specifically addressed health and welfare benefits. Throughout the years, these health benefits remained fairly consistent from agreement to agreement. However, in 2009, Johnson Controls unilaterally reduced retiree health benefits by instituting a $50,000.00 lifetime cap on benefits payable for each participant sixty-five years of age and older. As a result of the cap, some plaintiffs are no longer eligible for retiree healthcare benefits because they have reached the $50,000 lifetime coverage limit. This suit ensued.

In analyzing the case, the Court noted that, in its unanimous decision in the Tackett case, the U.S. Supreme Court rejected the inferences in favor of vesting set forth in the Sixth Circuit's Yard-Man case and its progeny, and reaffirmed that collective bargaining agreements are to be interpreted according to ordinary principles of contract law, at least to the extent not inconsistent with Federal labor policy. The Supreme Court emphasized that a court's objective when interpreting a collective bargaining agreement, as with any contract, is to give effect to the contractual rights and expectations of the parties.
Using this guidance, the Court found that:

-- the applicable language in certain of the CBAs was unambiguous and did not express the intent to create unalterable, lifetime benefits.

--the applicable language in other CBAs and the GIPS have explicit durational clauses providing the exact date and time when those documents ceased to be in effect, as well as additional language contemplating the termination of retiree health benefits. In the face of these provisions, the "until death" language appearing in those documents does not constitute clear and express vesting language sufficient to overcome the durational provisions. Since the durational clauses must be given effect, the Court finds that those CBAs and the GIPs did not promise any benefits beyond the expiration of the relevant contract, and the retiree benefits do not vest.

--a reservation of rights in the GIPs is unambiguous, and further forecloses any notion of vesting.

The result is that the retiree health benefits in question are not vested, and may be reduced by Johnson Controls.

April 5, 2016

ERISA-Idaho Supreme Court Finds A QDRO To Be Valid

In Kesting v. Kesting, Docket No. 42875, 2016 Opinion No. 35 (Supreme Court of Idaho, Boise, February 2016 Term), Appellant, Linda Kesting ("Linda"), obtained a judgment against Respondent, James Kesting ("James"), for breach of an alimony/spousal support agreement entered into during their divorce. When that judgment was returned without recovery, the magistrate judge issued a Judgment of Qualified Domestic Relations Order ("QDRO"). The subsequent judgment was intended to allow recovery of the unpaid spousal support and associated attorney fees from James' pension plan. James appealed to the district court, which reversed.

The district court concluded that the QDRO was not valid because the spousal support agreement was not merged into the divorce decree and, therefore, the QDRO was not issued pursuant to the State's domestic relations law as required under ERISA. Linda timely appealed.

Upon reviewing the case, the Supreme Court of Idaho (the "Court") said that the district court erred in holding the QDRO invalid. It said that the central question is whether, as required to be valid under ERISA, the QDRO was made pursuant to a state domestic relations law. The Court ruled that it was, stating that a QDRO is issued pursuant to Idaho's domestic relations law when, as here, it is issued to enforce a judgment for breach of a spousal support agreement and complies with the Title 11 of the Idaho Code. Thus, the Court reversed the district court's decision and found the QDRO to be valid.

March 31, 2016

ERISA-Eighth Circuit Holds That Case, Involving Plaintiff's Claim Of Breach Of ERISA Fiduciary Duty, Must Be Remanded To Determine Whether Parties Waived The Use Of Collateral Estoppel To Block Plaintiff's Claim

In Blue Cross Blue Shield of Minnesota v. Wells Fargo Bank, N.A., No. 14-3457 (8th Cir. 2016), the plaintiffs ("Plaintiffs") are administrators of employee benefit plans governed by ERISA, who entered into securities lending agreements with Wells Fargo Bank ("Wells Fargo"). Plaintiffs alleged that they suffered substantial losses as a result of Wells Fargo's improper and imprudent investment of their funds and asserted breach of fiduciary duty claims under ERISA. Plaintiffs are seeking to reverse the district court's judgment that it was bound by collateral estoppel and thus required to find against Plaintiffs and in favor of Wells Fargo on their ERISA claims.

