April 29, 2014

ERISA-Tenth Circuit Rules That The Full Cost Of Inpatient Hospital Alcohol Treatment Must Be Paid By The Group Policy, Even Though Employee Handbook Is To The Contrary

In Garrett v. Principal Life Insurance Company, No. 13-6087 (10th Cir. 2014), the defendant, Principal Life Insurance Company ("Principal"), is appealing from the district court's orders that reversed Principal's decision to deny plaintiff Patrick Garrett (" Mr. Garrett") his claim for medical benefits and awarded Mr. Garrett the full amount of his claim.

In this case, Mr. Garrett has been insured since 1998 through a group medical benefits policy (the "Group Policy") issued to his employer by Principal as part of an employee benefits plan under ERISA. The Group Policy provided coverage for inpatient hospital alcohol abuse treatment. In June 2008, Principal sent the employer a new "Group Booklet-Certificate." The booklet-certificate purported to exclude inpatient coverage for alcohol abuse treatment, but stated: "Member rights and benefits are determined by the provisions of the Group Policy". Principal did not issue a new group policy which excluded such inpatient coverage until 6 months after Mr. Garrett filed his claim for medical benefits described below.

Mr. Garrett went to Cliffside Malibu ("Cliffside") in March 2009 for inpatient alcohol abuse treatment. At the conclusion of Mr. Garrett's treatment in April, Cliffside submitted a claim to Principal for $65,000. Principal denied the claim and Mr. Garrett filed suit for medical benefits under section 502(a)(1)(B) of ERISA. The question for the Tenth Circuit Court of Appeals (the "Court"): must Principal honor the claim for the medical benefits?

In analyzing the question, the Court noted Principal's argument that the 2008 booklet-certificate should control what is and is not a covered medical benefit. However, the Court concluded that the Group Policy-which covers inpatient hospital alcohol abuse treatment- governs. First, a summary plan description should not be enforced over the terms of a plan, based on the Supreme Court's decision in Amara. Second, there is no evidence that the Group Policy was amended. The Court also agreed with the district court that the full amount of the Cliffside bill-$65,000-should be paid by Principal. As such, the Court affirmed the district court's orders.

April 28, 2014

ERISA-Sixth Circuit Rules That CBAs Create Vested Right To Lifetime Health Benefits, Which Employer Cannot Unilaterally Change

In United Steel, Paper and Forestry, Rubber, Manufacturing Energy, Allied Industrial And Service Workers International Union, AFL-CIO-CLC v. Kelsey-Hayes Company, No. 13-1717 (6th Cir. 2014), the defendants are Kelsey-Hayes Company and its parent company, TRW Automotive. The plaintiffs are a class of 400 retired union workers from the now-closed Kelsey-Hayes automobile-manufacturing plant in Jackson, Michigan. The defendants appeal the district court's grant of summary judgment, injunctive relief, and attorney fees in favor of plaintiffs.

In this case, the plaintiffs worked at the Jackson plant until July 2006, when it shut down. All plaintiffs retired under one of three collective bargaining agreements ("CBAs") that were negotiated in 1995, 1999, and 2003; each of those CBAs contained identical language with regard to the issues pertinent to this case . Under the CBAs, Kelsey-Hayes agreed to include certain medical services in their employees' health care coverages. Article III, Section 5(a) of the CBAs provided that, once an employee retired, Kelsey-Hayes promised the now-retiree the "continuance" of "[t]he healthcare coverages [that he or she] ha[d]. . . at the time of retirement." And, Kelsey-Hayes agreed to pay the "full premium or subscription charge for health care coverages continued in accordance with Article III, Section 5" for retirees.

Until late 2011, consistent with the commitments set forth in the CBAs, Kelsey-Hayes provided health care for plaintiffs and their families both before and after the Jackson plant closed. In late 2011, however, TRW (which had purchased Kelsey-Hayes) sent a letter to plaintiffs indicating that it would be discontinuing group health care coverages beginning in 2012. Instead of group coverages, defendants would be providing plaintiffs with "Health Reimbursement Accounts" ("HRA"s). TRW would make a one-time contribution into the HRAs of $15,000 for each eligible retiree and his or her eligible spouse in 2012, and for 2013, TRW would provide a $4,800 credit into the HRAs for each eligible retiree and eligible spouse. No commitment was made by TRW past 2013. The plaintiffs wanted their group health care coverage to continue, and this suit ensued. The plaintiffs claimed that the health plan change to HRAs breached the CBAs, in violation of Section 301 of the LMRA and ERISA.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") said that the key issue is what the parties intended in the CBAs with regard to health care benefits. The Court held that the pertinent language in the CBAs (set out above) is unambiguous and that this CBA language alone, when construed in light of the Sixth Circuit's Yard-Man inference in favor of vesting , created a vested lifetime right to health care benefits. The unilateral implementation of the HRAs breached the CBAs, not because HRAs are "unreasonable" under Sixth Circuit case law, but because the HRAs are simply not what the parties bargained for in the first instance, as the HRAs shift risk and possibly costs from the defendants to the plaintiffs. As such, the Court affirmed the district court's summary judgment.

