March 3, 2014

ERISA-Eleventh Circuit Upholds District Court's Grant Of Preliminary Injunction Against Enforcement Of A State Law Imposing Notice Requirements On A Self-Insured Health Plan

In America's Health Insurance Plans v. Hudgens, No. 13-10349 (11th Cir. 2014), the Eleventh Circuit Court of Appeals (the "Court") reviewed an opinion and order by the district court preliminarily enjoining Defendant Ralph T. Hudgens (the "Commissioner") from enforcing several provisions of the Georgia Code as preempted by Section 514 of the ERISA.

In this case, on May 2011, the State of Georgia enacted the Insurance Delivery Enhancement Act of 2011 ("IDEA"), which amends certain portions of Georgia's Insurance Code, including Georgia's "Prompt Pay" laws. These Prompt Pay laws had been in place since 1999 and required "insurers" to either pay a claim for benefits, or give notice of why a claim would not be paid, within fifteen working days after receipt of a claim. If an insurer did not comply with the Prompt Pay requirements, the insurer would have to pay annual interest of eighteen percent on the proceeds or benefits due under the terms of the plan. IDEA extended Prompt Pay to apply to self-funded ERISA plans and their third party administrators. The question for the Court: is Prompt Pay, as so extended, preempted by Section 514 of ERISA.

In analyzing the case, the Court said, first, that the district court's grant of a preliminary injunction is reviewed for abuse of discretion. A district court may grant a preliminary injunction only if the moving party shows that: (1) it has a substantial likelihood of success on the merits; (2) irreparable injury will be suffered unless the injunction issues; (3) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) if issued, the injunction would not be adverse to the public interest.

In this case, the Court found that Prompt Pay should be preempted under ERISA Section 514. It impermissibly relates to self-funded ERISA plans, since it would require such plans to process and pay provider claims, or notify claimants of claim denials, within fifteen or thirty days, depending on whether the claim is submitted electronically or conventionally, thereby creating certain timeliness requirements unique to Georgia instead of allowing uniform, national rules. Prompt Pay would not be saved by the "Saving Clause" in Section 514, which permits state regulation of insurance without preemption, since the "Deemer Clause" in Section 514 exempts self-insured plans from the Savings Clause. Given that Prompt Pay is preempted, the Court ruled that an examination of the factors (1) to (4) for granting a preliminary injunction indicate, in this case, that the district court did not abuse its discretion. As such, the Court upheld the preliminary injunction.

February 28, 2014

ERISA-Sixth Circuit Rules That Plan Administrator's Denial Of Disability Benefits Must Be Overturned

In Kennard v. Means Industries, Incorporated, Case No. 13-1911 (6th Cir. 2014) (Unpublished), the plaintiff, Kyle Kennard ("Kennard"), was appealing the district court's adverse judgment on his claim for disability retirement benefits from his former employer under ERISA.

In this case, Kennard had operated machines for his employer, Means Industries, Inc. ("Means") until 1990 when he inhaled fumes from a chemical spill, severely injuring his lungs and rendering him ultra-sensitive to noxious fumes. As a result, his treating physician imposed a lifelong restriction that he work only in a clean-air environment. Means provided Kennard a clean-air environment to perform clerical work from March 1992 until 2006. However, fumes from perfume and candles in that area would shorten Kennard's breath and require him to leave work. Kennard stopped working at Means in 2006.

That same year, Kennard successfully applied for disability benefits from the Social Security Administration ("SSA"). SSA's written decision detailed his disability. SSA decision in hand, Kennard next sought disability retirement benefits under Means's ERISA-governed group insurance policy (the "Plan"). The Plan entitles an employee to benefits "if he has been totally disabled by bodily injury or disease so as to be prevented thereby from engaging in any occupation or employment for remuneration or profit, and which condition constitutes total disability under the federal Social Security Act." Means's plan further conditions benefits on an assessment by its chosen physician that the disability be permanent. Based on its physician's reports, Means's Plan Administrator denied Kennard's request for benefits in a February 2010 letter and this suit ensued The district court granted Mean's motion to affirm the Plan Administrator's decision. Kennard appeals.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") found the employer's decision to deny the benefits to be arbitrary and capricious, and reversed the district court's decision. Why? The Court concluded that, upon a close reading of the medical reports, it rejected the district court's conclusion that those reports support the Plan Administrator's decision that Kennard can "engag[e] in any occupation or employment." A valid denial of benefits premised on those reports would need to include evidence of the existence of absolute-clean-air jobs available to Kennard. The SSA found (and Means does not dispute) that "there are no jobs in the national economy that Kennard could perform." Though the Plan Administrator was not required to seek out vocational evidence, or to apply the SSA's legal standard for disability, Means's Plan Administrator needed to ground its decision on a reasoned explanation, which it did not. The Court remanded the case back to the district court, with instructions to award Kennard his disability retirement benefit.

