In Milby v. MCMC LLC, No. 16-5483 (6th Cir. 2016), Samantha Milby was granted monthly long-term disability benefits through a group insurance policy provided by her employer, University of Louisville Hospital. Her benefits were subsequently terminated after her disability carrier hired defendant MCMC, a third-party medical record reviewer, and MCMC opined that Milby could return to work. Milby brought this state-law claim against MCMC, alleging negligence since it was practicing medicine without a license. MCMC removed the case to federal court alleging complete preemption under ERISA.  Milby appeals the district court’s denial of her motion to remand the case back to state court, and its grant of MCMC’s motion to dismiss her case. The Sixth Circuit Court of Appeals (the “Court”) affirmed the district court’s rulings.

As to the complete preemption issue, the Court said that, in Aetna Health Inc. v. Davila, 542 U.S. 200 (2004),  the Supreme Court articulated a two-prong test to determine whether a state law claim is completely preempted or not.  A state law claim is subject to complete preemption if it satisfies both prongs of the following test: (1) the plaintiff complains about the denial of benefits to which he is entitled only because of the terms of an ERISA-regulated employee benefit plan; and (2) the plaintiff does not allege the violation of any legal duty (state or federal) independent of ERISA or the plan terms.

The Court determined that the state-law claim in this case fits in the category of claims that are completely preempted by ERISA. First, the claim is in essence about the denial of benefits under an ERISA plan. Second, the defendant does not owe an independent duty to the plaintiff because the defendants were not practicing medicine under the specific Kentucky law invoked here as the basis for negligence per se. Accordingly, prong (1) and prong (2) are met.


In Troiano v. Aetna Life Insurance Company, No. 16-1307 (1st Cir. 2016), the lawsuit arose from a dispute between an ERISA disability plan administrator (here, defendant Aetna) and a beneficiary over the amount by which the monthly disability payments made to the beneficiary from the plan should be offset by her other monthly income from Social Security. The administrator maintains that the disability payments must be offset by the gross (pre-tax) amount of Social Security income, while the beneficiary argues that the payments must be offset by the net (post-tax) amount of Social Security income.

The district court found for the administrator, noting that its interpretation of the Plan language to allow for a gross offset was entitled to deference and was, in any event, ultimately reasonable. In addition to contesting this decision, the beneficiary was complaining that the district court abused its discretion when it denied the beneficiary’s broad requests for discovery. Having made a number of assumptions in the beneficiary’s favor, the First Circuit Court of Appeals (the “Court”) affirmed the district court’s rulings, upholding the administrator’s decision on how to compute the offset and denying discovery. The Court noted that, to be clear, the dispute is not about whether the Social Security income may offset the disability payments. It is about whether the administrator may use the simple gross amount of the Social Security payments for offset purposes, with the Court concluding that it may.


In Midwest Operating Engineers Welfare Fund v. Cleveland Quarry, Nos. 15-2628, 15-3221, 15-3861, 16-1870 (7th Cir. 2016), the plaintiffs are certain employee welfare funds.  The defendant is RiverStone Group, Inc., a producer of crushed stone, sand, and gravel (“RiverStone”).

RiverStone had collective bargaining agreements with Local 150 of the International Union of Operating Engineers, AFL-CIO.  The latest agreement, made in 2010, was scheduled to expire in 2015.  It required RiverStone to contribute a specified dollar amount to the welfare funds specified in the agreement for each hour for which an employee receives wages under the terms of the agreement.  But in 2013 employees at RiverStone voted in an election supervised by the National Labor Relations Board to decertify Local 150 as their collective bargaining representative.  Following the vote, RiverStone stopped contributing to the welfare funds, precipitating these suits against it by the welfare funds under 29 U.S. Code § 1145, a provision of ERISA permitting suits for delinquent contributions. The welfare funds were seeking payment of the contributions that would have been due pursuant to the terms of the last collective bargaining agreement  until its 2015 expiration. The question: does the collective bargaining agreement, or “CBA”, expire when the union is decertified as the representative?

