The IRS discusses the small business health care tax credit in IRS Health Care Tax Tip 2016-20, February 17, 2016. Here is what the IRS said:

The Affordable Care Act includes the small business health care tax credit, which can benefit small employers who provide health coverage for their employees.

The small business health care tax credit benefits employers who:

The case of Gallo v. Moen Incorporated, Nos. 14-3633 and 14-3918 (6th Cir. 2016), involved the question of whether several collective bargaining agreements (the “CBAs”) entitle a class of retirees from Moen Inc. to unalterable, vested healthcare benefits for life. The district court ruled in favor of the class.

However, the Sixth Circuit Court of Appeals (the “Court”) reversed, finding that nothing in the CBAs-read by applying ordinary contract principles- committed or showed the intention of Moen to provide unalterable healthcare benefits to retirees and their spouses for life. This obtains despite use in the CBAs of phrases like “continued” and “will be provided” and “will be covered” when discussing the retiree health care, which could imply lifetime benefits, since the CBAs made commitments only for 3-year terms.

In IRS Health Care Tax Tip 2016-18, February 11, 2016, the IRS discussed reporting health coverage on IRS tax forms. Here is what the IRS said:

While most taxpayers will simply need to check a box on their tax return to indicate they had health coverage for all of 2015, there are a few forms and specific lines on Forms 1040, 1040A, and 1040EZ that relate to the health care law.

To help navigate health coverage reporting, you should consider filing your return electronically. Using tax preparation software is the best and simplest way to file a complete and accurate tax return as it guides you through the process and does all the math. There are a variety of electronic filing options, including free volunteer assistance, IRS Free File for taxpayers who qualify, commercial software, and professional assistance.

In United Food and Commercial Workers Union-Employer Pension Fund v. Rubber Associates, Inc., No. 15-3434 (6th Cir. 2016), Rubber Associates appeals the district court’s dismissal of its counterclaim for equitable relief to reduce the withdrawal liability it incurred after the union-mandated withdrawal from the United Food and Commercial Workers Union-EmployerPension Fund (the “Fund”), a multiemployer pension plan which is governed by ERISA.

After the United Food and Commercial Workers Union (the “Union”) disclaimed interest in representing the company’s employees, Rubber Associates was deemed to have withdrawn from the, Fund under ERISA. The Fund calculated Rubber Associates’ withdrawal liability obligation to be $1,713,169, which the arbitrator awarded in full to the Fund. The Fund then sued Rubber Associates in the district court to enforce the arbitrator’s award. Rubber Associates counterclaimed on the basis that because its withdrawal from the Fund was union-mandated, its withdrawal liability should be calculated by an alternate method, making its liability only $312,000. The district court granted the Fund’s motion to dismiss Rubber Associates’ counterclaim.

Upon reviewing the case, the Sixth Circuit Court of Appeals (the “Court”) affirmed the district court’s decision. The Court said that ERISA provides four statutory methods for calculating withdrawal liability: (1) the presumptive method, (2) the modified presumptive method, (3) the rolling-5 method, and (4) the direct attribution method. With certain exceptions not applicable here, the plan computes withdrawal liability in accordance with the presumptive method, unless the plan adopts an alternative method which the PBGC must approve. In this case, the Fund calculated Rubber Associates’ withdrawal liability in accordance with the presumptive method, and the parties agree that, if the presumptive method is to be applied, the Fund accurately calculated Rubber Associates’ withdrawal liability.

In Ingram v. Terminal Railroad Association of St. Louis Pension Plan for Nonschedule Employees, No. 14-3589 (8th Cir. 2016), in 2006, Theodore Ingram was employed by Union Pacific Railroad (“Union Pacific”) and living in Los Angeles. On July 1, he was hired to be the Superintendent of Transportation of the Terminal Railroad Association of St. Louis (“Terminal”) and moved to St. Louis. Ingram elected to receive early retirement benefits from Union Pacific beginning January 1, 2010. When he retired from Terminal at the end of 2010, he became eligible for retirement benefits under Terminal’s Pension Plan for Nonschedule Employees (the “Plan”).

In this action under § 502(a)(1)(B) of ERISA, Ingram alleges that the Plan erroneously determined his pension benefits by (i) excluding a 2006 sign-on bonus from pension-qualifying earnings and (ii) improperly inflating the offset for retirement benefits Ingram receives from Union Pacific. Reviewing the Plan’s decision for abuse of discretion, the district court granted summary judgment in favor of the Plan, concluding that the administrator’s decisions were reasonable. Ingram appeals. The Eighth Circuit Court of Appeals reviewed and affirmed the district court’s ruling.

In Tackett v. M & G Polymers USA, LLC, No. 12-3329 (6th Cir. 2016), the Plaintiffs are Ohio residents, retirees, and spouses of retirees (“Retirees”) from a plant owned by Defendant M&G Polymers USA, LLC (“M&G”).

From 1991 to 2005, the Retirees entered into several collective bargaining agreements (the “CBAs”) with M&G and its predecessors, which included Pension and Insurance Agreements outlining retiree health care benefits (collectively, “Agreements”). The Agreements provide that the employer will make a full Company contribution towards the cost of health care benefits for certain retirees. In December 2006, M&G announced that Retirees would, for the first time, be required to contribute to their health care costs or risk being dropped from the plan. The Retirees brought this suit, contesting the announced contributions, on the grounds that the Agreements granted a vested right to lifetime contribution-free health care benefits. This case reached the Sixth Circuit Court of Appeals (the “Court”) three times, this time on remand from the Supreme Court.

