May 15, 2014

ERISA-DOL Provides Guidance On Coverage Of Preventive Services Under The Affordable Care Act

The U.S. Department of Labor (the "DOL") has issued FAQs about Affordable Care Act Implementation (Part XIX), which provide guidance on the coverage of preventive services under the Affordable Care Act (the "ACA"). Here is what the FAQs say:

In General. PHS Act section 2713 and the interim final regulations relating to coverage of preventive services require non-grandfathered group health plans offered in the group market to provide benefits for, and prohibit the imposition of cost-sharing requirements with respect to, the following:

• Evidenced-based items or services that have in effect a rating of "A" or "B" in the current recommendations of the United States Preventive Services Task Force (the "USPSTF") with respect to the individual involved, except for the recommendations of the USPSTF regarding breast cancer screening, mammography, and prevention issued in or around November 2009, which are not considered current;

• Immunizations for routine use in children, adolescents, and adults that have in effect a recommendation from the Advisory Committee on Immunization Practices (the "ACIP") of the Centers for Disease Control and Prevention (the "CDC") with respect to the individual involved;

• With respect to infants, children, and adolescents, evidence-informed preventive care and screenings provided for in comprehensive guidelines supported by the Health Resources and Services Administration (the "HRSA"); and

• With respect to women, evidence-informed preventive care and screening provided for in comprehensive guidelines supported by HRSA, to the extent not already included in certain recommendations of the USPSTF.(10)

If a recommendation or guideline does not specify the frequency, method, treatment, or setting for the provision of that service, the plan can use reasonable medical management techniques to determine any such coverage limitations.
These requirements do not apply to grandfathered health plans.

Tobacco Use. Plans may use reasonable medical management techniques to determine the frequency, method, treatment, or setting for a recommended preventive service, to the extent not specified in the recommendation or guideline regarding that preventive service. Evidence-based clinical practice guidelines can provide useful guidance. The DOL will consider a group health plan to be in compliance with the requirement to cover tobacco use counseling and interventions, if, for example, the plan covers without cost-sharing:

1. Screening for tobacco use; and,

2. For those who use tobacco products, at least two tobacco cessation attempts per year. For this purpose, covering a cessation attempt includes coverage for:

o Four tobacco cessation counseling sessions of at least 10 minutes each (including telephone counseling, group counseling and individual counseling) without prior authorization; and

o All Food and Drug Administration ("FDA")-approved tobacco cessation medications (including both prescription and over-the-counter medications) for a 90-day treatment regimen when prescribed by a health care provider without prior authorization.

May 14, 2014

ERISA-DOL Provides Guidance On Limitations On Cost Sharing Under The Affordable Care Act

The U.S. Department of Labor (the "DOL") has issued FAQs about Affordable Care Act Implementation (Part XIX), which provide guidance on the limitations on cost sharing under the Affordable Care Act (the "ACA"). Here is what the FAQs say:

In General. Public Health Service ("PHS") Act section 2707(b), as added by the ACA, provides that a non-grandfathered group health plan shall ensure that any annual cost-sharing imposed under the plan does not exceed the limitations provided for under section 1302(c)(1) of the ACA, which limits an enrollee's out-of-pocket costs.

For plan years beginning in 2014, the annual limitation on out-of-pocket costs in effect under section 1302(c)(1) is $6,350 for self-only coverage and $12,700 for coverage other than self-only coverage. For plan years starting after 2014, this annual limitation is adjusted for inflation. It has been proposed by HHS that, for plan years beginning in 2015, the annual limitation be $6,600 for self-only coverage and $13,200 for coverage other than self-only coverage.

In Network/Out Of Network. If a plan includes a network of providers, the plan may, but is not required to, count out-of-pocket spending for out-of-network items and services towards the plan's annual out-of-pocket maximum. A plan that counts such spending towards the out-of-pocket maximum may use any reasonable method for doing so. For example, if the plan covers 75% of the usual, customary, and reasonable amount (UCR) charged for services provided out-of-network and the participant pays the remaining 25% of UCR plus any amount charged by the out-of-network provider in excess of UCR, the 25% of UCR paid by the participant may reasonably be counted, in full or in part, toward the out-of-pocket maximum without including any amount charged above UCR paid by the participant.

