In Hunter v. Berkshire Hathaway, Inc., No. 15-10854 (5th Cir. 2016), in an ERISA action, plaintiffs Judy Hunter, Anita Gray, and Bobby Lynn Allen appeal the district court’s dismissal of their claims against Berkshire Hathaway, Inc. (“Berkshire”) and Acme Building Brands, Inc. (“Acme”).

In 2000, Berkshire bought Justin Industries, Inc. (“Justin”). At the time, Justin’s subsidiary Acme provided its eligible employees with certain retirement benefits, including an ability to participate in a company Pension Plan or an individual 401(k) Plan. Acme matched fifty percent of an employee’s contributions to his or her 401(k) Plan account on an annual basis, up to five percent of the employee’s compensation (rate of match subsequently reduced or eliminated).  In 2014, Berkshire allegedly contacted Acme about reducing or eliminating benefits in Acme’s retirement plans. One alternative given to Acme was to implement an immediate “hard freeze” of the Pension Plan, and restore the 401(k) Plan’s employer matching contribution to fifty percent, with the caveat that the contribution rate could be changed any time after 2014. Acme ultimately chose this alternative and amended the Pension Plan on August 11, 2014 to implement the freeze.

Consequently, the plaintiffs, who are current and retired employees of Acme, sued Acme and Berkshire under ERISA section 502(a)(3). The plaintiffs sought, among other things, to overturn the amendment to the Pension Plan, and to prevent a future reduction in the rate of the employer matching contribution to the 401(k) plan, on the grounds that the amendment and future reduction violated, or would violate, a merger agreement between Berkshire and Justin.   The district court dismissed all of the plaintiffs’ claims, and this appeal ensued.

In Singletary v. United Parcel Service, No. 15-30762 (5th Cir. 2016), Linda Singletary purchased life insurance for herself and her husband through her employer, United Parcel Service. Her husband, Timothy Singletary, was an active-duty soldier in the United States Army. He was killed in a weekend motorcycle accident while off base and not on duty. Prudential Insurance Company of America (“Prudential”), treated as the plan administrator, denied his widow’s claim pursuant to an exclusion in the policy for active-duty servicemen. Mrs. Singletary brought suit, claiming she had no notice of the exclusion and that the exclusion is otherwise unenforceable. The district court granted summary judgment for Prudential and UPS.

The Fifth Circuit Court of Appeals (the “Court”) affirmed the district court’s decision. The Court said that, when reviewing a denial of benefits made by an ERISA plan administrator, the court applies a de novo standard of review, unless the benefit plan gives the administrator discretionary authority to determine eligibility for benefits or to construe the terms of the plan. In this case, the plan gave Prudential, the plan administrator, this discretionary authority. Therefore, the Court reviews Prudential’s decision for abuse of discretion. Further, the Court found that Prudential correctly interpreted the policy’s exclusion as barring the claim. Further, since the instant case is a claim for benefits filed under section 502(a)(1)(B) of ERISA, the Court must only interpret the policy, and the issue of notice of the exclusion does not arise. Nothing renders the exclusion unenforceable, since the applicable Georgia state law is preempted by ERISA. As such, the Court affirmed the district court’s decision.



An annual fee to help pay for the Patient-Centered Outcomes Research Institute (“PCORI”) is imposed by the Affordable Care Act (the “ACA”) on issuers of specified health insurance policies and sponsors of self-insured health plans. In the case of a self-insured multiemployer plan, the sponsor is normally the Board of Trustees which administers the plan and manages its assets.

The payment of the fee must be accompanied by a tax return, Form 720, Quarterly Excise Tax Return (Second Quarter). This form and its instructions are here and here.  The payment may, but need not, be made electronically, through the Electronic Federal Tax Payment System. Similarly, the Form 720 may, but need not, be filed electronically.

This year, the fee and return are due by August 1, 2016. The fee generally applies to major medical coverage. It does not apply to dental and vision coverage which are excepted benefits. For more information on whether a type of insurance coverage or arrangement is subject to the fee, see this Chart.

The New Rev. Proc. The IRS has issued Rev. Proc. 2016-37, its periodic update on the determination letter program for qualified retirement plans. But this year there is a twist-as announced last year, in IRS Announcement 2015-19, the IRS is curtailing the program for individually designed plans. Rev. Proc. 2016-37 summarizes the new rules for individually designed plans as follows.