Following the trial, the parties simultaneously submitted Proposed Findings of Fact and Conclusions of Law with respect to the ERISA claims. In its submission, WellsFargo asserted that collateral estoppel should apply and that based on the jury verdict, the court was bound to find that there was no breach of fiduciary duty. The district court determined that it was constrained by collateral estoppel to render judgment on Plaintiffs' claims consistent with the jury's determination and issued judgment, dismissing Plaintiffs' ERISA claims with prejudice. Plaintiffs appeal, arguing that the district court erred in failing to find that Wells Fargo waived any right to assert that the district court was bound by the jury's findings.

Upon reviewing the case, the Eighth Circuit Court of Appeals (the "Court") held that, the district court failed to consider whether the parties waived the application of collateral estoppel. As such, the case must be vacated and remanded to the district court to determine whether the waiver occurred.

March 29, 2016

ERISA-Second Circuit Rules That Plaintiffs In A Stock Drop Case Fail To State A Claim Of Breach Of Fiduciary Duty Under ERISA

The case of In Re: Lehman Bros. Sec. and ERISA Litig., No. 15-2229 (2d Cir. 2016) has returned to the Second Circuit Court of Appeals (the "Court") for the second time since 2013. After the September 2008 bankruptcy of Lehman Brothers Holdings, Inc. ("Lehman"), the plaintiffs ("Plaintiffs") brought suit on behalf of a putative class of former participants in an employee stock ownership plan ("ESOP") invested exclusively in Lehman's common stock. Plaintiffs alleged, among other things, that the defendants ("Plan Committee Defendants"), who were fiduciaries of this ESOP, breached their duty of prudence under ERISA by continuing to permit investment in Lehman stock in the face of circumstances arguably foreshadowing its eventual demise. The District Court had ruled in favor of the Plan Committee Defendants.

The Court reviewed the case history and noted that on June 25, 2014, the Supreme Court of the United States held in Fifth Third Bancorp v. Dudenhoeffer ("Fifth Third") that ESOP fiduciaries are not entitled to any special presumption of prudence when the plan invests in employer stock, abrogating the so called Moench presumption of prudence. Nevertheless, even without this presumption, the Court ruled that the Plaintiffs have failed to state a claim of breach of fiduciary duty.

After reviewing the case, the Court stated that it agreed with the District Court that, even without the presumption of prudence rejected in Fifth Third, Plaintiffs have failed to plead plausibly that the Plan Committee Defendants breached their fiduciary duties under ERISA by failing to recognize the imminence of Lehman's collapse. Plaintiffs have not adequately shown that the Plan Committee Defendants should be held liable for their actions in attempting to meet their fiduciary duties under ERISA while simultaneously offering an undiversified investment option for employees' retirement savings.

March 24, 2016

ERISA-First Circuit Holds That An Administrator's Claim Denial Is Not Entitled To A Deferential Review When The Plan Does Not Grant Discretionary Authority To The Adminstrator

In Stephanie C. v. Blue Cross Blue Shield of Massachusetts HMO Blue, Inc., No. 15-1531 (1st Cir. Feb. 17, 2016), Stephanie C. ("Stephanie"), individually and on behalf of her minor son M.G., challenges a decision of the claims administrator, Blue Cross Blue Shield of Massachusetts HMO Blue, Inc. ("BCBS"), partially denying her claim for benefits. The denial related to some charges incurred during M.G.'s stay at a residential/educational mental healthcare facility. The district court upheld the partial denial.

In this appeal, Stephanie asserts that the district court erred in failing to find that BCBS committed procedural violations (such as failing to engage in dialogue with her, to answer her questions, and to take into account the materials that she submitted); that the court appraised her benefits-denial claim through the wrong lens; and that the court, in all events, erroneously upheld the partial denial of benefits.

Upon reviewing the case, the Court of Appeals for the First Circuit (the "Court") rejected Stephanie's claims that BCBS committed procedural violations. It then said that from that point forward, however, the case raises important questions concerning what a claims administrator must do to reserve discretion in the handling of benefits claims. Specifically, in order for the decision of the claims administrator-here BCBS- to be given discretion by the courts, the plan must reflect a clear grant of discretionary authority to the claims administrator to determine eligibility for benefits. Here, in the Court's view, the plan did not do so, stating only that BCBS "decides which health care services and supplies that you receive (or you are planning to receive) are medically necessary and appropriate for coverage."