Brand Name Prescription Drugs. Large group market coverage and self-insured group health plans have discretion to define "essential health benefits." For example, a plan may include only generic drugs, if medically appropriate (as determined by the individual's personal physician) and available, while providing a separate option (not as part of essential health benefits) of electing a brand name drug at a higher cost sharing amount. If, under this type of plan design, a participant or beneficiary selects a brand name prescription drug in circumstances in which a generic was available and medically appropriate (as determined by the individual's personal physician), the plan may provide that all or some of the amount paid by the participant or beneficiary (e.g., the difference between the cost of the brand name drug and the cost of the generic drug) is not required to be counted towards the annual out-of-pocket maximum. For ERISA plans, the SPD must explain which covered benefits will not count towards an individual's out-of-pocket maximum.

In determining whether a generic is medically appropriate, a plan may use a reasonable exception process. For example, the plan may defer to the recommendation of an individual's personal physician, or it may offer an exceptions process meeting the requirements of 45 CFR section 156.122(c).

Reference Pricing. Reference pricing aims to encourage plans to negotiate cost effective treatments with high quality providers at reduced costs. Until guidance is issued and effective, with respect to a large group market plan or self-insured group health plan that utilizes a reference-based pricing program, the DOL will not consider a plan as failing to comply with the out-of-pocket maximum requirements of PHS Act section 2707(b) because it treats providers that accept the reference amount as the only in-network providers for purposes of applying the annual limitation on cost-sharing, provided the plan uses a reasonable method to ensure that it provides adequate access to quality providers.

May 13, 2014

ERISA-Sixth Circuit Holds That An Inquiry Is Needed To Establish A Section 510 Retaliation Claim

In Sexton v. Panel Processing, Inc., No. 13-1604 (6th Cir. 2014), the plaintiff, Brian Sexton ("Sexton"), had brought suit under ERISA against his former employer, defendant Panel Processing, Inc. ("Panel Processing"). Sexton claimed that Panel Processing fired him in retailiation for complaining about Panel Processing's ERISA violations. The district court granted summary judgment against Sexton on the retaliation claim, and Sexton appeals..

In this case, Panel Processing makes floor panels. Sexton worked as a general manager in its facility in Coldwater, Michigan, and served as a trustee for the company's employee retirement plan. In 2011, Sexton and another trustee, Robert Karsten, campaigned on behalf of two employees running for the company's board of directors. The employees won the election, but the board refused to seat them on the ground that it would violate the company's bylaws, which limited the number of inside directors. At the same time, the board removed Sexton and Karsten as trustees of the retirement plan. Two days later, Sexton emailed the chairman of the board:I believe that your actions . . . in refusing to seat [the employees] as directors of the company and removing Rob Karsten and me as Trustees of the [retirement plan] are violations of ERISA and other laws. I plan to bring these violations to the attention of the U.S. Department of Labor and Michigan Department of Licensing and Regulatory Affairs unless they are immediately remedied. Neither the chairman nor anyone else responded to the email, and Sexton took no further action. About six months later, the company fired Sexton from his job as a general manager. Sexton brought suit because of the firing, and the case wound up in district court.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") said that, on appeal, Sexton challenges the district court's rejection of his retaliation claim under ERISA. The relevant law says in pertinent part: "It shall be unlawful for any person to discharge, fine, suspend, expel, or discriminate against any person because he has given information or has testified or is about to testify in any inquiry or proceeding relating to [ERISA]." 29 U.S.C. § 1140 (ERISA Section 510). Both parties take as a given (for now) that the company fired Sexton because of his email to the chairman of the board. The Court said further, that in this case, Sexton can establish a retaliation claim only if the email amounted to "giv[ing] information . . . in any inquiry."Was there an inquiry? The Court said no, since an inquiry appears to require an official investigation, or a question or a request for information by the potential informer or retaliator, and there was none here. As such, the Court affirmed the district court's judgment.

May 12, 2014

ERISA-DOL Issues Updated COBRA Notices, As Part Of Its Affordable Care Act Implementation

The U.S. Department of Labor (the "DOL") announces that it has issued revised, updated COBRA notices in its FAQs about Affordable Care Act Implementation (Part XIX). Here is what the FAQs say:

Qualified Beneficiaries. In general, under the Consolidated Omnibus Budget Reconciliation Act ("COBRA"), an individual who was covered by a group health plan on the day before the occurrence of a qualifying event (such as a termination of employment or a reduction in hours that causes loss of coverage under the plan) may be able to elect COBRA continuation coverage upon that qualifying event. Individuals with such a right are referred to as "qualified beneficiaries".