February 25, 2014

ERISA-Sixth Circuit Rules Upholds The Plan Administrator's Determination To Deny Long-Term Disability Benefits

In McClain v. Eaton Corporation Disability Plan, No. 13-5395 (6th Cir. 2014), the relevant long-term disability plan provided that the plaintiff was disabled if she was "totally and continuously unable to engage in any occupation or perform any work for compensation or profit." (Emphasis added.) The defendant plan administrator denied the plaintiff's claim for disability benefits, because her treating physician opined she could work part-time, and a market study identified various part-time positions in the area for which she was qualified. The plan administrator thus took the position that the plaintiff was not totally disabled from doing any work because she could do some work.

In analyzing this case, the Sixth Circuit Court of Appeals (the "Court") stated that its review is limited to determining whether this determination by the plan administrator-which had discretionary authority over the plan- is arbitrary and capricious. The district court found that it was not. The Court agreed, concluding that, based on the whole administrative record which included the records of plaintiff's physicians and two independent doctors who reviewed the case, the plan administrator's decision to deny to disability benefits was rational and based on a reasonable reading of the plan's provisions.

February 24, 2014

Employee Benefits-IRS Issues Final Regulations On "Pay-Or-Play", Which Contains Relief For Multiemployer Health Plans

Further to my earlier blog today, on February 12, 2014, the Internal Revenue Service (the "IRS") published final regulations on the employer "pay-or-play" requirements introduced in the Affordable Care Act (the "ACA"). These requirements become effective in 2015. They apply to an employer with at least 50 full-time equivalent employees (at least 100 for 2015). Under "pay- or- play", such an employer will pay a penalty if it either:

(1) fails to offer to "substantially all" (70% in 2015, 95% thereafter) of its full-time employees (and their dependent children) group health coverage, and receives notice that at least one of its full-time employees, who qualifies for a premium tax credit or cost- sharing reduction, buys health coverage through an ACA health care marketplace or exchange (an "Exchange"), or

(2) fails to offer health coverage that is "affordable" (i.e., single only coverage that costs less than 9.5% of household income or another safe-harbor measure) and has "minimum value" (i.e., coverage that reimburses at least 60% of claims), and receives notice that at least one of its full-time employee, who qualifies for a premium tax credit or cost -sharing reduction, buys health coverage through an Exchange.

The monthly penalty for a failure in (1) is the number of the employer's full-time employees less 30 (80 in 2015), multiplied by 1/12 of $2,000. The monthly penalty for a failure in (2) is number of the employer's full-time employees, who qualify for a premium tax credit or cost -sharing reduction and buy health coverage through an Exchange, multiplied by 1/12 of $3,000, limited by the maximum penalty that could be imposed under (1).

The penalty is imposed on an employer. A multiemployer health plan pays for its participants' benefits with employer contributions that are required to be made under collective bargaining agreements. But the plan is not the employer on which a "pay- or- play" penalty could be imposed. So why would a multiemployer health plan care about "pay- or-play"? The answer: the multiemployer health plan would like to make available to each contributing employer a health plan under which the employer could cover its employees, or at least its unionized employees, and avoid a penalty with respect to those employees.

To help the multiemployer health plans meet this goal, and to help employers who contribute to multiemployer plans avoid the "pay-or-play" penalties, the final regulations contain a transition rule. This rule was originally contained in the preamble to the proposed regulations on "pay-or-play", and it previously applied only in 2014. The transition rule is available to an employer which is subject to "pay-or-play", and which is required by a collective bargaining agreement or an appropriate related participation agreement to make contributions, with respect to some or all of its employees, to a multiemployer health plan. Under this rule, such an employer will not be treated, with respect to employees for whom it must make such contributions, as failing to offer the opportunity to enroll in group health coverage to full-time employees (and their dependents), and will not be subject to penalty (2) described above, so long as the multiemployer health plan:

-- offers, to individuals who satisfy the plan's eligibility conditions, coverage that is affordable and provides minimum value, and

--offers coverage to those individuals' dependents.