However, believing the language was sufficient to grant discretion, the district court reviewed BCBS's partial denial of the benefits claim by allowing discretion to BCBS, instead of reviewing the decision de novo, and thus employed the wrong standard of review when considering the partial denial of benefits. Accordingly, the Court vacated the district court's judgment and remanded the case for further proceedings consistent with this opinion.

March 23, 2016

ERISA-IRS Says That Just One Multiemployer Annual Actuarial Certification Should Be Sent Per Year

Here is what the IRS says on the multiemployer annual certification:

The multiemployer plan actuary must complete an Annual Actuarial Certification of the plan's funding status. It must be submitted to the IRS no later than 90 days after the beginning of the plan year.

We're receiving duplicate certifications from the same plan for the same plan year. Submitting duplicate certifications to ensure we've received it creates administrative issues because we now have duplicate entries.

If you wish to confirm delivery, we suggest using the U.S. Postal Office's Certified Mail service for mailed certifications and the confirmation page for faxed certifications.

You may submit your certification in one of three ways:
• Email:
• Fax: 855-215-7122
• Mail: Internal Revenue Service
Employee Plans Compliance Unit
Group 7602 (TEGE:EP:EPCU)
230 S. Dearborn Street
Room 1700 - 17th Floor
Chicago, IL 60604

March 22, 2016

ERISA-Seventh Circuit Holds That A Plan Established By A Church-Affiliated Organization Is Not A Church Plan, And Therefore Is Not Exempt From ERISA

In Stapleton v. Advocate Health Care Network, No. 15-1368 (7th Cir. 2016), the Seventh Circuit Court of Appeals (the "Court") said that ERISA protects employees from unexpected losses in their retirement plans by setting forth specific safeguards for those plans. ERISA, however, exempts church plans from those requirements. This case explores the question that has been brewing in the lower federal courts: whether a plan established by a church-affiliated organization, such as a hospital, is also exempt from ERISA's reach. The Court concluded that it is not. Why?

The Court said, as to what constitutes a church plan, that section 3(33) of ERISA requires the plan to be established by a church, as opposed to a church-affiliated organization. The plan in question was established by Advocate, which is possibly a church-affiliated organization offering heath care, but is not actually a church. Therefore, this plan is not a church plan.

March 21, 2016

ERISA-Seventh Circuit Rules That Plan Administrator's Determination of Pension Offest Was Correct.

In Cocker v. Terminal Railroad Association of St. Louis Pension Plan For Nonschedule Employees, No. 15-2690 (7th Cir. 2016), the plaintiff is a participant in a retirement plan (the "Terminal Plan") governed by ERISA; the defendant is the Terminal Plan.

In this case, the plan document provides that "the retirement income benefit payable under this Plan shall be offset by the amount of retirement income payable under any other defined benefit plan ... to the extent that the benefit under such other plan or plans is based on Benefit Service taken into account in determining benefits under this Plan." The Terminal Plan based its calculation of the plaintiff's plan benefits on his total years of work, including the years he'd spent working for Union Pacific Railroad. So it made sense for the plan to subtract from the plaintiff's benefits under the Terminal Plan any benefits that Union Pacific had already given him for his years of working for that company. The Terminal Plan provides that if "the benefit under such another plan is paid in a form other than the form of payment under this Plan, including without limitation a single lump sum cash payment made prior to retirement, the amount of such offset shall be the dollar amount per month of the benefit that would have been payable under such other plan in the form of a Single Life Annuity commencing on the Participant's Normal Retirement Date" (emphasis added).

The appeal revolves around the meaning of "payable" in the plan document. The plaintiff had taken early retirement from Union Pacific in 2006. His normal retirement date would have been in 2019, and had he waited until then to retire he would have received a retirement benefit of $2,311.73 a month. Instead he chose to begin receiving his benefits in 2009, in the form of a monthly benefit of $1,022.94. The two dollar figures are actuarially identical, in the sense that the present value of the two streams of money is the same because the smaller monthly benefit is received for 111 months longer than the larger one. After retiring from Union Pacific the plaintiff went to work for Terminal Railroad and became a participant in the Terminal Plan. When in 2010 he retired from Terminal Railroad, the Terminal Plan's administrator calculated the monthly benefit owed him for his combined years of service to Terminal and Union Pacific to be $3,725.02, from which the Terminal Plan would deduct the monthly benefits payable under the Union Pacific Plan. The question is whether the amount to be deducted each month should be $2,311.73 or $1,022.94. The plaintiff argued to the plan administrator for the smaller deduction; the administrator rejected the argument. So the plaintiff sued the Terminal Plan under 29 U.S.C. § 1132(a)(1)(B). He won in the district court, precipitating the Plan's appeal in this case.

