ERISA Lawyer Blog

The Department of Labor (the "DOL") has now issued a final, interim regulation on improved fee disclosure for pension plans. The DOL has also made available a Fact Sheet which describes the new regulation. Here is what the Fact Sheet says:

ERISA requires plan fiduciaries, when selecting and monitoring service providers and plan investments, to act prudently and solely in the interest of the plan's participants and beneficiaries. Responsible plan fiduciaries must also ensure that arrangements with their service providers are "reasonable" and that only "reasonable" compensation is paid for services. Fundamental to the ability of fiduciaries to discharge these obligations is obtaining information sufficient to enable them to make informed decisions about the services, the costs, and the service providers.

The new regulation represents a significant step toward ensuring that pension plan fiduciaries are provided the information they need to assess both the reasonableness of the compensation to be paid for plan services and potential conflicts of interest that may affect the performance of those services. For the first time, a specific obligation to provide this information is imposed on plan service providers.

Overview of The New Regulation

• It applies only to defined contribution and defined benefit pension plans, and focuses on the disclosure of the direct and indirect compensation certain service providers receive from the plans.
• It applies to plan service providers that expect to receive at least $1,000 in compensation in connection with their services to the plan, and that provide: (1) certain fiduciary or registered investment advisory services, (2) recordkeeping or brokerage services to a participant-directed individual account plan in connection with the investment options made available under the plan or (3) certain other services for which indirect compensation is received.
• It focuses on service providers and compensation arrangements that are most likely to raise questions for plan fiduciaries with respect to the amount of compensation being received by a service provider for plan-related services and potential conflicts of interests that might compromise the quality of those services.
• It includes a class exemption from ERISA's prohibited transaction provisions for a plan fiduciary who enters into a contract without knowing that the service provider has failed to comply with its disclosure obligations.

Disclosure of Services and Compensation Under the New Regulation

• Information required to be disclosed by plan service providers must be furnished in writing to the plan fiduciary.
• Information that must be disclosed includes a description of the services to be provided and all direct and indirect compensation to be received by the service provider, its affiliates or subcontractors from the plan. Direct compensation is compensation received directly from the plan. Indirect compensation generally is compensation received from any source other than the plan sponsor, the covered service provider, an affiliate, or subcontractor.
• Because certain services and costs are so significant or present the potential for conflicts of interest, information concerning those services and costs must be disclosed without regard to whether services are furnished as part of a bundle or package.
• Service providers must disclose whether they are providing any services as a fiduciary to the plan.
• Information also must be disclosed about plan investments and investment options. These disclosure obligations are placed on the fiduciaries to investment vehicles that hold plan assets and on recordkeepers and brokers who, through a platform or other mechanism, facilitate the investment in various options by participants in individual account plans, such as 401(k) plans.

Ongoing Disclosure Obligations Under the New Regulation

• Changes: A service provider generally must disclose a change to the initial information required to be disclosed as soon as practicable, but no later than 60 days from the date on which the covered service provider is informed of such change.
• Reporting and Disclosure Requirements: Service providers also must, upon request, disclose compensation or other information related to their service arrangements that is requested by the responsible plan fiduciary or plan administrator in order to comply with ERISA's reporting and disclosure requirements.

The new regulation is effective for contracts or arrangements between plans and service providers as of July 16, 2011.

In Williams v. Metropolitan Life Insurance Company, Nos. 09-1025, 09-1568 (4th Cir. 2010), the plaintiff, Gloria Williams, had been employed by Cingular Wireless as a customer services clerk. She became a participant in Cingular's insurance plan (the "Plan"), which offered long-term disability benefits. The Plan was insured by the defendant, Metropolitan Life Insurance Company ("MetLife"), who was the claims administrator, and served in the dual role of evaluating benefit claims and paying approved claims. The terms of the Plan granted MetLife the discretionary authority to interpret the Plan and to determine benefit eligibility.