April 24, 2014

Employment-Fourth Circuit Rules That County Retirement Plan Violates ADEA, As It Determines Employee Contribution Rates Based On Age

In Equal Employment Opportunity Commission v. Baltimore County, No. 13-1106 (4th Cir. 2014), the Court was asked to consider whether an employee retirement benefit plan (the "Plan") maintained by Baltimore County, Maryland (the "County") unlawfully discriminated against older County employees based on their age, in violation of the Age Discrimination in Employment Act (the "ADEA). The challenged plan provision involved the different rates of employee contribution to the plan, which required that older employees pay a greater percentage of their salaries based on their ages at the time they enrolled in the Plan. The district court concluded that the plan violated the ADEA, and granted summary judgment against the County on the issue of liability. The County appeals.

In analyzing the case, the Fourth Circuit Court of Appeals (the "Court") determined that the district court correctly determined that the County's plan violated the ADEA, because the plan's employee contribution rates were determined by age, rather than by any permissible factor. The Court further concluded that the ADEA's "safe harbor provision" applicable to early retirement benefit plans does not shield the County from liability for the alleged discrimination. Accordingly, the Court affirmed the district court's award of summary judgment on the issue of liability, and remanded the case for consideration of damages.

In analyzing the case, the Court noted that the ADEA prohibits discrimination with respect to "compensation, terms, conditions, or privileges of employment," which includes "all employee benefits, including such benefits provided pursuant to a bona fide employee benefit plan." 29 U.S.C. §§ 623(a)(1), 630(l). Accordingly, it generally is unlawful for an employer to maintain a retirement benefit plan that treats older employees in the protected age group differently from younger employees, unless the differentiation "is based on reasonable factors other than age." 29 U.S.C. § 623(f)(1).

In the present case, the EEOC alleged that the Plan was facially discriminatory. A policy that explicitly discriminates based on age violates the ADEA. The Plan mandated different contribution rates that escalated explicitly in accordance with employees' ages at the time of their enrollment in the Plan. The Court found no merit in the County's argument that the employee contribution rates lawfully were based on a reasonable factor other than age, such as the "time value of money." The Court said that it's conclusion is not altered by the County's reliance on the ADEA's "safe harbor provision" in 29 U.S.C. § 623 (l)(1)(A)(ii)(I). As relevant to this appeal, that provision states that "it shall not be a violation" of the ADEA "solely because" a retirement benefit plan "provides for . . . payments [by the employer] that constitute the subsidized portion of an early retirement benefit. . . ." Id. The Court said that the safe harbor provision is not a defense to the challenged disparate treatment. The safe harbor provision permits an employer to subsidize early retirement benefits without violating the ADEA. However, the provision does not address employee contribution rates nor does it permit employers to impose contribution rates that increase with the employee's age at the time of plan enrollment. Thus, the Court concluded that the safe harbor provision is inapplicable here.

April 23, 2014

ERISA-Tenth Circuit Holds That Plan Administrator Did Not Abuse Its Discretion When Deciding To Stop Disability Benefits

In Fite v. Bayer Corporation, No. 13-7027 (10th Cir. 2014), the plaintiff, Margie Fite ("Fite"), appeals the district court's grant of summary judgment to the defendants (collectively, "Bayer") on her ERISA claim for denial of short-term disability ("STD") benefits under Bayer's Disability Plan (the "Plan"). The district court determined that Bayer did not abuse its discretion when it concluded that Fite's depression and anxiety were excluded from coverage under the Plan as employment-related mental or emotional disabilities.

In this case, Fite had worked as a pharmaceutical representative for Bayer for several years when, based on a psychologist's diagnosis of major depressive disorder and generalized anxiety disorder, she took leave and applied for STD benefits under Bayer's Plan. After receiving the benefits for a while, Bayer determined that Fite was ineligible for the benefits and cut them off. This suit ensued.

In analyzing the case, the Tenth Circuit Court of Appeals (the "Court") first said that Bayer's decision to stop the STD benefits will be reviewed under the arbitrary and capricious standard, since the Plan gave Bayer discretionary authority to determine the eligibility for benefits and to construe the terms of the Plan. The Court then said that Bayer has an inherent conflict of interest (as plan administrator and payer), so that the Court must weigh the conflict as a factor in determining whether there was an abuse of discretion, according it more or less weight depending on its seriousness. Here, the Court said that Bayer took active steps to reduce any potential bias and to promote accuracy: it sought an independent review of Fite's medical records by 4 different psychiatrists . Therefore, the Court said that it must give the conflict-of-interest factor limited weight in determining whether Bayer abused its discretion.