For purposes of determining whether coverage under the multiemployer plan is affordable, employers may use a new safe harbor measure, under which an employee's required contribution, if any, toward self-only health coverage under the plan does not exceed 9.5 percent of the wages reported to the multiemployer health plan. The amount of wages may be determined based on actual wages or an hourly wage rate under the applicable collective bargaining agreement or participation agreement.

The preamble to the final regulations indicates that employers may presently rely on the transition rule. It says that any future guidance that limits the scope of the transition rule will be applied prospectively, and will apply no earlier than January 1 of the calendar year beginning at least six months after the date of issuance of the guidance. This extends the transition rule beyond 2014. Moreover, it gives relying employers a reasonable period of protection, since the transition rule will be available at least until the IRS affirmatively modifies it, which may never happen, and then for at least 6 months after the modification is made. Thus, it will encourage employers to use multiemployer health plans to avoid "pay-or-play" penalties by agreeing under collective bargaining agreements to contribute to these plans.

February 24, 2014

Employee Benefits-Treasury Department and IRS Issue Final Regulations Implementing Employer Shared Responsibility Under the Affordable Care Act for 2015

A press release (dated 2/10/2014) says that the U.S. Department of the Treasury and the Internal Revenue Service ("IRS") have issued final regulations implementing the employer responsibility provisions under the Affordable Care Act ("ACA") that take effect in 2015. In addition, final regulations will be issued shortly that aim to substantially streamline employer reporting requirements for employers that offer highly affordable coverage to all or virtually all of their full-time employees. The employer responsibility rules assist employers affected by these policies in providing quality, affordable coverage to their workers. If employers decide not to offer insurance to their employees, they will make an employer shared responsibility payment beginning in 2015 to help offset the costs to taxpayers of their employees getting tax credits through the Health Insurance Marketplace.

The Press Release continues by saying:

"While about 96 percent of employers are not subject to the employer responsibility provision, for those employers that are, we will continue to make the compliance process simpler and easier to navigate," said Assistant Secretary for Tax Policy Mark J. Mazur. "Today's final regulations phase in the standards to ensure that larger employers either offer quality, affordable coverage or make an employer responsibility payment starting in 2015 to help offset the cost to taxpayers of coverage or subsidies to their employees."

The final rules issued today implement the employer shared responsibility provisions of the ACA, under section 4980H of the Internal Revenue Code. The rules make a number of commonsense improvements in response to input on the proposed regulations issued in December 2012.

Highlights of today's rules include addressing a number of questions about how plans can comply with the employer shared responsibility provisions; ensuring that volunteers such as firefighters and emergency responders do not count as full-time employees; and phasing in provisions for businesses with 50 to 99 full-time employees and those that offer coverage to most but not yet all of their full-time workers.

How the policy affects employers:

Small Businesses with fewer than 50 employees: (about 96% of all employers): Under the Affordable Care Act, companies that have fewer than 50 employees are not required to provide coverage or fill out any forms in 2015, or in any year, under the Affordable Care Act.

Larger employers with 100 or more employees (about 2% of employers): The overwhelming majority of these companies with 100 or more employees already offer quality coverage. Today's rules phase in the percentage of full-time workers that employers need to offer coverage to from 70 percent in 2015 to 95 percent in 2016 and beyond. Employers in this category that do not meet these standards will make an employer responsibility payment for 2015.

Employers with 50 to 99 employees (about 2% of employers): Companies with 50-99 employees that do not yet provide quality, affordable health insurance to their full-time workers will report on their workers and coverage in 2015, but have until 2016 before any employer responsibility payments could apply.

For more information, see the fact sheet here and the final rule here.

February 20, 2014

ERISA-Second Circuit Rules That Showing Of Actual Harm Not Needed To Obtain Relief In The Form Of Plan Reformation

In Osberg v. Foot Locker, Inc., No. 13-187-cv. (2nd Cir. 2014) (Summary Order), the plaintiff, Geoffrey Osberg ("Osberg"), was appealing the district court's award of summary judgment to the defendants, his former employer Foot Locker, Inc., and Foot Locker Retirement Plan ("Foot Locker"), on claims that Foot Locker violated ERISA, in connection with converting its defined benefit plan to a cash balance plan, by (1) issuing false and misleading summary plan descriptions in violation of ERISA's disclosure requirements; (2) breaching fiduciary duties in making such materially false and misleading statements and omissions and (3) failing to provide plan participants with notice, as required by ERISA § 204(h).