The plaintiff had developed medical issues with her hands and wrists, causing severe pain when she engaged in work activities, such as typing on a computer. Eventually, the plaintiff left work and filed a claim with MetLife for long-term disability benefits. MetLife paid the benefits for about 18 months, and then terminated them. The plaintiff filed this suit under ERISA, challenging MetLife's decision to terminate the long-term disability benefits, and the case found its way to the Fourth Circuit Court of Appeals.

The Court said that when, as here, a plan subject to ERISA grants the claims administrator the discretionary authority to make eligibility determinations for participants, a reviewing court evaluates the claims administrator's decision to deny or stop benefits for abuse of discretion. Under that standard,the Court will not overturn the claims administrator's decision so long as it is reasonable. To be "reasonable", the decision must result from a deliberate, principled reasoning
process, and must be supported by substantial evidence.

The Court continued by noting that under the Supreme Court's decision in Metropolitan Life Insurance Co. v. Glenn, 554 U.S. 105, 128 S. Ct. 2343 (2008), where, as here, the claims administrator has a structural conflict of interest because it both decides and pays claims, the conflict becomes one of the factors that a judge must take into account in determining whether the claims administrator's decision to deny or terminate benefits is reasonable. In this case, however, this conflict should not have a significant role in the Court's evaluation of MetLife's decision to terminate the plaintiff's benefits. MetLife's initial finding and payment of the long-term disability benefits, and its referral of its termination decision to two independent doctors, suggests that MetLife was not inherently biased in making its
decision to terminate the benefits.

Nevertheless, the Court found that MetLife's termination decision is not supported by substantial evidence. The plaintiff's claims file contained overwhelming evidence reflecting significant problems with her hands and wrists. Her physicians repeatedly concluded that she should not return to work, or required a modification of job duties, due in part to the pain in her hands and her inability to type on a computer. MetLife itself noted that the plaintiff was unable to turn her head and use her hands for extended periods of time due to the pain. Based on its review of the administrative record, the Court said that MetLife's decision to terminate the benefits was not reasoned and principled, and was not supported by substantial evidence. MetLife appears to have disregarded, without justification, the plaintiff's treating physicians' conclusions regarding her medical problems. The Supreme Court has said that claims administrators may not arbitrarily refuse to credit a claimant's reliable evidence, including the opinions of a treating physician.

Based on the foregoing, the Court concluded that MetLife's decision to terminate the plaintiff's long-term disability benefits was an abuse of discretion and thus had to be overturned.

According to a News Release, the Department of Labor ("DOL") has adopted an amendment to Prohibited Transaction Exemption ("PTE") 84-14, which allows a QPAM to manage the assets of a plan it sponsors.

The News Release says that PTE84-14 allows plans whose assets are managed by a QPAM to engage in a variety of transactions otherwise prohibited by ERISA, provided that certain safeguards have been met. Banks, insurance companies, savings and loan associations, and investment advisors who meet certain regulatory and financial standards are eligible to serve as QPAMs under the amended exemption. The amendment to PTE 84-14 allows the QPAM to manage the assets of a plan it sponsors, so long as, among other things:

--The QPAM adopts policies and procedures designed to assure compliance with the conditions of the exemption; and

--An independent auditor conducts an annual exemption audit, which is designed to ensure that the conditions of the class exemption have been met.

So many times, an employee of a company, or a representative of an insurer, answers a participant's questions about a pension plan or health care plan. When the company or the insurer is a fiduciary of that plan for ERISA purposes, what can it do to protect itself from a claim of breach of fiduciary duty, should that employee or representative give out wrong information to the participant? In Kenseth v. Dean Health Plan, Inc., No. 08-3219 (7th Cir. 2010), the Court provides some guidance on this point.

The Court said the following. The duty to disclose material information is the core of a fiduciary's responsibility. This duty requires the fiduciary to take reasonable steps to provide accurate and complete information to participants. The most important way to meet this duty is to provide to participants accurate and complete written explanations of the benefits available under the plan. To this end, the plan's summary plan description (the "SPD") must explain the terms of the plan in language that may be understood by the ordinary reader.