The Court concluded that -under the foregoing standard of review-Fite did not raise any arguments which show that Bayer abused its discretion in stopping the STD benefits. Therefore, the Court affirmed the district court's decision.

April 22, 2014

Employment-D.C. Circuit Rules That Unprofessional And Uncivil Behavoir Does Not Establish A Case Of Racial Or Sexual Discrimination In Violation Of Title VII

In Brooks v. Grundmann, No. 12-5171 (D.C. Cir. 2014), the plaintiff, Patricia Brooks ("Brooks"), was appealing the district court's summary judgment in favor of her employer. The D.C. Circuit Court of Appeals (the "Court") reviewed the record. It noted that Brooks claims her supervisors at work engendered a hostile work environment, discriminating against her on the basis of her race and sex. The Court concluded, however, that, while the supervisors' actions may have been unprofessional, uncivil, and somewhat boorish, they did not constitute an adequate factual basis for the Title VII claims presented. Accordingly, the Court affirmed the district court's grant of summary judgment.

April 21, 2014

ERISA-Ninth Circuit Holds That Reopening A Claim for LTD Benefits By The Plan Administrator Does Not Restart The Statute Of Limitations, Which Otherwise Expired, For Filing Suit For Those Benefits

In Gordon v. Deloitte & Touche, LLP Group Long Term Disability Plan, No. 12-55114 ( 9th Cir. 2014), the plaintiff, Bridget Gordon ("Gordon"), was appealing the district court's summary judgment in favor of the defendant, Deloitte & Touche, LLP Group Long Term Disability Plan (the "Plan") "), based on her failure to file suit within the applicable limitation period. The Plan is insured and administered by Metropolitan Life Insurance Company ("MetLife").

In this case, while Gordon was working for Deloitte & Touche, she learned that she was HIV positive and claimed she could no longer work due to depression. She filed a claim for long-term disability ("LTD") benefits under the Plan. MetLife initially determined that she was eligible for LTD benefits under the Plan, and began paying the benefits, but later gave notice that it had terminated further payments, on the grounds that Gordon had failed to furnish continuing proof of disability as required by the Plan. Later, MetLife sent Gordon a letter, dated November 4, 2003 letter, saying that additional LTD benefits had been approved for the limited period of January 1, 2003 through March 2, 2003, because she was disabled during that period by her major depression, but the Plan limited payments to 24 months since the disability stemmed from a mental illness. The letter advised Gordon that she could appeal the decision limiting LTD benefits within 180 days.

Gordon failed to appeal, and took no action for more than four years. Later, spurred on by a letter from California's Department of Insurance , MetLife reopened the case. However, on December 8, 2009, MetLife informed Gordon in writing that it was upholding its original decision to terminate her benefits based on the Plan's 24-month limitation for disabilities resulting from mental illness. The letter said Gordon could appeal this decision, and also stated that if such appeal were to be denied, Gordon would have the right to bring a civil action under § 502(a) of ERISA. Gordon timely appealed, but on January 31, 2011, before MetLife's review of the appeal was completed, Gordon filed this suit pursuant to § 502(a) of ERISA in the district court. The district court granted summary judgment for the Plan. It concluded that Gordon's ERISA action was barred by the applicable four-year statute of limitation (found in analogous California law on contract claims), as well as by a three-year contractual limitation period contained in the Plan itself. The district court also rejected Gordon's arguments that the reopening of her file in 2009 reset the statute of limitation and that the Plan waived its limitation defense or was estopped from asserting it. The Ninth Circuit Court of Appeals (the "Court") agreed with the district court, and it affirmed the district court's decision.

The Court explained that the length of the statute of limitations is borrowed from state law, as was done by the district court. Also, an ERISA cause of action accrues - that is, the statute of limitations starts to run- either at the time benefits are actually denied or when the claimant has reason to know that the claim has been denied. A claimant has such reason to know where there has been a clear and continuing repudiation of a claimant's rights under a plan, such that the claimant could not have reasonably believed but that his benefits had been finally denied. Here, Gordon's claim was denied in the November 4, 2003 letter from Metlife. Assuming arguendo that the November 4 letter was not a final denial, because Gordon still had an administrative appeal option, the letter also stated that the right to appeal would expire 180 days from November 4, 2003, which meant on or about May 4, 2004. The Court then concluded that Gordon's right to file an ERISA action accrued no later than May 4, 2004. Gordon did not file the pending complaint until January 31, 2011. The result is that her suit is barred by the four-year statute of limitation. In addition, the Court said that MetLife's reopening of the claim does not restart the statute of limitations under Federal law.