COBRA Notices. Under COBRA, group health plans must provide covered employees and their families with certain notices explaining their COBRA rights. A group health plan must provide each covered employee and spouse (if any) with a written notice of COBRA rights "at the time of commencement of coverage" under the plan (the "General Notice"). After a qualifying event has occurred, a group health plan must also provide qualified beneficiaries with a notice which describes their rights to COBRA continuation coverage and how to elect this coverage (the "Election Notice").

Affordable Care Act And Other Laws. Some qualified beneficiaries may want to consider and compare health coverage alternatives to COBRA continuation coverage, such as coverage that is available through the Health Insurance Marketplace (the "Marketplace"). Qualified beneficiaries may be eligible for a premium tax credit (a tax credit to help pay for some or all of the cost of coverage in plans offered through the Marketplace) and cost-sharing reductions (amounts that lower out-of-pocket costs for deductibles, coinsurance, and copayments), and may find that Marketplace coverage is more affordable than COBRA.

The Children's Health Insurance Program Reauthorization Act of 2009 ("CHIPRA") specifies that an employer that maintains a group health plan in a State that provides premium assistance for the purchase of coverage under a group health plan is required to notify each employee of potential opportunities currently available for premium assistance in the State in which the employee resides.

Model Notices. The DOL has model notices that plans may use to satisfy the requirement to provide the General Notice and Election Notice under COBRA, and the notice regarding premium assistance under CHIPRA. The COBRA model Election Notice was revised on May 8, 2013 to help make qualified beneficiaries aware of other coverage options that would soon become available in the Marketplace. The DOL is now issuing a Notice of Proposed Rulemaking, as well as updated versions of the model General Notice and model Election Notice that reflect that the Marketplace is now open and that better describes special enrollment rights in Marketplace coverage. The DOL is also issuing a revised CHIPRA notice with similar updates related to Marketplace coverage.

Obtaining A Copy Of The Revised Notices. The model General Notice and model Election Notice are available on the DOL website at www.dol.gov/ebsa/cobra.html and the model CHIPRA notice is available at http://www.dol.gov/ebsa/compliance_assistance.html. (The model notices are available in modifiable, electronic form). As with the earlier model notices, in order to use the model properly, the plan administrator must complete it by filling in the blanks with the appropriate plan information.

Contemporaneous with the issuance of these FAQs, DOL is also issuing a Notice of Proposed Rulemaking to update its regulations with respect to the COBRA model notices. Until rulemaking is finalized and effective, the DOL will consider use of the model notices available on its website, appropriately completed, to constitute compliance with the notice content requirements of COBRA.

May 8, 2014

Employment-Eighth Circuit Holds That, Of The Three Plaintiffs, Two Fail To Meet the Executive Emption From FLSA Overtime Requirements, While One Meets This Exemption And Need Not Be Paid Overtime Under The FLSA

In Madden v. Lumber One Home Center, Inc., No. 13-2214 (8th Cir. 2014), three former employees of Lumber One Home Center, Inc. ("Lumber One"), a lumberyard in Mayflower, Arkansas, filed suit against the company. The employees claimed Lumber One incorrectly classified them as executive employees who were exempt from overtime pay regulations under the Fair Labor Standards Act (the "FLSA"). In the district court, the jury found that all three plaintiff-employees worked in an executive capacity and were therefore not entitled to recover overtime wages. Following trial, the plaintiffs moved for judgment as a matter of law, which the district court granted. After overturning the jury verdict, the district court awarded the plaintiffs overtime pay and attorneys' fees. Lumber One appeals.

In analyzing the case, the Eighth Circuit Court of Appeals (the "Court") said that the employer has the burden to prove that its employee is an executive and therefore exempt from the FLSA's overtime pay requirements. The Court determines whether an employee meets the executive exemption by applying Department of Labor ("DOL") regulations, which state in pertinent part:

(a) The term `employee employed in a bona fide executive capacity' in section 13(a)(1) of the [FLSA] shall mean any employee:
(1) Compensated on a salary basis at a rate of not less than $455 per week... exclusive of board, lodging or other facilities;
(2) Whose primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof;
(3) Who customarily and regularly directs the work of two or more other employees; and
(4) Who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.
29 C.F.R. § 541.100.