Further, anticipating that the plan's participants will have questions for company employees or insurer representatives about the plan, the fiduciary must exercise appropriate caution in hiring, training, and supervising the its employees and representatives whose job requires them to field questions from participants about their benefits. Thus, when the plan documents are clear and the fiduciary has exercised appropriate oversight over what its employees and representatives advise plan participants, the fiduciary will not be held liable for a breach of duty simply because the employee or representative has given incomplete or mistaken advice to a participant.

The lesson: This may be a good time for an employer or insurer to review its plan documents for accuracy, and to confirm that, where required by ERISA, the documents, such as the SPD, have been furnished to participants. An employer or insurer could also think about how it is training and supervising those employees or representatives that will interact with plan participants.

In Ringwald v. Prudential Insurance Company, No. 09-1933 (8th Cir. 2010), the plaintiff, Eric Ringwald, had brought suit under ERISA against the defendant, Prudential Insurance Company ("Prudential"), for long-term disability benefits. The suit challenged Prudential's decision to deny plaintiff's claim for those benefits. The District Court had granted summary judgment against the plaintiff, and the plaintiff appealed.

The issue for the Eighth Circuit Court was whether Prudential's decision to deny the benefits should be reviewed under the abuse of discretion standard, as opposed to the de novo standard. The abuse of discretion standard applies when the plan gives the reviewing insurer the discretion to determine eligibility for benefits under the plan. In this case, the plan's summary plan description, or "SPD", granted this discretion to Prudential, while the plan itself said nothing on this matter. Following its recent decision in Jobe v. Medical Life Insurance Co., the Court said that a grant of discretion to the plan administrator (here Pruential), appearing only in an SPD, does not vest the administrator with discretion, where the plan provides a mechanism for amending the plan, and this mechanism does not allow the SPD to alter the plan. In this case, the insurance policy with Prudential served as the plan, and the policy had no mechanism for amendment at all. Therefore, the SPD could not be deemed to amend the plan to provide discretion to Prudential.

Based on the above, the Court ruled that Prudential's decision to deny the Plaintiff's long-term disability benefits should be reviewed under the novo standard. The Court remanded the case back to the District Court, overturning its grant of summary judgment.

According to a News Release (dated June 16, 2010), the U.S Department of Labor's Employee Benefits Security Administration is proposing to amend Prohibited Transaction Exemption ("PTE") 96-23. PTE 96-23 is a class exemption that allows in-house managers of large employee benefit plans to engage in a wide range of transactions with related parties.

The News Release says that the proposed amendment, if adopted, would remove numerous administrative burdens that have been cited by practitioners, and would expand relief under the class exemption to include certain transactions not currently permitted. It would also address practitioner uncertainty that exists regarding certain provisions contained in the class exemption. Among other things, the proposed amendment clarifies the department's views and expectations regarding the class exemption's annual audit and written report requirements. The application of these requirements will further enhance the participant protections embodied in the class exemption.

The proposed amendment to PTE 96-23 is here.

According to a Press Release (June 10, 2010), the U.S. Department of Labor has issued a final rule regarding certain requirements for qualified domestic relations orders ("QDROs") under ERISA. The rule is being issued under the Pension Protection Act of 2006, which requires the Labor Department to issue regulations clarifying that a domestic relations order, which otherwise meets ERISA's QDRO requirements, would not fail to be treated as a QDRO solely because of when it is issued or because it is issued after, or revises, another domestic relations order. The rule includes examples to address various circumstances involving the timing of a domestic relations order.

In Wood v. Detroit Diesel Corporation, No. 09-1252 (6th Cir. 2010), the defendant, Detroit Diesel Corporation ("Detroit Diesel"), and the union representing its workers entered into a series of agreements, starting in January 1993 (and outside of the collective bargaining agreements or "CBAs"), purporting to establish caps on Detroit Diesel's contributions to the workers' retiree health care benefits. These caps applied to workers who retired between 1993and 2004. Both Detroit Diesel and the union intended that these agreements would reduce Detroit Diesel's balance sheet liability after an accounting rule change in late 1992 required--for the first time--that Detroit Diesel account for retiree health care costs on an accrual basis. The agreements included duration clauses, under which a cap would remain at the specified amount until the expiration of the related CBA. Detroit Diesel and the union did not renew the agreements capping the retiree health care contributions for the 1993-2004 retirees in later bargaining cycles, instead implementing a new retiree health care program for post-2004 retirees.