The New Rules.

–Consistent with IRS Announcement 2015-19, this revenue procedure eliminates, as of January 1, 2017, the staggered five-year remedial amendment cycle system for individually designed plans, currently set forth in Rev. Proc. 2007-44. However, sponsors of Cycle A plans (that is, generally, plan sponsors with employer identification numbers ending in 1 or 6) will continue to be permitted to submit determination letter applications during the period beginning February 1, 2016, and ending January 31, 2017.

In Board of Trustees of the Automobile Mechanics’ Local No. 701 Union and Industry Pension Fund v. Full Circle Group, Inc.,  No. 15‐2497 (7th Cir. 2016), the plaintiff, a board of trustees the (“Board”) that administers a multiemployer defined‐benefit pension plan sponsored by Mechanics’ Local Union No. 701, filed this suit against a company named Full Circle Group and its subsidiaries (together “FCG”) seeking to impose withdrawal liability on them . Here, the Board appeals the district court’s grant of summary judgment in favor of FCG.

In this case, FCG purchased the assets of a shipping and shipyard services company named Hannah Maritime Corporation (“HMC”), whose president was Donald Hannah. HMC had a collective bargaining agreement with the mechanics union that required it to make contributions to the union’s pension fund to finance pensions for HMC’s employees. Hannah had hired his son Mark to work at HMC in 2007. The following year Mark formed FCG, and the new company bought two land leases and shipyard equipment from HMC and also hired HMC’s shipyard service employees. No significant liabilities of HMC were explicitly transferred to the new company—notably, HMC’s withdrawal liability was not transferred. FCG tried to negotiate its own collective bargaining agreement with the union, and though the attempt failed the company contributed to the union’s pension fund until the company’s employees voted to decertify the union in 2009. With HMC having ceased contributing to the fund, the fund assessed withdrawal liability against it. But in the meantime HMC had become insolvent, which prompted this suit in which the fund seeks to impose HMC’s liability to the fund on FCG as HMC’s successor.

In reviewing the case, the Seventh Circuit Court of Appeals (the “Court”) said that the successor could be held liable for the predecessor’s obligations-here the withdrawal liability-if there is substantial continuity between the predecessor’s and successor’s businesses and the latter has notice of the former’s acts. In particular, the Court pointed to its decision in Tsareff v. ManWeb Services, Inc., in which the Court had determined that an asset buyer is on notice of, and therefore subject to, successor liability if he has notice that the seller may be contingently liable for withdrawal liability.  The Court concluded, however, that in this case a trial is needed to establish the facts and determine if the requirements for imposing the liability of FGC are met. Thus, the Court overturned the district court’s summary judgment and remanded the case.

In Brown v. Bluecross Blueshield of Tenn., 2016 U.S. App. LEXIS 11738 (6th Cir. 2016), Healthcare provider Harrogate Family Practice, LLC, and its owner, Amanda Brown (collectively “Harrogate”), brought suit under Section 502 of the ERISA to enjoin Blue Cross Blue Shield of Tennessee (“Blue Cross”) from recouping payments for services Harrogate provided to Blue Cross members. The district court dismissed for lack of subject matter jurisdiction, finding that Harrogate lacked standing under ERISA.

In this case, Harrogate is a healthcare provider that participates in Blue Cross networks, regularly treating patients who are participants and beneficiaries under health-benefit plans administered by Blue Cross. Per industry practice, Harrogate’s patients signed an “Assignment of Benefits Form,” allowing Harrogate to bill Blue Cross directly for payment of services. The arrangement between Harrogate and Blue Cross is governed by a Provider Agreement, which allows Blue Cross to perform post-payment audits and recoup overpayments from Harrogate in the event a payment error is detected. Harrogate objected to certain attempted recoupments, those made for so-called “ALCAT tests” (which purport to identify certain food allergies), and brought this suit.