April 18, 2014

Employment-Eleventh Circuit Rules That An Employee Must Be Eligible To Take FMLA Leave To Be Able To Bring A Claim Of FMLA Violation

In Hurley v. Kent of Naples, Inc., No. 13-10298 (11th Cir. 2014), the plaintiff, Patrick Hurley ("Hurley"), sued the defendants for violating the Family Medical Leave Act (the "FMLA").

In this case, Hurley, who suffers from depression, contends that the defendants wrongfully denied his request for eleven weeks of vacation time and terminated his employment. Following a jury trial, the district court entered, in favor of Hurley, a judgment for $200,000 in actual damages for backpay, $200,000 in liquidated damages, and $353,901.85 in damages for front pay. The defendants contend on appeal that Hurley's request did not qualify for FMLA protection, so that no damages should be awarded. The Eleventh Circuit Court of Appeals (the "Court") agreed with the defendants that Hurley did not qualify for the leave, and overturned the judgments entered by the district court.

In analyzing the case, the Court ruled that an employee must actually qualify for FMLA to state a claim of FMLA violation including a claim or interference with or retaliation for asserting FMLA rights. Here, Hurley did not so qualify, despite a chronic health condition, because he did not experience any period of incapacity or treatment for such incapacity due to a chronic serious health condition. The Court implicity accepted that neither he nor anyone else, such as a family member, met any other health condition that would qualify him for FMLA leave.

April 17, 2014

Employment -Ninth Circuit Rules That Plaintiff's Claim Of Interference With FMLA Rights Fails, Since She Declined FMLA Leave

In Escriba v. Foster Poultry Farms, Inc., Nos. 11-17608, 12-15320 (9th Cir. 2014), the plaintiff, Maria Escriba ("Escriba"), had worked in the Foster Poultry Farms, Inc. ("Foster Farms") processing plant in Turlock, California for 18 years. She was terminated in 2007 for failing to comply with the company's "three day no-show, no-call rule" after the end of a previously approved period of leave, which she took to care for her ailing father in Guatemala. Escriba subsequently filed suit under the Family and Medical Leave Act (the "FMLA") and its California equivalent. She claimed that her termination was an unlawful interference with her FMLA right. The district court denied Escriba's motion for summary judgment on the interference claim.The jury at the district court found in favor of Foster Farms on this claim, and Escriba appeals.

In analyzing the case, the Ninth Circuit Court of Appeal (the "Court") indicated that an employee can affirmatively decline to use FMLA leave, even if the underlying reasons for seeking the leave would have invoked FMLA protection, and such decline would cause a claim of interference with FMLA rights to fail. The Court said, as to the district court's denial of the summary judgment request, that whether the district court erred in entertaining Foster Farms's contention that Escriba did not intend to take FMLA leave is the dispositive issue in this case. The Court found that the district court did not err in denying Escriba's motion for summary judgment on the basis that Foster Farms's cited evidence demonstrates that Escriba was given the option and prompted to exercise her right to take FMLA leave, but that she unequivocally refused to exercise that right, the refusal voiding the interference claim.

The Court further found that substantial evidence supports the jury's verdict, so the verdict-based on a finding that Escriba declined FMLA leave- must be upheld. As such, since Escriba declined FMLA leave, the Court affirmed the holdings from the district court that Escriba's interference claim fails.

April 16, 2014

ERISA-Seventh Circuit Upholds District Court's Order Of Contempt Issued For Failure To Comply With Its Earlier Order Requiring Health Plan Participant And Her Attorney To Place Funds In Attorney's Trust Fund Account For The Plan's Subrogation Lien

In Central States, Southeast and Southwest Areas Health and Welfare Fund v. Lewis, No. 13‐2214 (7th Cir. 2014), the defendants were appealing an order of the district court holding them in contempt. In this case, defendant Beverly Lewis had been injured in an automobile accident in Georgia, and her health plan (the principal plaintiff in this case) paid about $180,000 for the cost of her medical treatment. Represented by the other defendant in the present suit, Georgia lawyer David T. Lashgari, Lewis brought a tort suit in Georgia state court against the driver of the car involved in the accident (her son-in-law), and obtained a $500,000 settlement, under a settlement agreement. The plan had--and Lashgari knew it had--a subrogation lien: that is, a right, secured by a lien, to offset the cost that the plan had incurred as a result of the accident against any money that Lewis obtained in a suit arising out of the accident.