In analyzing the case, the Second Circuit Court of Appeals (the "Court") said first, as to the Section 204(h) notice claim (claim (3) above), that Section 204 (h) does not, in any event, afford Osberg the remedy he seeks, i.e., a pension benefit calculated under the cash balance plan but with an opening balance equal to the value of the retirement annuity he had already earned under the old formula. This is because insufficient notice in violation of § 204(h) does not, as Osberg contends, invalidate only the undisclosed portion of the plan amendment, but rather voids the entire amendment. Thus, the Court affirmed the district court's dismissal of his § 204(h) claim.

As to Osberg's disclosure claims (claims (1) and (2) above), the Court said that to survive summary judgment, Osberg was required to raise a genuine issue of material fact with respect to his demand for "appropriate equitable relief"--specifically, surcharge or reformation--under ERISA § 502(a)(3). The Court noted that, in CIGNA Corp. v. Amara, the U.S. Supreme Court recognized surcharge and reformation as traditional equitable remedies that may allow for awarding monetary compensation based on misleading disclosures. The Court further noted that it had recently articulated the following two questions to be answered in determining entitlement to these remedies: (i) what remedy is appropriate and (ii) whether the plaintiffs have established the requisite level of harm as a result of the notice violations.

Here, the Court continued, the district court concluded that Osberg's disclosure claim failed to raise an issue of fact as to whether he suffered the type of "actual harm" necessary to obtain the equitable relief of reformation and surcharge. As such, the district court erroneously applied an "actual harm" requirement. Since, in this case, reformation of the plan in question would afford Osberg the total relief sought, there is no need for the Court to decide now whether he would also be entitled to recovery under surcharge. Thus, the Court overturns the district court's summary judgment, and remands to the case back to the district court, as it applies to a request for reformation.

February 19, 2014

ERISA- Eighth Circuit Holds That Plaintiff Fails To Make Out A Case Of Interference Under Section 510 Of ERISA

In Barnhardt v. Open Harvest Cooperative, No. 13-2254 (8th Cir. 2014), the plaintiff, Jacqueline Barnhardt ("Barnhardt"), was appealing the district court's grant of summary judgment to the defendant, Open Harvest Cooperative ("Open Harvest"), on her claim alleging a violation of § 510 of ERISA.

In this case, in December 2006, Barnhardt was diagnosed with arteriovenous malformation ("AVM"), a vascular condition that causes cognitive difficulties and occasional seizures. At some point during February 2011, Barnhardt disclosed her AVM to her supervisor. Open Harvest terminated Barnhardt's employment in August 2011. On September 15, 2011, Barnhardt filed a claim for short-term disability benefits with Dearborn National. In its letter denying benefits, Dearborn National stated that Open Harvest had terminated Barnhardt's coverage on July 31, 2011, and that Barnhardt had not become disabled until August 2, 2011. Because she became disabled after her coverage had terminated, Barnhardt was not entitled to benefits. Barnhardt then brought suit againt Open Harvest claiming, among other things, that Open Harvest had violated § 510 of ERISA by preventing her from obtaining the short-term disability benefits.

In analyzing the case, the Eighth Circuit Court of Appeals (the "Court") said that Section 510 of ERISA prohibits, among other things, an employer from discharging or discriminating against a participant in an ERISA plan "for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan." 29 U.S.C. § 1140. In order to recover under a § 510 interference claim, a plaintiff must prove that the defendant possessed a specific intent to interfere with her ERISA benefits. The Court found that Barnhardt had not identified any direct evidence that Open Harvest acted with the specific intent to interfere with her ERISA benefits. As such, the Court said that it had to analyze her claim under the McDonnell Douglas burden-shifting framework.