The Seventh Circuit Court of Appeals (the “Court”) said No. The CBA at issue states that “the employer’s responsibility to make contributions to the [w]elfare [funds] shall terminate upon expiration of this agreement”. The meaning of this phrase depends on whether “expiration” means the date on which the agreement becomes unenforceable or the date on which it lapses by passage of time. It became unenforceable by the union when the union was decertified, whereby the employer was no longer bound to the promises it had made to the union; but the agreement did not thereby cease to exist—and therefore did not expire—until its five-year term ended. By prematurely ceasing to contribute to the welfare funds, RiverStone became liable under ERISA to make delinquent contributions, the relief sought by the welfare funds. The welfare funds could also prevail as third party beneficiaries of the CBA.

In Tribble v. Edison International, No. 10-56406, No. 10-56415 (9th Cir. 2016), on remand from the Supreme Court, the en banc court of the 9th Circuit Court of Appeals vacated the district court’s judgment in the case, which had been in favor of an employer and its benefits plan administrator on claims of breach of fiduciary duty in the selection and retention of certain mutual funds for a benefit plan governed by ERISA.

The 9th Circuit Court of Appeals (the “Court”) had previously affirmed the district court’s holding that the plan beneficiaries’ claims regarding the selection of mutual funds in 1999 were time-barred under the six-year limit of section 413(1) of ERISA.  The Supreme Court vacated the Court’s decision, observing that federal law imposes on fiduciaries an ongoing duty to monitor investments even absent a change in circumstances, and remanded the case back to the Court. Rejecting defendants’ contention that the beneficiaries waived the ongoing-duty-to-monitor argument, the en banc court held that the beneficiaries did not forfeit the argument either in the district court or on appeal.  Rather, defendants themselves failed to raise the waiver argument in their initial appeal, and thus forfeited this argument.

Section 413 of ERISA states that (absent a case of fraud or concealment) no action may be commenced under ERISA, with respect to a fiduciary’s breach of any responsibility, duty, or obligation under ERISA, or with respect to a violation of ERISA, after the earlier of—

The IRS has revised its Employee Plans Compliance Resolution System (the “EPCRS”), under which errors in the administration of qualified retirement plans may be corrected.  Below, I reproduce a memo I prepared summarizing the EPCRS as revised.  If any errors arise in plan administration, consideration should be given to fixing them using the EPCRS.  Let me know if you have any questions.



In News Release IR-2016-171, Dec. 15, 2016, the Internal Revenue Service (the “IRS”) says that, as the tax filing season approaches, low- and moderate-income workers are reminded that they can take steps now to save for retirement and earn a special tax credit in 2016 and years ahead.  Here is the text of the News Release:

The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.

Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2016 tax returns. People have until the due date for filing their 2016 return (April 18, 2017), to set up a new individual retirement arrangement or add money to an existing IRA for 2016. This includes the Treasury Department’s myRA. However, elective deferrals (contributions) must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, or the Thrift Savings Plan for federal employees.

In Trustees Of The Upstate New York Engineers Pension Fund v. Ivy Asset Management, Docket No. 15-3124 (2nd Cir. 2016), the plaintiff Board of Trustees of a pension fund was suing the fund’s investment manager, Ivy Asset Management, alleging breach of fiduciary duty in failing to advise the fund in 1998 that it had become imprudent to continue as a customer of Bernard L. Madoff Investment Securities LLC.  The Board of Trustees were also suing Bank of New York Mellon Corporation, alleging that it knowingly participated in the fiduciary breach.  The district court dismissed the Board of Trustees’ complaint for failure to state a claim and for failure to allege an actual injury sufficient to establish Article III standing.  Upon review, the Second Circuit Court of Appeals (the “Court”) affirmed the district court’s dismissal.