The lien was thus a secured claim against the proceeds of the settlement. But when Lashgari received the settlement proceeds in June 2011, instead of giving $180,000 of the $500,000 to the plan he split the proceeds between himself and his client. Lashgari's refusal to honor the subrogation lien precipitated the present suit, filed in July 2011, a suit under ERISA to enforce the lien, under Section 502(a)(3) of ERISA. The defendants argued in the district court that because the settlement funds have been dissipated, this really is a suit for damages--that is, a suit at law rather than in equity--and therefore not authorized by Section 502(a)(3). But, according to the Seventh Circuit Court of Appeals (the "Court"), the defendants are wrong. The plan wasn't required to trace the settlement proceeds. Its equitable lien automatically gave rise to a constructive trust of the defendant's assets.

In February 2012, the district court granted a preliminary injunction against the defendants' disposing of the settlement proceeds, until the health plan received its $180,000 share. The district judge also ordered the defendants to place at least $180,000 in Lashgari's client trust fund account pending final judgment in the case. The defendants complied with neither order. They said they couldn't pay $180,000, but offered no evidence of their inability to do so. As a result, the district court issued an order holding them in contempt. Does the order stand? Yes, said the Seventh Circuit Court, since the defendants willfully ignored the plan's subrogation lien and offered no evidence as to why. Further, the Seventh Circuit Court issued an order to the defendants to show cause why they should not be sanctioned under Rule 38 for filing a frivolous appeal, and it remanded the case, directing the district court to determine whether defendants should be jailed, until they comply with the order to deposit the settlement proceeds in a trust account.

April 15, 2014

ERISA-Eighth Circuit Upholds The Plan Administrator' Decision To Deny Long Term Disability Benefits, As The Decision Was Entitled To A Deferential Review, And The Decision Was Not An Abuse Of Discretion

In Prezioso v. The Prudential Insurance Company of America, No. 13-1641 (8th Cir. 2014), the plaintiff, Michael Prezioso ("Prezioso"), brought suit under Section 502(a)(1)(B) of ERISA, claiming that the Prudential Insurance Company of America ("Prudential") wrongly denied him long term disability ("LTD") benefits-for disability due to a back injury at work- under a group policy sponsored by his former employer (the "Plan"). Prezioso appeals the district court's grant of summary judgment dismissing this claim. He argues that the court erred in applying the abuse of discretion standard of judicial review and, alternatively, that Prudential abused its discretion in denying LTD benefits.

In analyzing the case, the Eighth Circuit Court of Appeals (the "Court") said that a denial of benefits challenged under ERISA is to be reviewed under a de novo standard, unless the benefit plan gives the administrator discretionary authority to determine eligibility for benefits, in which case a deferential standard applies. In this case, the Court found that the Plan has sufficient language to provide Prudential-the plan administrator- with such discretionary authority. For instance, the policy expressly provides that, in considering a claim for LTD benefits, Prudential may request proof of continuing disability, satisfactory to Prudential. Another provision states that benefits, if granted, will cease on the date you fail to submit proof of continuing disability satisfactory to Prudential. Further, the Plan's summary plan description ("SPD") clearly explains to plan participants that Prudential has the sole discretion to interpret the terms of the Group Contract, to make factual findings, and to determine eligibility for benefits, and that Prudential's decisions as claims administrator shall not be overturned unless arbitrary and capricious. The SPD-which clearly grants discretionary authority to Prudential-may be relied on as a clarification of the Plan. As such, the Court ruled that Prudential has the requisite discretionary authority, so that its decision to deny LTD benefits is entitled to a deferential review.

As to the question of whether Prudential abused its discretion in deciding to deny the LTD benefits, the Court said that the record demonstrates that Prudential provided Prezioso a required full and fair review before denying his first appeal from the initial denial of LTD benefits. It considered all comments, medical records, and other information submitted by Prezioso; did not afford deference to the initial decision; referred the appeal to a different decision maker; consulted a neutral health care professional with appropriate training and experience in lower back disabilities; and obtained advice from a qualified vocational expert regarding the demands of Prezioso's regular occupation. See 29 C.F.R. § 2560.503-1(h)(2) and (3). Prudential did not abuse its discretion by according more weight to the opinions of its own experts than to the opinions of Prezioso's treating physicians and other experts. Based on this record, the Court held that Prudential did not abuse its discretion in denying Prezioso's first appeal from the adverse initial decision. Similarly, the Court held that subsequent medical evidence submitted by Prezioso for a voluntary, second appeal he took did not render Prudential's denial of his mandatory first appeal an abuse of discretion As such, the Court concluded that Prudential did not abuse it discretion in deciding to deny the LTD benefits, and affirmed the district court's summary judgment in Prudential's favor.