Applying this analysis, the Court concluded that Open Harvest had articulated a legitimate, non-discriminatory justification for its termination of Barnhardt's coverage under the short-term disability plan. Under the McDonnell Douglas framework, the burden shifted back to the plaintiff to show a genuine dispute whether Open Harvest's justification was pretextual. The Court concluded that Barnhardt had not shown a genuine dispute whether Open Harvest terminated her employment with a specific intent to interfere with her ERISA benefits. As such the Court affirmed the district court's summary judgment in favor of Open Harvest.

February 11, 2014

ERISA-Second Circuit Rules That ERISA Preempts State Law Requiring A Report From A Self Insured Health Plan

ERISA-Second Circuit Rules That ERISA Preempts State Law Requiring A Report From A Self Insured Health Plan

In Liberty Mutual Insurance Co. v. Donegan, No. 12-4881-cv (2nd Cir. 2014), the plaintiff, Liberty Mutual Insurance Co. ("Liberty Mutual"), was appealing a judgment by the district court, concluding that ERISA does not preempt a Vermont statute and regulation requiring self-insured employee health plans to report to the state, in specified format, claims data and "other information relating to health care."

In analyzing the case, the Second Circuit Court of Appeals (the "Court") said, as to ERISA preemption, that recent court precedent has set a rebuttable presumption against preemption of state health care regulations. Two constants in the cases, however, remain: (1) recognition that ERISA's preemption clause is intended to avoid a multiplicity of burdensome state requirements for ERISA plan administration and (2) acknowledgment that "reporting" is a core ERISA administrative function. These two considerations, for a statute and regulation that clearly has a connection to ERISA plans, led the Court to conclude that the Vermont law, as applied to compel the reporting of Liberty Mutual plan data, is preempted. The Court therefore reversed the district court's decision and remanded the case for entry of judgment in favor of Liberty Mutual.

February 10, 2014

Employment-Seventh Circuit Rules That An Employee Is Entitled to FMLA Leave To Care For A Parent, Even When The Parent Traveled To Las Vegas

In Ballard v. Chicago Park District, No. 13‐1445 (7th Cir. 2014), the Court faced the question of what the term "caring for" a family member means for purposes of the Family and Medical Leave Act (the "FMLA"). The FMLA gives eligible employees a right to twelve workweeks of leave for, among other things, to care for the spouse, or a son, daughter, or parent, of the employee, if such spouse, son, daughter, or parent has a serious health condition.

In this case, a question arose as to whether FMLA leave is available to allow an employee to provide physical and psychological care to a terminally ill parent while that parent is traveling away from home. Here, the plaintiff, Beverly Ballard ("Ballard"), is a former Chicago Park District employee. In April 2006, Ballard's mother, Sarah, was diagnosed with end‐stage congestive heart failure. Ballard lived with Sarah and acted as her primary caregiver. In 2007, Sarah and a social worker met to discuss Sarah's end‐of‐life goals. Sarah said that she had always wanted to take a family trip to Las Vegas, and the trip and funding therefore were arranged.

Ballard requested unpaid leave under the FMLA from the defendant, the Chicago Park District, so that she could accompany her mother to Las Vegas. The Park District ultimately denied the request, although Ballard and her mother went anyway. Ballard continued to serve as her mother's caretaker during the trip. Several months later, the Chicago Park District terminated Ballard for unauthorized absences. Ballard then filed suit under the FMLA. The issue for the Seventh Circuit Court of Appeals (the "Court") was whether Ballard was entitled to FMLA leave, in order to care for her mother, even though the care was rendered during a trip to Las Vegas.

In analyzing the case, the Court said that the words "to care" for, as used in the FMLA regulations, include "physical and psychological care" without any geographic limitation. It agreed with the district court, which had stated that where the care takes place has no bearing on FMLA protections. The Court therefore ruled that entitlement to FMLA leave was not lost because of the Las Vegas trip.

February 6, 2014

Employment-Supreme Court Rules That Time Spent Changing To And From Protective Gear Is Not Compensable Under The FLSA

In Sandifer v. United States Steel Corporation, No. 12-417 (S.Ct. 2014), the Supreme Court faced the question of the meaning of the phrase "changing clothes" as it appears in the Fair Labor Standards Act (the "FLSA"). The plaintiffs were seeking backpay for time spent donning and doffing various pieces of protective gear, which the employer required them to wear because of hazards regularly encountered in their work at a steel plant. The district court granted summary judgment to the defendant, United States Steel Corporation. The Court of Appeals for the Seventh Circuit upheld this judgment, and the plaintiffs appeal.