The matter in dispute was whether the caps on retiree health care contributions in the agreements continue to apply to 1993-2004 retirees, even after the close of the years covered by the agreements, and after the related CBAs expire . The Court interpreted the agreements to provide for lifetime, capped health care contributions, saying that this interpretation:

--is the most sensible reading of those agreements, as the agreements specifically limited Detroit Diesel's contribution toward retiree health care benefits without providing for an expiration date for the limitation;

--is consistent with Detroit Diesel's accounting obligations; and

--is consistent with prior case law, under which the duration clauses appearing in the agreements, which fail to include a specific expiration date for the caps, support the conclusion that the caps continue even after the after the close of the years covered by the agreements, and after the related CBAs expire.

The Court concluded that the agreed caps on the retiree health care contributions therefore continue to apply to 1993-2004 retirees.

In Goletz v. Prudential Insurance Company of America, No. 08-4740 (3rd Cir. 2010), the Third Circuit reveals some pitfalls in disability cases. Here, the defendant, Prudential Insurance Company of America ("Prudential"), decided to deny the plaintiff's claim for long-term disability ("LTD") benefits. The plaintiff filed suit under ERISA to challenge this decision. The District Court granted summary judgment in Prudential's favor, and the plaintiff appealed.

At the Third Circuit, the plaintiff asked the Court to rule that Prudential's decision to deny the LTD benefits should be reviewed under the de novo standard, rather than the deferential arbitrary and capricious standard (the de novo standard being more favorable to the plaintiff). However, the plaintiff had raised this issue for the first time in the appeal. The Court stated that, absent exceptional circumstances (none present here), the Court would not entertain an issue not raised in the District Court. The plaintiff again tried for review under the de novo standard, based on the grounds that the District Court had admonished Prudential for making a mistake in the course of the proceedings. However, the Court pointed to the recent Supreme Court's decision in Conkright v. Frommert, under which the de novo standard does not become applicable merely because Prudential made an error.

Outside of the case, the plaintiff had been awarded disability benefits from Social Security. In the appeal, the plaintiff attempted to have the summary judgment stricken on the basis that Prudential failed to explain why it could deny the plaintiff's claim for disability, when she had received this award from Social Security. Here, the Court found that Social Security had based its decision on different evidence than Prudential, namely certain experts that Prudential had relied on. As a result of the above, the Court affirmed the summary judgment in Prudential's favor.

In Bloemaker v. Laborers' Local 265 Pension Fund, No. 09-3536 (6th Circuit 2010), an employee became entitled to receive early retirement benefits under his employer's ERISA-covered defined benefit pension plan. As part of the process of applying for these benefits, the plan had provided him with a benefit election form, stamped by the plan's administrator, and certifying that he is entitled to receive $2,339.47 per month for his life (the "Certified Benefits Calculation"). After receiving benefit payments from the plan for nearly two years, the plan's administrator notified the employee that the Certified Benefits Calculation was incorrect and his monthly payments should be $1,829.71 per month, that his future payments would be decreased to reflect the appropriate amount, and that he would be required to repay the excess amounts he had received. The employee filed suit, alleging in his complaint that the plan and the administrator had breached a contractual agreement with him, that he had detrimentally relied on the their misrepresentations, and that they breached their fiduciary duties under the plan.

Of particular interest is how the Court applied the doctrine of equitable estoppel to the case. The Court indicated that the employee's complaint may be construed as stating a claim under ERISA for a pension benefit based on the federal common law rule of equitable estoppel ("equitable estoppel"). The Court began by noting it (the Sixth Circuit Court of Appeals) has recognized that equitable estoppel may be a viable theory in ERISA cases, although it had not yet applied this theory to a claim for a pension benefit, as opposed to a welfare benefit. However, the Court said that it-as have other circuits- would apply equitable estoppel when the representation as to the pension benefit was made in writing (so that an oral statement cannot vary plan terms) and the plaintiff can demonstrate extraordinary circumstances.