As to the standing issue, the Court said that, in order to establish standing: (1) the plaintiff must have suffered an injury-in-fact; (2) there must be a causal connection between the injury and the conduct at issue; and (3) the injury must be likely to be redressed by a favorable decision.  Further, in a case arising under ERISA, the plaintiff must allege some injury or deprivation of a specific right that arose from a violation of an ERISA duty in order to meet the injury-in-fact requirement.  In this case, the Court found that there is no cognizable investment loss.  The Board of Trustees did not claim that the fund suffered a loss that exceeded profits, and an increase in pension funds, shown in this case, is not a recognizable loss.  Further, a breach of fiduciary duty under ERISA, as alleged here, in and of itself does not constitute an injury-in-fact sufficient for constitutional standing.  Accordingly, the Court found that the Board of Trustees failed to allege facts sufficient to show Article III standing.

This helps: IRS says (with a very limited exception) “No Amendments Required”!  The details follow.

The Internal Revenue Service (the “IRS”) has issued Notice 2016-80, which contains the Required Amendments List for 2016 (“2016 RA List”).  The major points:

Final Day of Remedial Amendment Period.  The Notice reminds us that, in the case of an individually designed qualified retirement plan, the remedial amendment period for a disqualifying provision arising as a result of a change in qualification requirements generally is extended to the end of the second calendar year that begins after the issuance of the Required Amendments List (RA List) in which the change in qualification requirements appears.  As such, the Notice provides that December 31, 2018 is the last day of the remedial amendment period-and is the deadline for adopting the amendment- with respect to a disqualifying provision arising as a result of a change in qualification requirements that appears on this 2016 RA List.

Employee Benefits-IRS Provides Guidance On Extension Of Time To Provide Information Forms To Individuals Receiving Health Coverage

In IRS Health Care Tax Tip 2016-78, November 30, 2016, the Internal Revenue Service (the “IRS”) reminds employers and others that it has extended the 2017 due date for employers and coverage providers to furnish information statements to individuals.  However, the due dates to file those returns with the IRS are not extended. A chart is provided to help interested persons understand the upcoming deadlines.

The Tax Tip makes reference to IRS Notice 2016-70, in which the IRS formally announced the extension.

In Foster v. Sedgwick Claims Management Services, Inc., No. 15-7150  (DC Cir. 2016), the appeal before the District of Columbia Court of Appeals (the “Court”) involved two issues under ERISA, with respect to private benefit plans. The first issue concerns the definition of “payroll practices” that are exempt from ERISA. The second addresses whether terms of the ERISA plan at issue in this case gives discretion to the plan administrator sufficient to warrant deferential review of the administrator’s benefit determinations.

In this case, in July 2014, Plaintiff  Kelly Foster sued Sedgwick Claims Management Services, Inc. (“Sedgwick”) and Sun Trust Bank Short and Long Term Disability Plans (together “Defendants”) under ERISA, to enforce her rights to benefits under short-term and long-term disability benefit plans that had been adopted by her employer, Sun Trust Bank (“SunTrust”). The district court found that the short-term plan was a “payroll practice” exempted from ERISA’s ambit by a Department of Labor regulation. Plaintiff  initially conceded this point. Because Plaintiff’s sole cause of action with respect to the short-term plan rested on ERISA, the District Court rejected Plaintiff’s claim. The District Court additionally found that the long-term plan gave Sedgwick, the plan administrator, sole discretion to “evaluate” an employee’s medical evidence and “determine” if the employee’s condition meets the plan’s definition of disability. The district court accordingly applied a deferential standard of review to Sedgwick’s denial of long-term disability benefits sought by Plaintiff and concluded that the administrator had neither abused its discretion nor acted arbitrarily or capriciously in assessing Plaintiff’s claim for benefits. The district court granted summary judgment to Defendants and dismissed Plaintiff’s complaint.

Plaintiff then filed a motion for reconsideration. She admitted she had conceded that the short-term disability plan was exempt from ERISA during summary judgment, but argued that the district court’s embrace of this position constituted an error of law. The district court rejected Plaintiff’s attempt to raise a new legal theory in a motion for reconsideration when the same claim could have been asserted during summary judgment. The district court denied the motion for reconsideration.