In analyzing the case, the Supreme Court said that, in 1949, Congress amended the FLSA to provide that the compensability of time spent changing clothes or washing is a subject appropriately committed to collective bargaining (a "CBA"). Here, under the applicable CBA, changing clothes is not compensable time. But does the donning and doffing of protective gear qualify as "changing clothes"? The Supreme Court answered this by saying that "clothes" encompasses the entire outfit that one puts on to be ready for work-including the protective gear. As to "changing", the Supreme Court said that any alteration of dress will constitute a change. As such, the Court held that the plaintiff's donning and doffing of the protective gear at issue qualifies as "changing clothes", which is not compensable under the applicable CBA. Therefore, the Court affirmed the lower courts' rulings.

February 4, 2014

ERISA- Eighth Circuit Uphold District Court's Decision That Death Was Accidental, So That A Death Benefit Is Payable

In Nichols v. UniCare Life and Health Insurance Company, Nos. 12-4047, 13-1033 (8th Cir. 2014), defendant UniCare was appealing the district court's grant of summary judgment to the plaintiff Nichols. In this case, Nichols is the surviving spouse of Dana Nichols. Dana was employed by Acxiom Corporation, and she was insured under the Acxiom Corporation Life and Accidental Death and Dismemberment Insurance Plan (the "Plan"). The Plan is funded by a policy underwritten by UniCare, and UniCare also serves as the claims administrator.

On May 3, 2010, Dana was found face down in bed, and upon being transported to a nearby hospital, she was pronounced dead. The autopsy report indicated that her manner of death (natural, accidental, etc.) "could not be determined," and her cause of death was mixed drug intoxication. Nichols filed a claim for accidental death benefits under the Plan. UniCare-as claims administrator- ultimately denied Nichols' claim, on the grounds that: (1) the manner of death was listed on the death certificate as "could not be determined," and (2) the Plan excludes benefits for death caused by intoxication. This suit ensued. The district court, applying a de novo standard of review, granted Nichols the accidental death benefits in a summary judgment, finding that the cause of Dana's death was more likely than not an accident and rejecting the argument that Dana's consumption of numerous medications was an intentional act so that no accident had occurred. UniCare appeals.

In analyzing the case, the Eighth Circuit Court of Appeals (the "Court") agreed with the district court, which had said that, in sum, all of the evidence indicates that Dana's death was the unexpected result of ingesting prescribed medications. That is, the death was an accident. Accordingly, the Court concluded that the district court correctly found that UniCare erred in denying coverage for accidental death benefits. The Court also rejected an application of the Plan's intoxication exclusion, since UniCare had not met its burden that this exclusion applied. As such, the Court affirmed the district court's decision.

February 3, 2014

Employee Benefits-IRS Provides Answers On The Health Coverage Tax Credit

Have any questions on the Health Coverage Tax Credit? The IRS has provided a list of the most frequently asked questions about the credit for the 2013 tax year. The list is here.

January 29, 2014

Employee Benefits-IRS Says That Deadline To Add New In-Plan Roth Rollover Provisions Has Been Extended

In Employee Plans News, Issue 2013-10, December 19, 2013, the IRS discusses the extended deadline for adding new in-plan Roth rollover provisions to an eligible plan. Here is what the IRS says:

In Notice 2013-74, the IRS extended the deadline to adopt a discretionary plan amendment to allow in-plan Roth rollovers in 2013 of amounts in a plan that could not be distributed to the participant:

401(k) and governmental 457(b) plans - to the later of the last day of the first plan year in which the amendment is effective or December 31, 2014. Safe Harbor 401(k) plans have until December 31, 2014, to add the amendment effective for 2013 and 2014.
403(b) plans - to the later of the last day of the first plan year in which the amendment is effective or the end of the plan's remedial amendment period. The end date of the remedial amendment period has not been announced, but it will not be before 2015.
The amendment's effective date must be the date the plan first allows the designated Roth account transactions permitted by the amendment.
The extended amendment deadline also applies to related amendments that permit:

• in-plan Roth rollovers of some or all otherwise distributable amounts,
• designated Roth accounts to accept rollovers, and
• elective deferrals under the plan to be designated as Roth contributions.