Upon reviewing the case, the Seventh Circuit Court of Appeals determined that the plan administrator was right, so that the proper deduction is the $2,311.73 amount. This obtains because that amount is the amount payable under the prior employer's plan, without actuarial reduction for a pre-normal retirement date start of payments.

March 16, 2016

ERISA-First Circuit Holds That Failure To Include Time Period For Filing Suit Renders The Plan's Own Limitation's Period Inapplicable

In Santana-Diaz v. Metropolitan Life Ins. Co., No. 15-1273 (1st Cir. Mar. 14, 2016), Appellant Dionisio Santana-Díaz ("Santana-Díaz") challenges the district court's dismissal of his suit as time-barred, arguing that he is entitled to equitable tolling, in part because the plan administrator, Appellee Metropolitan Life Insurance Company ("MetLife"), failed to include the time period for filing suit in its denial of benefits letter.

The First Circuit Court of Appeals (the "Court") held that ERISA requires a plan administrator in its denial of benefits letter to inform a claimant of not only his right to bring a civil action, but also the plan-imposed time limit for doing so. Because MetLife violated this regulatory obligation, the plan's limitations period in this case was rendered inapplicable, and Santana-Díaz's suit was therefore timely filed. Accordingly, the Court reversed and remanded the case.

The Court said the following about the statute of limitations. ERISA itself does not contain a statute of limitations for bringing a civil action, so federal courts usually borrow the most closely analogous statute of limitations in the forum state. But where the employee benefit plan itself provides a shorter limitations period, that period will govern as long as it is reasonable. In this case, the plan contained a three-year limitations period that ran from the date proof of disability was due. MetLife included no mention of this time limit in its final denial letter. In failing to provide such notice, MetLife was not in substantial compliance with the ERISA regulations (see 29 C.F.R. § 2560.503-1(g)(1)(iv)) and that rendered the plan's limitations period altogether inapplicable.

March 15, 2016

ERISA-New FAQs Issued On Affordable Care Act Implementation (Part 30), Announcing Effective Date Of New SBC Template

A new Frequently Asked Question ("FAQ") regarding implementation of the Affordable Care Act has been issued (Affordable Care Act Implementation (Part 30)). This FAQ has been prepared jointly by the Departments of Labor, Health and Human Services, and the Treasury (collectively, the "Departments"). Like previously issued FAQs (available here), this FAQ answers questions from stakeholders to help people understand the Affordable Care Act and benefit from it, as intended. Here is what the new FAQ says.

Summary of Benefits and Coverage

Public Health Service ("PHS") Act section 2715, as added by the Affordable Care Act and incorporated by reference into the Employee Retirement Income Security Act and the Internal Revenue Code, directs the Departments to develop standards for use by a group health plan and a health insurance issuer offering group or individual health insurance coverage in compiling and providing a summary of benefits and coverage ("SBC") that "accurately describes the benefits and coverage under the applicable plan or coverage." On June 16, 2015, the Departments published revised joint final regulations regarding the requirements for the SBC. Separately, on February 26, 2016, the Departments published a coordinated information collection request proposing a new SBC template and instructions, an updated uniform glossary, and other associated materials consistent with the requirements of the Paperwork Reduction Act.

What is the intended implementation date for SBCs using the new template and associated documents?

After the close of the public comment period on March 28, 2016, regarding the proposed SBC template and associated documents that were published on February 26, 2016, the Departments intend to review the comments and finalize the new SBC template and associated documents expeditiously. The Departments intend that health plans and issuers that maintain an annual open enrollment period will be required to use the new SBC template and associated documents beginning on the first day of the first open enrollment period that begins on or after April 1, 2017 with respect to coverage for plan years (or, in the individual market, policy years) beginning on or after that date. For plans and issuers that do not use an annual open enrollment period, the new SBC template and associated documents would be required beginning on the first day of the first plan year (or, in the individual market, policy year) that begins on or after April 1, 2017.