The issue in Ceco Concrete Construction, LLC v. Centennial State Carpenters Pension Trust, Nos. 15-1021, 15-1190 (10th Cir. May 3, 2016), is whether a construction company that stopped contributing to its employees’ pension plan must pay withdrawal liability under the Multiemployer Pension Plan Amendment Act (“MPPAA”).

In this case, Ceco Concrete Construction, LLC (“Ceco”) was a party to a collective bargaining agreement (“CBA”) that required it to contribute to the Centennial State Carpenters Pension Trust (“Trust”), a multiemployer pension plan. After Ceco stopped contributing, the Trust assessed MPPAA withdrawal liability, which is a payment that withdrawing employers must make to pension plans. Ceco disputed the withdrawal liability and initiated arbitration. The arbitrator sided with Ceco, concluding withdrawal liability was improper. Ceco then sued in federal district court to affirm the arbitrator’s decision. The Trust and its Board of Trustees (jointly, “the Plan”) counterclaimed, asking the district court to vacate the arbitrator’s award. The district court granted summary judgment in Ceco’s favor, and the Plan appeals.

Upon reviewing the case, the Tenth Circuit Court of Appeals (the “Court”) overturned the district court’s summary judgement. The Court noted that, under  ERISA § 1301(b)(1), an “employer” means “trades or businesses” under “common control” (i.e., a common-control group), and that all businesses under common control are treated as a single employer for purposes of collecting withdrawal liability, and each is liable for the withdrawal liability of another. Further, for construction employers, ERISA § 1383(b)(2) provides that a withdrawal (which triggers withdrawal liability) occurs when: (1) an employer ceases to have an obligation to contribute under the plan, and (2) either (a) continues to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required or (b) resumes such work within 5 years after the date on which the obligation to contribute under the plan ceases, and does not renew the obligation at the time of the resumption.

In Hogan v. Jacobson, No. 15-5572 (6th Cir. 2016),  Violet Hogan (“Hogan”) had sued the Life Insurance Company of North America (“LINA”) for violating the ERISA, by denying her claim for benefits under a disability-insurance policy (offered under a plan subject to ERISA). After losing that case, Hogan appealed to the Sixth Circuit Court of Appeals (the “Court”), which later affirmed the grant of judgment against her. While that appeal was still pending at the Court, Hogan filed the present case in the Jefferson County Circuit Court against Jo Ellen Jacobson (“Jacobson”) and Kem Alan Lockhart (“Lockhart”), two nurses who worked for LINA and who had provided opinions regarding Hogan’s eligibility for disability benefits after reviewing her claim.

Hogan carefully pleaded her claims in the second suit to avoid reference to LINA or ERISA, alleging only that Jacobson and Lockhart committed negligence per se by giving medical advice without being licensed under Kentucky’s medical-licensure laws. The defendants removed the case to federal court on the basis of ERISA’s complete-preemptive rule, and the district court then denied Hogan’s attempts to remand the case to state court and later granted the defendants’ motion to dismiss.

Upon reviewing the second case, the Court said that, because Hogan’s artfully pleaded state-law claims are, at bottom, claims for the wrongful denial of benefits under an ERISA plan that arise solely from the relationship created by that ERISA plan, the Sixth Circuit Court of Appeals (the “Court”) affirms the denial of Hogan’s motion to remand. Further, finding that Hogan’s second claim for benefits is virtually identical to her first and suffers from the same infirmities, and that her new claim under a different portion of ERISA fails to state anything beyond conclusory allegations, the Court affirms the grant of the defendants’ motion to dismiss.

The case of Rich v. Shrader, No. 14-55484 (9th Cir. 2016), involves, among other things, an employer’s Stock Rights Plan (the “SRP”). The question arose as to whether the SRP is subject to ERISA.