The Court further said that (at least in the Sixth Circuit) the elements of an equitable estoppel claim, when asserted by an employee against a plan and its administrator, are: (1) conduct or language amounting to a representation of material fact; (2) awareness of the true facts by the plan and its administrator; (3) an intention on the part of the plan and its administrator that the representation be acted on; (4) unawareness of the true facts by the employee; and (5) detrimental and justifiable reliance by the employee on the representation (this apparently being the extraordinary circumstances).

The Court went on to find that each of these elements was present in the instant case, so that the employee had established a claim for pension benefits based on equitable estoppel. The employee alleged that he received a document stating that he could receive a pension benefit of $2,339.40 per month, certified by the plan's administrator, meeting element (1). Elements (2), (3), (4) and (5). are met, since the employee alleges that the plan and its administrator were aware of the true facts, that they intended for the employee to rely upon their representations, and the employee was unaware of the true facts, but relied on the misrepresentations when deciding to retire.

Hardt v. Reliance Standard Life Insurance Co., No. 09-448 (Supreme Court 2010) involved a claim by the plaintiff against an insurance company, defendant Reliance, for long-term disability benefits. Reliance had denied the plaintiff's claim for the benefits. The District Court had ruled against the plaintiff's motion for summary judgment on her claim for the benefits. The District Court had found compelling evidence that the plaintiff is totally disabled, and stated that it was inclined to rule in her favor. However, to give Reliance a chance to reconsider its denial, the District Court remanded the case back to Reliance for another review of the plaintiff's claim. Reliance conducted the court-ordered review, reversed its denial of the benefit claim, and awarded the plaintiff the benefits she sought. The District Court then awarded attorney's fees to the plaintiff, under section 502(g)(1) of ERISA.

One matter addressed by the Court was whether the District Court's award of attorney's fees was correct. Here is what the Court said on this matter. Section 502(g)(1) is a fee shifting provision, which applies in most ERISA lawsuits. It states that the court in its discretion may allow a reasonable attorney's fee and costs to either party. A person need not be a prevailing party to be eligible for an award of attorney's fees and costs under section 502(g)(1). A court may award attorney's fees and costs to either party under that section, as long as the party asking for the fees and costs has achieved some degree of success on the merits. A party does not satisfy this requirement by achieving trivial success on the merits or a purely procedural victory. This requirement is satisfied if the court can fairly call the outcome of the litigation some success on the merits, without conducting a lengthy inquiry into the question of whether a particular party's success was substantial or came on a central issue. Further, the Court found that, in this particular case, the plaintiff showed the requisite success in order to be eligible for the award, so that the District Court properly exercised its discretion to attorney's fees to the plaintiff.

Questions/Points: The new standard makes it easier for a plaintiff bringing suit for benefits under ERISA to collect attorney's fees and costs. However, if the defendant, typically the insurance company denying the benefits, has "some degree of success on the merits", can it collect attorney's fees from the plaintiff, even if the plaintiff wins the case? Doesn't that possibility make it more risky for a plaintiff to pursue a claim for benefits, contrary to the intention behind ERISA? Also, the standard of "some success on the merits" would seem to invite a lot of

In Conkright v. Frommert, No. 08-810 (S. Ct. 2010), the United States Supreme Court faced the issue of when discretion must be given under ERISA to the decision made by a plan administrator.