April 14, 2014

Employment-Eleventh Circuit Rules That Plaintiff Waived Her Rights Under The FMLA By Signing A Severance Agreement, Despite DOL Proscription Against Prospective FMLA Waivers

In Paylor v. Hartford Fire Insurance Company, No. 13-12696 (11th Cir. 2014), the plaintiff, Blanche Paylor ("Paylor"), appeals the district court's grant of summary judgment for her former employer, Hartford Fire Insurance Company ("Hartford"), on her claims of interference and retaliation under the Family Medical Leave Act of 1993 (the "FMLA"). In this case, although Paylor signed a Severance Agreement with Hartford ostensibly waiving her FMLA claims, she argues that those claims were "prospective" and therefore not waivable under Department of Labor ("DOL") regulations. See 29 C.F.R. § 825.220(d) (2009). In the alternative, Paylor argues that her signing of the Severance Agreement was not knowing and voluntary, and that the Severance Agreement is void as contrary to public policy.

In analyzing the case, the Eleventh Circuit Court of Appeals (the "Court") said that the only issue is the validity of the Severance Agreement that Paylor signed, since if the agreement is valid, then Paylor waived her FMLA rights. Paylor's principal argument for invalidity is that the district court erred in concluding that she waived her FMLA claims when she signed the Severance Agreement. Paylor says this waiver cannot be enforceable against her because the FMLA does not permit employees to waive "prospective rights" without Department of Labor ("DOL") or court approval, and her rights in this case were "prospective" in the sense that she had--at the time she signed the agreement--an outstanding request for FMLA leave.

The Court noted a DOL regulation, which says "Employees cannot waive, nor may employers induce employees to waive, their prospective rights under FMLA." 29 C.F.R. § 825.220(d) (2009). According to the Court, it is well-settled that an employee may not waive "prospective" rights under the FMLA, but an employee can release FMLA claims that concern past employer behavior. But what are "prospective rights"? The Court said that such rights, under the FMLA, are those allowing an employee to invoke FMLA protections at some unspecified time in the future, so that an employee may not waive FMLA rights, in advance, for violations of the statute that have yet to occur. The Severance Agreement Paylor signed did not ask her to assent to a general exception to the FMLA, but rather to a release of the specific claims she might have based on past interference or retaliation. Hence, Paylor did not waive prospective rights.

The Court disposed of Paylor's remaining arguments based on a review of the record, finding she voluntarily signed the Severance Agreement based on a totality of the circumstances, and that the public policy argument was not presented to the district court and therefore cannot be addressed on appeal. As such, the Court concluded that the Severance Agreement-and the waiver of the FMLA rights- is valid, and the Court affirmed the district court's summary judgment in favor of Hartford.

April 11, 2014

Employee Benefits-Multiemployer Pension Plans May Have to Be Amended To Comply With IRS Guidance On The Treatment of Same- Sex Marriage By Retirement Plans THE IRS GUIDANCE

In Notice 2014-19 (the "Notice") and accompanying Frequently Asked Questions posted on its website (the FAQs), the Internal Revenue Service (the "IRS") provides guidance on the application of the Supreme Court's decision in United States v. Windsor ("Windsor") and the holdings of Rev. Rul. 2013-17 to the treatment of same-sex marriages by a multiemployer pension plan (and any other tax-qualified retirement plan).


Prior to Windsor , section 3 of the Defense of Marriage Act ("DOMA") prohibited the recognition of same-sex spouses for purposes of Federal tax law. Windsor ruled that section 3 is unconstitutional. Based on this decision, Rev. Rul. 2013-17 held the following:

(1) For Federal tax purposes, the terms "spouse," "husband and wife," "husband," "wife" : (a) include an individual married to a person of the same sex if the individuals are lawfully married under state law, and the term "marriage" includes such a marriage between individuals of the same sex and (b) do not include individuals (whether of the opposite sex or the same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law that is not denominated as a marriage under the laws of that state, and the term "marriage" does not include such formal relationships.

(2) For Federal tax purposes, the IRS adopts a general rule recognizing a marriage of same-sex individuals that was validly entered into in a state whose laws authorize the marriage of two individuals of the same sex, even if the married couple is domiciled in a state that does not recognize the validity of same-sex marriages.

These holdings apply to a multiemployer pension plan, prospectively as of September 16, 2013.


Very briefly, the Windsor outcome will affect any plan provision that considers a participant's marital status, such as those pertaining to qualified joint and survivor annuities ("QJSAs"), qualified preretirement survivor annuities ("QPSAs"), beneficiary designations, loans, section 415 limits, incidental death benefit requirements, minimum required distributions, rollovers, safe harbor hardship withdrawals, qualified domestic relations orders ("QDROs") and stock ownership attribution rules.


The Notice establishes the following rules for a multiemployer pension plan:

Uniform Treatment. Any retirement plan qualification rule, under section 401(a) of the Internal Revenue Code (the "Code"), that applies because a participant is married must be applied with respect to a participant who is married to an individual of the same sex. For example, a participant in a plan subject to the rules of section 401(a)(11) of the Code who is married to a same-sex spouse cannot waive a QJSA without obtaining spousal consent pursuant to section 417 of the Code.