The Court then said that issue in this case is whether the plaintiffs meet element (4). The district court had found that Lumber One presented no evidence that the plaintiffs had the authority to make personnel decisions or that the company gave their hiring recommendations particular weight. Examining the evidence, the Court concluded that Lumber One failed to present any evidence which shows that two of the plaintiffs-Madden and O'Bar- met the element (4). However, the Court concluded that Lumber One did prove that the third plaintiff-Wortman- met element (4) and thus was eligible for the executive exemption. Lumber One did present sufficient evidence to allow a jury to conclude that Wortman provided a recommendation for at least one employee and that Lumber One relied on that recommendation when deciding to hire the applicant. Thus the Court upheld the district court's judgment as to Madden and O'Bar, while it reversed the judgment as to Wortmen.

May 6, 2014

Employment-Sixth Circuit Rules That Telecommuting May Be A Reasonable Accommodation Under The ADA

In Equal Employment Opportunity Commission v. Ford Motor Company, No. 12-2484 (6th Cir. 2014), the issue was whether a telecommuting arrangement could be a reasonable accommodation for an employee suffering from a debilitating disability. Charging party Jane Harris ("Harris") was terminated from her position as a resale steel buyer at Ford Motor Co. ("Ford"), after she asked to telecommute several days per week in an attempt to control the symptoms of irritable bowel syndrome ("IBS"). The Equal Employment Opportunity Commission ("EEOC") argues that Ford discriminated against Harris on the basis of her disability and retaliated against her for filing a charge with the EEOC. The district court granted summary judgment in favor of Ford, and Harris appeals.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") said that, under the Americans With Disabilities Act (the "ADA"), an employer discriminates against an employee if it does not make "reasonable accommodations to the known physical or mental limitations of an otherwise qualified individual with a disability who is an applicant or an employee, unless [the employer] can demonstrate that the accommodation would impose an undue hardship on the operation of the business. "42 U.S.C. § 12112(b)(5). Harris is indisputably disabled under the ADA, and has provided evidence to establish that she is "otherwise qualified" for her position at Ford. Further the EEOC can demonstrate that Harris was qualified for the resale buyer position with a reasonable accommodation for her disability, namely a telecommuting arrangement. But is telecommuting a "reasonable accommodation"?

The Court continued by saying that it has previously concluded that telecommuting is not a reasonable accommodation for most jobs. However, there may be unusual cases when telecommuting is reasonable because the employee can effectively perform all work-related duties at home. In this case, the EEOC has presented sufficient evidence to create a genuine factual dispute as to whether Harris is one of those employees who can effectively work from home, and Ford has not shown that such arrangement would create undue hardship for Ford.

Further, as to the claim of retaliation, the EEOC evidence creates a genuine dispute as to whether Ford was truly motivated by retaliatory intent or by a reasoned business decision to terminate an underperforming employee. This is

May 5, 2014

ERISA-Second Circuit Finds That A Plan Amendment, Which Reduces Retirement-Type Subsidies Of Participants Not Meeting Preamendment Conditions For The Subsidies When They Left Work, But Who Could Subsequently Meet The Conditions Without Returning To Work,

In Alcantara v. Bakery & Confectionery Union & Indus. Int'l Pension Fund Pension Plan (2nd Cir. 2014), the defendants were appealing a judgment by the district court, holding that the anti‐cutback rule in § 204(g) of ERISA precludes a plan amendment that reduces retirement‐type subsidies of the plaintiffs, who ceased employment without satisfying the preamendment conditions for the subsidy, but who could later satisfy the conditions without returning to work. The Second Circuit Court of Appeals (the "Court") ruled that this amendment does violate the anti-cutback rule, and upheld the district court's decision.

In this case, the defendants are the Bakery and Confectionery Union and Industry International Pension Fund Pension Plan (the "Plan"), a multiemployer defined‐benefit pension plan, and its Board of Trustees. The plaintiffs are participants in the Plan. The Plan provides for a range of benefits. The standard benefit, payable at age 65 -- the "normal retirement age" under the Plan -- was labeled Plan A. Participants could elect to receive their Plan A pension benefits as early as age 55, but at an actuarially reduced level that reflected the earlier (and longer) expected stream of payments. Certain employers elected to offer additional subsidized early retirement benefits that were not actuarially reduced. Two of these plans, Plan G (the "Golden 80 Plan"), and Plan C (the "Golden 90 Plan"), are at issue here. Under those Plans, a participant who had completed at least ten years of service with a participating employer, and whose combination of his age and years of service totaled 80 or 90 years, respectively, could retire and receive full pension benefits (that is, benefits with no actuarial reduction).