In reviewing the case, the Court began with the Supreme Court’s decision in the case, M&G Polymers, in which the Supreme Court concluded that the Agreements should be examined using ordinary principles of contract law. Importantly, the Supreme Court rejected the Sixth Circuit’s Yard-Man‘s inferences in favor of retirees, but also declined to adopt an “explicit language” requirement in favor of companies. However, applying these principles requires the district court to make certain determinations. Therefore, the Court remands the case back to the district court to decide: (1) what particular documents make up the parties’ Agreements; (2) whether reference to extrinsic evidence is appropriate; and (3) whether the Agreements, and any extrinsic evidence that may be considered, vests with Retirees lifetime contribution-free health care benefits. The district court should use ordinary principles of contract law to answer these questions, without a “thumb on the scale” in favor of either party.

In Bond v. Marriott International, Inc., Nos. 15-1160, 15-1199 (4th Cir. 2016) (Unpublished Opinion), Dennis Bond and Michael Steigman (the “Plaintiffs”), filed this action against their former employer, Marriott International, Inc., alleging that Marriott’s Deferred Stock Incentive Plan (the “Plan”), a tax-deferred Retirement Award program, violates the vesting requirements of ERISA. After targeted discovery on the statute of limitations, the district court found that the claims were timely and granted summary judgment to the Plaintiffs on that issue. Marriot appeals. Upon reviewing the case, the Fourth Circuit Court of Appeals (the “Court”) concluded that the Plaintiff’s claims were time barred, and granted judgment to Marriot.

In reaching this decision, the Court said that, except for breach of fiduciary duty claims, ERISA contains no specific statute of limitations, and we therefore look to state law to find the most analogous limitations period. Here, Maryland’s three year statute of limitations for contract actions applies. However, while we apply this three-year state limitations period, the question of when the statute begins to run is a matter of federal law. In most cases an ERISA cause of action does not accrue until a claim of benefits has been made and formally denied.

However, the Court continued, while the “formal denial” rule is generally applied in ERISA cases, we recognized that in limited circumstances the rule is impractical to use, such as cases-like the present one- which do not involve an internal review process and a formal claim denial. In such cases, the Court will look at the time at which some other event, other than a denial of a claim, should have alerted the plaintiff to his entitlement to the benefits he did not receive. Under this approach, a formal denial is not required if there has already been a repudiation of the benefits by the fiduciary which was clear and made known to the beneficiary.

In Amgen v. Steve Harris, 577 U. S. ____ (2016), the U.S. Supreme Court reversed the Ninth Circuit’s determination that a participants’/stockholders’ complaint states a claim under ERISA against plan fiduciaries for breaching the duty of prudence, when the fiduciaries failed to stop offering employer stock as an investment alternative under the plan. The Supreme Court discussed the facts and allegations supporting the claim of breach that should appear in the participants’/stockholders’ complaint, in order to state a claim under ERISA. The case is here.

In PLR 201538021, the IRS provided a private ruling which allowed an LLC to adopt an ESOP. The letter was issued in response to a request for a ruling, concerning whether the unit shares of Company A, a limited liability company or LLC, constitute employer securities within the meaning of section 409(l)(2) of the Internal Revenue Code (“Code”). If they do, the LLC could adopt an ESOP which holds the unit shares.

Here is what the IRS said in the PLR.

For federal tax purposes, Company A represented that it is classified as an association and has a valid S corporation election. Ownership interest in Company A is represented by unit shares (“Unit Shares”). Under its operating agreement (the “Operating Agreement”), all profits and losses of Company A, and any dividends to be paid by Company A, are to be allocated among the shareholders in proportion to the number of Unit Shares owned by them. The Operating Agreement further provides that all Unit Shares confer identical rights to voting distributions, dividends and liquidation proceeds, and otherwise meet the requirements of Code section 409(l)(2). In addition Company has no authorized, issued, or outstanding employer securities that are readily tradable on an established securities market within the meaning of Code section 409(l)(1).

In Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, No. 14-723 (U.S. Supreme Court 2016), the Court faced the issue of subrogation rights of a health plan subject to ERISA. The Court noted that health plans often contain subrogation clauses requiring a plan participant to reimburse the plan for medical expenses, if the participant later recovers money from a third party for his injuries. In this case, the plan in question had a subrogation clause, and petitioner Montanile has signed a reimbursement agreement reaffirming his obligation to reimburse the plan from any recovery he obtained (the “Agreement”).

Montanile has been seriously injured by a drunk driver, and his ERISA health plan paid more than $120,000 for his medical expenses. Montanile later sued the drunk driver, obtaining a $500,000 settlement. Pursuant to the health plan’s subrogation clause and the Agreement, respondent plan administrator (the Board of Trustees of the National Elevator Industry Health Benefit Plan, or the “Board”), sought reimbursement from the settlement. However, Montanile’s attorney refused that request and subsequently informed the Board that the fund would be transferred from a client trust account to Montanile unless the Board objected. The Board did not respond, and Montanile received the settlement.

Six months later, the Board sued Montanile in Federal District Court under §502(a)(3) of ERISA, which authorizes plan fiduciaries to file suit “to obtain . . . appropriate equitable relief . . . to enforce . . . the terms of the plan.” 29 U. S. C. §1132(a)(3). The Board sought an equitable lien -which arises from the plan’s subrogation clause and the Agreement-on any settlement funds or property in Montanile’s possession and an order enjoining Montanile from dissipating any such funds. Montanile argued that because he had already spent almost all of the settlement, no identifiable fund existed against which to enforce the lien. The District Court rejected Montanile’s argument, and the Eleventh Circuit affirmed, holding that even if Montanile had completely dissipated the fund, the health plan was entitled to reimbursement from Montanile’s general assets.