Mandatory Effective Date. Plan operations must reflect the outcome of Windsor as of June 26, 2013. A plan will not be treated as failing to meet the requirements of section 401(a) of the Code merely because it did not recognize the same-sex spouse of a participant as a spouse before June 26, 2013.

Amendment Prior To Mandatory Effective Date. A plan will not lose its qualified status due to an amendment to reflect the outcome of Windsor for some or all purposes of the plan and the Code as of a date prior to June 26, 2013, if the amendment complies with applicable qualification requirements (such as those in section 401(a)(4)). For example, for the period before June 26, 2013, a plan sponsor may choose to amend its plan to reflect the outcome of Windsor solely with respect to the QJSA and QPSA requirements of section 401(a)(11) and, for those purposes, solely with respect to participants with annuity starting dates or dates of death on or after a specified date.

Transition Rule. A plan will not be treated as failing to meet the requirements of section 401(a) merely because the plan, prior to September 16, 2013, recognized the same-sex spouse of a participant only if the participant was domiciled in a state that recognized same-sex marriages.


The FAQs provide guidance on specific applications of the Windsor decision, Rev. Rul. 2013-17 and the Notice (together, the "Notice Requirements") to a multiemployer pension plan:

Particular Rule For Beneficiary Designations. In a profit-sharing or stock bonus plan, to the extent the section 401(a) qualification rules require a married participant's spouse to be the participant's beneficiary with respect to all or part of the participant's benefits (unless the spouse consents to the participant's designation of another beneficiary), the plan must treat a participant who is lawfully married on the date of death to an individual of the same sex as married for purposes of applying those qualification rules with respect to a participant who dies on or after June 26, 2013. This applies regardless of any conflicting plan terms and regardless of any prior beneficiary or other designation to which the participant's spouse has not consented that specifies an individual other than the participant's spouse to receive those benefits (except as provided in a QDRO).

State Law Not Applicable. If a plan's terms designate a particular state's laws as applying to the plan, and that state does not recognize same-sex marriage for purposes of applying state law, it is not permissible , on and after June 26, 2013, for the plan to be operated in a manner that does not recognize a participant's same-sex spouse with respect to the section 401(a) qualification requirements which apply to married participants. Thus, if-on or after June 26, 2013- a plan administrator does not recognize the participant's same-sex spouse for purposes of the plan provisions that are required under section 401(a) because a plan administrator interprets the terms of the plan by applying a designated state's laws (such as under a plan's choice of law provision) to identify a participant's marital status, then the plan would violate the qualification requirements of section 401(a).

Retroactive Application of Amendments. A plan that is retroactively amended to be consistent with the Notice Requirements will not fail to retain its qualified status if the retroactive amendment is implemented using principles similar to those in the Employee Plans Compliance Resolution System (the "EPCRS"), as set forth in Rev. Proc. 2013-12. For example, if the plan is retroactively amended to apply the spousal consent rules under sections 401(a)(11) and 417 consistently with the Notice Requirements, the plan may obtain spousal consent to remedy a prior lack of spousal consent under the principles described in section 6.04(1) of Rev. Proc. 2013-12.

New Rights. In light of the Windsor decision, a plan sponsor may wish to amend a plan to provide new rights or benefits with respect to participants with same-sex spouses - such as an amendment that provides those participants with a new opportunity to elect a QJSA - to make up for benefits that were not previously available to those participants. Such an amendment must comply with the applicable qualification requirements (such as section 401(a)(4)).


The Notice requires that amendments be adopted by a multiemployer pension plan as follows:

(1) If the plan's terms with respect to the requirements of section 401(a) define a marital relationship by reference to section 3 of DOMA or are otherwise inconsistent with the outcome of Windsor or the guidance in Rev. Rul. 2013-17 or the Notice, then an amendment to the plan that reflects such outcome or guidance must be adopted.

(2) An amendment is required if a plan sponsor chooses to apply the rules with respect to married participants in a manner that reflects the outcome of Windsor for a period before June 26, 2013. The amendment must specify the date as of which, and the purposes for which, the rules are applied in this manner.

(3) An amendment is not required, if a plan's terms are not inconsistent with the outcome of Windsor and the guidance in Rev. Rul. 2013-17 and the Notice (for example, the term "spouse," "legally married spouse" or "spouse under Federal law" is used in the plan without any distinction between a same-sex spouse and an opposite-sex spouse).

(4) The deadline to adopt an amendment required in (1) or (2) above is the latest of: (a) the last day of the tenth month following the close of the plan year in which June 26, 2013 falls or (b) December 31, 2014.