In this case, the defendants are Xerox Corporation's pension plan (the "Plan") and the Plan's current and former administrators (the "Plan Administrator"). The plaintiffs are employees who left Xerox in the 1980's, received lump-sum distributions of their benefits under the Plan earned up to that point, and were later rehired. To account for the past distributions when calculating the plaintiffs' current benefits under the Plan, the Plan Administrator had first interpreted the Plan to apply the "phantom account" method (which generally calculates the hypothetical growth that an employee's past distributions would have experienced if the money paid out had remained invested in the Plan). After the Second Circuit Court of Appeals disagreed with that interpretation, the Plan Administrator changed its interpretation to account for the time value of money (using an interest rate fixed at the time of distribution as opposed to hypothetical investment). The Second Circuit again disagreed with the Plan Administrator's interpretation, failing to give it any deference, and the defendants appealed.

The Supreme Court ruled that, in this case, the Plan Administrator's second interpretation of the Plan-accounting for the time value of money- is subject to a deferential standard of review under ERISA. Under Firestone Tire & Rubber Co. v. Bruch, 489 U. S. 101 (1989), Metropolitan Life Ins. Co. v. Glenn, 554 U. S. ___ (2008) and the Plan's terms, the Plan Administrator here would normally be entitled to deference when interpreting the Plan. The Court of Appeals, however, crafted an exception to this deference, holding that a court need not apply a deferential standard when a plan administrator's first construction of the same plan terms was found to violate ERISA. The Supreme Court found no basis in prior cases or otherwise for this exception, rejecting this "one-strike-and-you're-out" approach. As such, it overturned the Second Circuits' decision and remanded the case.

In Schexnayder v. Hartford Life and Accident Insurance Company, No. 08-30538 (5th Cir. 2010), the plaintiff, Kelvin Schexnayder, sued Hartford Life and Accident Insurance Company ("Hartford") under ERISA for long terms disability benefits. The district court granted summary judgment to the plaintiff, holding that Hartford abused its discretion in denying the benefits.

The plaintiff had been a participant in his employer's long term disability plan, which was funded by an insurance policy for which Hartford became responsible. Hartford had sole discretionary authority to determine eligibility for benefits under the plan, and to interpret its terms and provisions. After the plaintiff became disabled, he received long term disability benefits under the plan for two years. However, after this two year period, under the terms of the plan, the plaintiff would be entitled to disability benefits only if he was unable to engage in any occupation for which he was or became qualified. The Social Security Administration (the "SSA") had determined that the plaintiff was totally disabled, meaning that he could not perform any work, and the SSA authorized him to receive disability benefits from Social Security. Nevertheless, Hartford notified the plaintiff that the information it had received from plaintiff's doctors did not support a finding that he was unable to work in any occupation, so that the disability benefits from the plan would end after being paid for two years. After unsuccessfully appealing Hartford's determination under its internal procedures, the plaintiff filed this case in federal court.

The Fifth Circuit reviewed Hartford's decision to end the plaintiff's disability benefits, using the abuse of discretion standard. In doing so, the Court noted that it would apply the Supreme Court's holding in Metro. Life Ins. Co. v. Glenn by giving increased weight to the conflict of interest present in the case due to Hartford's being both the payer and determiner of benefits. In so applying Glenn, the Court felt that Hartford's decision to stop the disability benefits suggests procedural unreasonableness. Further, the Court noted that Hartford had failed to even acknowledge the determination of disability made by the SSA, in its benefit denial letters or anywhere else. This led the Court to believe that Hartford's decision to end the benefits was procedurally unreasonable, and suggests that Harford failed to consider all relevant evidence. The Court said that, although substantial evidence supported Hartford's decision to end the benefits, the method by which it made the decision was unreasonable, and the conflict of interest present here acts as a tiebreaker for the Court to conclude that Hartford abused its discretion. Accordingly, the Court upheld the District Court's summary judgment for the plaintiff.

In Advisory Opinion 2010-01A, the Department of Labor (the "DOL") answered a question, posed by the Teachers Insurance and Annuity Association of America and College Retirement Equities Fund the "TIAA-CREF"). This question is whether the TIAA-CREF "Traditional Annuity" is a fully allocated contract for annual reporting purposes within the meaning of the ERISA regulations at 29 C.F.R. § 2520.104-44(b)(2) and the Form 5500 Instructions. The answer to this question determines whether the assets held in the Traditional Annuity must be reported as plan assets on the Form 5500 and applicable schedules and attachments.