Prior to July 2010, the Plan allowed a participant to "age into" Golden 80 or 90 benefits. This meant that a participant who had achieved the ten-year minimum service requirement, but who had left covered employment before achieving the requisite 80- or 90- year age‐plus‐years‐of‐service level, would still become eligible for Golden 80 or 90 benefits as soon as his age‐plus‐years‐of‐service reached the required 80‐ or 90‐year requirement. In July 2010, the Trustees amended the Plan to eliminate the option to "age into" benefits and to require that a participant be employed at the time he qualified for Golden 80 or 90 benefits. The amendment affected only those participants who had completed the ten‐year minimum service requirement, but who had not yet reached the requisite age‐plus‐years‐of‐service level and were no longer working for an employer participating in the Golden 80 or 90 Plans. Participants who lost their opportunity to qualify for Golden 80 or 90 benefits as a result of the amendment filed suit alleging that the plan amendment violated § 204(g), ERISA's anti‐cutback rule, which prohibits plan amendments that reduce or eliminate certain pension benefits.

In analyzing the case, the Court said that the anti‐cutback rule, ERISA § 204(g), treats as a benefit reduction, and therefore prohibits, the elimination or reduction of a retirement‐type subsidy , with respect to benefits attributable to service before the amendment. A proviso states that this prohibition applies only with respect to a participant who satisfies (either before or after the amendment) the preamendment conditions for the subsidy. 29 U.S.C. § 1054(g).

The Court continued by saying that it is clear that the Golden 80 and 90 Plans are retirement‐type subsidies that qualify for protection under § 204(g), since they offer benefits which actuarially exceed the normal retirement benefit. Moreover, the proviso recognizes that a participant may "grow into" eligibility for retirement‐type subsidy benefits protected by the anti‐cutback rule by satisfying the eligibility requirements after the date of the amendment. As such, the Court concluded that the anti-cutback rule protects the plaintiffs in this case who have satisfied -or will satisfy- the preamendment conditions for their Golden 80 and 90 benefits. This means that the anti-cutback rule protects the plaintiffs who qualified for the benefits prior to terminating employment (that is, they had sufficient service and were old enough before termination), and in addition protects those plaintiff who, although they have terminated their employment before qualifying for the benefits, will "grow" into those benefits even though they do not resume employment (that is, they had enough service at termination and will subsequently attain the age needed to qualify for the benefits).

May 1, 2014

ERISA-Sixth Circuit Rules That The "Clear Notice" Standard Should Apply When Determining Whether To Impose the ERISA Penalty For Failing To Furnish A Document Upon Request

In Cultrona v. Nationwide Life Insurance Company, No. 13-3558, 13-3585 (6th Cir. 2014), the plaintiff, Nicole Cultrona ("Nicole"), filed suit against Nationwide Life Insurance Company ("Nationwide"), the Nationwide Death Benefit Plan (the "Plan"), the Nationwide Benefits Administrative Committee (the "BAC"), and StarLine Group ("StarLine") , following the denial of her claim for accidental-death benefits and her subsequent exhaustion of the Plan's internal administrative procedures. The claim was based on the death of Nicole's husband, Shawn Cultrona, in June 2011. Nicole, an employee of a Nationwide affiliate, was a participant in the Plan. Among other benefits, the Plan provided coverage in the event of an accidental death. Shawn was a covered person under the Plan, and Nicole was the designated beneficiary for any benefits paid as a result of Shawn's death. Following the parties' cross-motions for judgment on the administrative record, the district court entered judgment in favor of the defendants on the claim for benefits , but assessed a statutory penalty of $55 per day (for a total of $8,910) against the BAC for its delay in providing Nicole with a copy of the accidental-death policy after her written request for relevant documents. One issue for the Sixth Circuit Court of Appeals (the "Court"): was the penalty valid?