On appeal, Harrogate argues that it has direct standing to sue as an ERISA beneficiary or, in the alternative, that it acquired derivative standing via an assignment of benefits from Blue Cross members. The Sixth Circuit Court of Appeals (the “Court”) concluded, that while Harrogate does have derivative standing through an assignment of benefits, its claim regarding recoupments falls outside the scope of that assignment, since the assigning patients have no standing to bring this suit. Therefore, the Court affirmed the judgment of the district court.



The U.S. Department of Labor (the “DOL”) has issued a new FAQ (Part 32), to provide guidance on the Notice of Coverage Options required in accordance with COBRA and the Affordable Care Act (the “ACA”). Here is what the FAQ says:

Notice of Coverage Options – COBRA and Health Insurance Marketplace Coverage

The ACA Health Insurance Marketplaces (the “Marketplaces”) are designed to ensure that individuals and small businesses have access to affordable coverage through a competitive private health insurance market. The Marketplaces offer “one-stop shopping” to assist individuals in finding, comparing and enrolling in private health insurance options. In general, under the COBRA continuation coverage provisions, an individual who was covered by a group health plan on the day before a qualifying event (such as termination of the covered employee’s employment, divorce, or a dependent aging out of a plan, if the event causes a loss of coverage) may be able to elect COBRA continuation coverage upon experiencing the qualifying event. Individuals with such a right are called qualified beneficiaries. A group health plan must provide qualified beneficiaries with a COBRA election notice that, among other things, describes their rights to COBRA continuation coverage and how to make a COBRA coverage election.

In IRS Health Care Tax Tip 2016-57, June 22, 2016, self-insured employers, applicable large employers and health coverage providers are reminded that the June 30 deadline to electronically file information returns with the IRS is approaching. The Tax Tip and the helpful information therein is here.

In IRS Health Care Tax Tip 2016-56, June 15, 2016, the IRS advises as follows:

If you filed for an extension of time to file your 2015 federal tax return – and you benefit from advance payments of the premium tax credit being made to your coverage provider – it’s important you file your return sooner rather than later.

You must file your 2015 tax return and reconcile your advance payments to ensure you can continue having advance credit payments paid on your behalf in future years. Advance payments of the premium tax credit are reviewed in the fall by the Health Insurance Marketplace for the next calendar year as part of their annual re-enrollment and income verification process. If you do not file and reconcile, you will not be eligible for advance payments of the premium tax credit in 2017. Use Form 8962, Premium Tax Credit, to reconcile any advance credit payments made on your behalf and to maintain your eligibility for future premium assistance.

In Chicago Regional Council of Carpenters Pension Fund v. Schal Bovis, Inc., Nos. 14-3413 & 14-3336 (7th Cir. 2016) the case had been brought by four carpenter union fringe benefit funds (“the Funds”) under § 301 of the Labor Management Relations Act (“LMRA”) and § 502(a) of ERISA. The Funds allege that Schal Bovis, Inc., a general contractor that builds large and small buildings in the Chicago metropolitan area, failed to make fringe benefit payments for work performed by nonunion labor, as was required under collective bargaining agreements. The Funds started with 36 claims of unpaid fringe benefits, but proceeded to trial on only four claims.

The district court granted summary judgment to the Funds on all four claims on the issue of liability. From summary judgment, the parties proceeded to a bench trial on damages, and from there both parties appeal. Schal Bovis appeals the granting of summary judgment for two of the four claims, the calculation of damages for those two claims, and the amount of attorneys’ fees awarded. The Funds cross-appeal the calculation of damages for one of the claims and the admission of certain evidence for that calculation.

Upon reviewing the case, the Seventh Circuit Court of Appeals (the “Court”) reversed the district court’s grant of summary judgment on the two claims that Schal Bovis appeals, and remanded the case for further proceedings. In the first of these claims, the Court held that the non-union subcontractor should be considered a single employer with the union signatory who ultimately performed the work. Consequently, the Funds are prevented from claiming fringe benefits for the work performed in that claim because Schal Bovis subcontracted the work to a union signatory as required by the collective bargaining agreement. In the second of these claims, the Court held that the collective bargaining agreement prevented the carpenters’ union from claiming work which was the existing practice of other trade unions. Since Schal Bovis presented undisputed evidence that the work performed in the second claim was the existing practice of another trade union—the union to which Schal Bovis subcontracted the work—the Funds cannot claim fringe benefit contributions for the work.