TIA-CREFF offers the Traditional Annuity as an investment option for participants in funding vehicles it makes available for 403(b) plans and 401(k) plans. Prior to payout, for each contribution or "premium" received, the Traditional Annuity provides a guarantee of principal, a guaranteed minimum interest rate (generally 3 percent but in some recent contracts between 1 percent and 3 percent), and the potential for additional interest which may be declared by TIAA-CREF in its discretion.

Section 29 C.F.R. § 2520.104-44(b)(2) provides a limited exemption for a plan from certain reporting requirements, including the need to have an accountant examine the plan's financial statements, when the plan's benefits are, generally, paid exclusively through allocated insurance contracts issued by an insurance company which guarantees the benefit payments. The 2008 Form 5500 Instructions further provide that this plan need not report the value of the allocated contracts on Part I of the Schedule H or I (i.e., as being plan assets). Those Instructions reiterate the DOL's longstanding view that "allocated" contracts include only those contracts under which an insurance company immediately assumes "fixed dollar obligations", and that the reporting exemption is premised on the fact that under these contracts the plan has effectively transferred the risk for the payment of benefits accrued to that date to the insurer.

After examining the Traditional Annuity, the ERISA regulations and Form 5500 Instructions, the Advisory Opinion concluded that the Traditional Annuity is not a fully allocated contract within the meaning of 29 C.F.R. § 2520.104-44(b)(2). This obtains because upon payment of each contribution or "premium" to the Traditional Annuity, TIAA-CREF does not unconditionally guarantee to provide a retirement benefit of a certain amount, or a "specific dollar benefit". Rather, the Traditional Annuity guarantees only a minimum rate of return, based on the contributions or premiums received and a minimum rate of interest. The value attributable to each contribution or premium payment can increase when additional interest is declared. Since the Traditional Annuity is not a fully allocated contract, any accumulations with respect to the contributions or premiums it receives must be reported as plan assets on Form 5500.

In Gorzynski v. JetBlue Airways Corp., No. 07-4618 (2nd Cir. 2010) , the plaintiff was appealing the dismissal, on summary judgment, of her employment discrimination action based on claims, among others, that she suffered a hostile work environment due to sexual harassment (the "Claim"). The plaintiff had complained to her supervisor, who was also her harasser, regarding the allegedly hostile work environment. One issue faced by the Court was whether, since the employer's sexual harassment policy provided that the plaintiff could have complained to persons other than her supervisor, the employer is, as a matter of law, entitled to the Faragher/Ellerth affirmative defense. The Court ruled that the employer is not so entitled.

The Court said that when, as here, the alleged harasser is in a supervisory position over the plaintiff, the objectionable conduct giving rise to the Claim is automatically imputed to the employer. But, subject to proof by a preponderance of the evidence, the employer may raise the Faragher/Ellerth affirmative defense to liability or damages from the Claim . This defense will protect the employer if two elements are present: (1) the employer exercised reasonable care to prevent and promptly correct any discriminatory or harassing behavior, and (2) the plaintiff employee unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer or to avoid harm otherwise. In this case, element (1) was satisfied, since the employer maintained a formal, written sexual harassment policy that was contained in an employee handbook.

As to element (2), the employer was required to demonstrate that the plaintiff unreasonably failed to take advantage of the policy described in the handbook, when the plaintiff complained only to the harassing manager-who failed to address her complaints-while the policy allowed the plaintiff to file a complaint with some one other than the harassing supervisor. Here, the Court ruled that there is no requirement that a plaintiff must exhaust all possible avenues made available, so that an employer is not, as a matter of law, entitled to the Faragher/Ellerth affirmative defense merely because an employer's sexual harassment policy offers such avenues. Rather, the facts and circumstances of each case must be examined to determine whether, by not pursuing other avenues provided in the policy, the plaintiff unreasonably failed to take advantage of the employer's preventative measures, so that element (2) is met. According to the Court, this examination is for a jury, and the Court remanded the case back to the District Court for further proceedings.