The Court said that, in a November 18, 2011 (written) letter to BAC, Nicole's counsel requested "all documents comprising the administrative record and/or supporting Nationwide's decision." The BAC, however, did not provide Nicole's counsel with a copy of the accidental-death policy until June 12, 2012. Pursuant to ERISA section 502(c)(1), the district court imposed an $8,910 penalty against the BAC as a consequence of this delay. The list of documents that a plan administrator must furnish to a participant or beneficiary upon written request is set forth ERISA section 104(b)(4). These documents include a "copy of the latest updated summary, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is . . . operated." Id. If a plan administrator fails to respond to a request for one or more of the above documents within 30 days, then the district court may in its discretion impose a penalty against the plan administrator of up to $110 per day under section 502(c)(1).

The Court continued by stating that the BAC argues that the district court erred in construing Nicole's broadly worded document request as including a request for a copy of the accidental-death policy. In making this argument, the BAC urges the Court to adopt the "clear-notice" standard, under which claimants seeking documents pursuant to section 104(b)(4) must provide clear notice to the plan administrator of the information they desire. The Court decided to adopt this standard on a going-forward basis, including here. As to the instant case, the Court found no abuse of discretion by the district court in imposing the statutory penalty in question. Nicole's counsel, true enough, broadly phrased the request as one for "all documents comprising the administrative record and/or supporting Nationwide's decision." The Court said that, although such language would not pass the clear-notice test for most of the documents identified in section 104(b)(4), one is hard-pressed to believe that the BAC should not have known that the accidental-death policy was the key document supporting its decision to deny Nicole's claim. Similarly, the Court found that the district court did not abuse its discretion by imposing less than the maximum amount of the penalty, based on the lack of prejudice Nicole suffered, a factor which a court may take into account. As such, the Court affirmed the district court's decision as to the assessment of the penalty.

April 30, 2014

ERISA-Fifth Circuit Rules That The Trustee May Use Plan Assets To Pay Attorney's Fees Incurred In A Contest For Benefits With The Plans' Sole Beneficiary

In Futral v. Chastant, No. 13-30856 (5th Cir. 2014), the plaintiff, Laurie Futral ("Futral"), the widow of Dr. (Dentist) Robert Chastant sued to recover attorney's fees that were allegedly illegally deducted from the dentist's ERISA plans to contest her status as beneficiary. The district court entered summary judgment against Futral on this issue.

In this case, Dr. Robert Chastant was murdered on December 13, 2010. Prior to his death, he established an ERISA qualified defined benefit plan and profit sharing plan through his dental practice, which was the plans' sponsor. He also purchased several life insurance policies. The sole remaining beneficiary under the plans and insurance policies was Futral. Defendant Chastant was named executor of Dr. Chastant's will and also the trustee of the ERISA plans. Shortly after her husband's death, Futral filed a suit against the insurance companies and Chastant to recover the insurance proceeds and plan benefits. However, by the time the suit was filed, Chastant and the insurance companies had become aware of allegations that Futral had a hand in her husband's death, which would have disqualified her from receiving benefits under the Louisiana Slayer Statute.

Subsequently, the insurance companies interpled the insurance proceeds, and Chastant answered Futral's complaint and asserted the Slayer Statute as an affirmative defense. On May 21, 2012, a jury found that Futral had not participated in the murder. The verdict was not appealed, and both the insurance proceeds and the ERISA plan benefits were released to Futral. During the course of the litigation, and allegedly in accord with the provisions of the ERISA plans, Chastant paid the majority of his attorney's fees from their corpus. Futral brought this suit to recover the plans' funds that Chastant applied to pay the attorney's fees. She alleged that using plan funds in this way was a breach of the fiduciary duty under ERISA that Chastant owed her as the plans' trustee. The district court granted summary judgment to Chastant, holding that Chastant did not breach his fiduciary duty.

In analyzing the case, the Fifth Circuit Court of Appeals (the "Court") said that Futral provides no authority for the proposition that Chastant's actions breached his fiduciary duties under ERISA, for example, by actually being conflicted as the plans' trustee and the estate's executor. Having both duties does not create a conflict of interest. It is undisputed that Chastant owed a duty of loyalty to the beneficiary of the plans, but only several weeks after his brother's murder, the allegations against Futral made it unclear whether Chastant could pay her claims without violating state law. Consequently, the Court continued, Chastant used plan funds to defend against a suit seeking to compel disbursement to a potentially ineligible beneficiary. When the issue was resolved, he released the balance of the funds after paying most of his attorney's fees from the plan's assets. The Court concluded that the foregoing is not a breach of ERISA fiduciary duty. As such, the Court affirmed the district court's summary judgment on the fiduciary breach claim.

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.