Note: For a multiemployer pension plan, an amendment required in (1) is not subject to the requirements of section 432 of the Code (generally prohibiting an amendment which increases liabilities through changes to benefits, benefit accruals, or vesting schedules for a plan in endangered or critical status), while an amendment required in (2) is subject to those requirements.


A plan sponsor of a multiemployer pension plan (normally the Trustees) needs to review the plan to determine if an amendment is required under the Notice and FAQs. Further, since the plan must comply with the requirements of the Notice and FAQs in operation, the plan sponsor needs to review the plan procedures, summary plan descriptions, election forms and notices, and other participant communications to see if revisions to them are needed. New communications may be required in any event if any options change or new beneficiary designations must be made. Finally, the plan sponsor should review whether the plan has complied with the Windsor outcome on and after June 26, 2013 (except as otherwise allowed by the Transition Rule) (e.g., whether QJSAs and QPSAs were properly made available).

April 9, 2014

Employee Benefits-IRS Provides Guidance On Keeping Your SARSEP Compliant

Do you have a Salary Reduction Simplified Employee Pension ("SARSEP") plan? If so, you need to keep the SARSEP in compliance with technical requirements. To help, the Internal Revenue Service ("IRS") has provided a "SARSEP Checklist" and a "SARSEP Plan Fix-It Guide". Check them out.

April 8, 2014

ERISA-Sixth Circuit Rules That Plaintiff Is Entiled To Long-Term Disability Benefits, Despite A Determination To The Contrary By the Plan Administrator

In Javery v. Lucent Technologies, Inc. Long Term Disability Plan For Management or LBA Employees, No. 12-3834 (6th Cir. 2014), the plaintiff, Nilratan Javery ("Javery"), was appealing the judgment of the district court in favor of the defendant, Lucent Technologies, Inc. Long Term Disability Plan For Management or LBA Employees (the "Plan"), denying Javery's claim under ERISA for long-term disability ("LTD") benefits.

In this case, Javery contends that the Plan wrongfully denied his application for LTD benefits. In support of his claim, Javery submitted opinions and evaluations from several medical doctors and psychiatrists, the majority of whom assert that Javery was unable to perform his job as a result of his physical and mental illnesses. Javery also offered other evidence including his successful application for Social Security disability benefits to show that he was "disabled" as that term is defined in the Plan. The Plan argues that Javery has not established by a preponderance of the evidence that he was "disabled" at the relevant time. Additionally, the Plan contends that Javery should be judicially estopped from pursuing his ERISA claim because he failed to disclose the claim in his Chapter 13 personal bankruptcy action.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") first refused to apply the estoppel defense, since Javery's failure to disclose the claim in the Bankruptcy action was almost certainly due to carelessness or inadvertent error as opposed to intentional, strategic concealment or impermissible gamesmanship. The Court then considered whether the district court erred in denying Javery's claim for LTD benefits. In this case, the decision of the plan administrator to deny the claim on the Plan's behalf is not entitled to deference, since the plan administrator was not given discretionary authority to decide claims. The Court said that, to succeed in his claim for LTD benefits under ERISA, Javery must prove by a preponderance of the evidence that he was "disabled," as that term is defined in the Plan. The Plan defines the term "disabled" as being "prevented by reason of . . . disability . . . from engaging in [his] occupation or employment at the Company." Thus, the dispositive inquiry is whether Javery was unable to work for Lucent (his employer) as a software engineer due to his physical condition, his mental condition, or a combination of the two. Here, the Court concluded, after a "careful and comprehensive review of the full administrative record and supplemental administrative record" that Javery proved that he was so disabled.

Based on this finding, the Court overturned the district court's decision, and remanded the case back to the district court with instructions to enter judgment approving Javery's claim for the LTD benefits.

April 7, 2014

Employee Benefits- Treasury And IRS Issue Guidance Facilitating Tax-Free Rollovers To Employer-Sponsored Retirement Plans

According to a Press Release dated 4/3/14, the U.S. Department of the Treasury and the Internal Revenue Service ("IRS") have issued guidance-in the form of a Revenue Ruling- designed to help individuals accumulate and consolidate retirement savings by facilitating the transfer of savings from one retirement plan to another. This guidance will increase pension portability by making it easier for employees changing jobs to move assets to their new employers' retirement plans.

The Press Release says that the ruling simplifies the rollover process by introducing an easy way for a receiving plan to confirm the sending plan's tax-qualified status. The plan administrator for the receiving plan can now simply check a recent annual report filing for the sending plan on a database that is readily available to the public online. This eliminates the need for the two plans to communicate (with the individual as go-between), expedites the rollover process, and reduces associated paperwork.

The Revenue Ruling is here.