Rules for in-plan Roth rollovers of otherwise nondistributable amounts

• The plan must separately account for any in-plan Roth rollovers of otherwise nondistributable amounts.
• The amounts rolled over remain subject to the distribution restrictions that applied to them before the in-plan Roth rollover.
• The rollover must be direct; 60-day rollovers are not permitted if the amount was otherwise nondistributable.
• Tax withholding does not apply.

Amounts now eligible for in-plan Roth rollovers

Regardless of the participant's age, a plan may permit in-plan Roth rollovers of:

• elective deferrals
• matching (including safe harbor 401(k) matching) contributions
• nonelective (including safe harbor 401(k) nonelective) contributions
• earnings

Adding or removing Roth provisions

A plan isn't required to offer designated Roth accounts or in-plan Roth rollovers. A plan may also limit the types and amounts of contributions eligible for Roth rollovers and the frequency of rollovers. For example, a plan could provide that only otherwise distributable amounts are eligible for in-plan Roth rollovers.
A plan may also discontinue the availability of in-plan Roth rollovers. An employee's ability to make in-plan Roth rollovers is not protected by the anti-cutback rules in Internal Revenue Code Section 411(d)(6).

Background on in-plan Roth rollovers

Since 2010, plan participants have been able to roll over certain amounts in a 401(k), 403(b) or governmental 457(b) plan to a designated Roth account in the same plan. But the amounts rolled over had to be eligible for distribution from the plan.
Beginning in 2013, a plan may also allow in-plan Roth rollovers of amounts that aren't otherwise distributable (Internal Revenue Code Section 402A(c)(4)(E), as amended by the American Taxpayer Relief Act of 2012).

January 28, 2014

ERISA-Fifth Circuit Holds That Plaintiff's Claim Of A Violation Of The Anti-Retaliation Rule Under ERISA Section 510 Survives Summary Judgment

The case of Parker v. Cooper Tire and Rubber Company, No. 12-60503 (5th Cir. 2013) (Unpublished Opinion), arose out of the termination of the plaintiff, Jimmy Parker ("Parker"), from his employment with the defendant, Cooper Tire and Rubber Company ("Cooper").

Parker had been taking absences from work due to severe disability. It appears that Parker complied with Cooper's notification of absence policy on all but three occasions. Nevertheless, Cooper fired Parker for failing to report those absences. This suit ensued. Parker claimed, among other things, that Cooper discharged him to prevent him from collecting disability and medical benefits in violation of the anti-retaliation rule in section 510 of ERISA.

In analyzing the case, the Fifth Circuit Court of Appeals (the "Court") noted that there were two disability benefit plans at issue: a short-term disability plan, and a long-term disability plan. As to the latter, the Court ruled that Parker had failed to apply for long-term ERISA benefits, even though he was enrolled in the long-term benefit plan, and this is fatal to his retaliation claim as to that plan. As to the short-term disability plan, the Court ruled that this plan was not covered by ERISA, since it falls in the exception for payroll practices. Thus Parker's claim fails as it applies to the disability plans.

As to the medical benefits, the Court concluded that Parker has met his burden of showing that the termination was a pretext for retaliation. It said that the close timing between Cooper's discovery that Parker had a severe disability requiring serious medical treatment (a liver transplant) and his subsequent termination (one day only between the events) factors into our analysis. Further, Cooper's stated reason for firing Parker was his failure to follow company procedures to report absences from work. However, Cooper repeatedly changed its determination as to which dates Parker actually failed to report his absences. This repeated inconsistency, in addition to efforts by Parker's family to report absences on his behalf, are other factors lending support to Parker's argument that Cooper's justification for his termination is pretextual. These factors are sufficient evidence to create a material issue of fact regarding whether Cooper's proffered reason for terminating Parker was mere pretext. Therefore, the Court held that Cooper is not entitled to summary judgment on Parker's claim for retaliation based on his loss of medical benefits.

January 22, 2014

Employee Benefits- IRS Issues a Checklist For SEPs

The IRS has issued a checklist for SEPs. Here is what it says about the checklist.

Every year it is important that you review the requirements for operating your Simplified Employee Pension ("SEP") plan. Use this checklist to help you keep your plan in compliance with many of the important rules. See for online versions of this checklist, Fix-It Guides, and other resources for SEPs and other plan types. On the online version of this checklist, click on "(More)" in any of the questions for additional information (including examples) on how to find, fix and avoid each mistake.

The checklist is here.