The SRP operated in the following manner: The employer granted eligible employees the right to purchase employer stock at such times, in such amounts and to such employees as determined in the “sole discretion” of the employer’s Board of Directors. The receiving employee was required to exercise the stock rights within sixty days of the grant by, among other things, purchasing ten percent of the stock rights. On June 15 of each subsequent year, the employee would have the opportunity to purchase another ten percent of the initial grant of stock rights. In the event the employee failed to exercise the rights within sixty days of the initial grant or each June 15, all unexercised rights that the employee may have would be forfeited. Although SRP participants were expected to hold their shares until they leave the firm, they were not precluded from selling paid-up stock back to the employer at any time. Shares earned through the SRP increased in value ten percent annually. In the event an SRP participant ceased being an employee of the employer by virtue of retirement, disability, or death, the employer had the right to repurchase that employee’s shares within twenty-four months after the end of his or her employment.

The Ninth Circuit Court of Appeals (the “Court”) said that ERISA coverage extends to employee pension benefit plans. A plan qualifies as an employee pension benefit plan if by its express terms or as a result of surrounding circumstances such plan: (i) provides retirement income to employees, or (ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond (29 U.S.C. § 1002(2)(A)).The paramount consideration is whether the primary purpose of the plan is to provide deferred compensation or other retirement benefits.

The Pension Benefit Guarantee Corporation (the “PBGC”) has now issued proposed rules on mergers and transfers between multiemployer plans. These proposed rules would amend the PBGC’s existing regulation on these mergers and transfers, to implement section 121 of the Multiemployer Pension Reform Act of 2014 (the “MPRA”). The proposed rules would also reorganize and update the existing regulation.

According to the Executive Summary in the Preamble to the proposed rules, section 121 of MPRA amends the existing rules under section 4231 of ERISA by adding a new section 4231(e), which clarifies PBGC’s authority to facilitate the merger of two or more multiemployer plans, if certain statutory requirements are met. For purposes of section 4231(e), “facilitation” may include training, technical assistance, mediation, communication with stakeholders, and support with related requests to other government agencies. In addition, subject to the requirements of section 4231(e)(2), the PBGC may provide financial assistance (within the meaning of section 4261 of ERISA) to facilitate a merger it determines is necessary to enable one or more of the plans involved to avoid or postpone insolvency. The proposed rules would provide guidance on the process for requesting a facilitated merger under section 4231(e) of ERISA, including a request for financial assistance under section 4231(e)(2).
 In addition, subject to the requirements of section 4231(e)(2), the PBGC may provide financial assistance (within the meaning of section 4261 of ERISA) to facilitate a merger it determines is necessary to enable one or more of the plans involved to avoid or postpone insolvency. The proposed rules would provide guidance on the process for requesting a facilitated merger under section 4231(e) of ERISA, including a request for financial assistance under section 4231(e)(2).

In American Psychiartric Association v. Anthem Health Plans, No. 14-3993-cv. (2nd Cir. 2016), the plaintiffs are two individual psychiatrists, Susan Savulak, M.D., and Theodore Zanker, M.D. (“the psychiatrists”), and three professional associations of psychiatrists, the American Psychiatric Association, the Connecticut Psychiatric Society, Inc., and the Connecticut Council of Child and Adolescent Psychiatry (collectively, “the associations”). They brought suit in the United States District Court for the District of Connecticut against the defendants, which are four health-insurance companies: Anthem Health Plans, Inc., Anthem Insurance Companies, Inc., Wellpoint, Inc. and Wellpoint Companies, Inc. (collectively, “the health insurers”).

The psychiatrists and the associations allege that the health insurers’ reimbursement practices discriminate against patients with mental health and substance use disorders in violation of the Mental Health Parity and Addition Equity Act of 2008 (“MHPAEA”) and ERISA. The associations brought suit on behalf of their members and their members’ patients, while the psychiatrists brought suit on behalf of themselves and their patients. The district court dismissed the case after concluding that the psychiatrists lacked a cause of action under ERISA and the associations lacked constitutional standing to pursue their respective claims.

The Second Circuit Court of Appeals (the “Court”) affirmed the district court’s decision. The Court held that, since the psychiatrists are not among those expressly authorized to sue, they lack a cause of action (that is, standing to sue) under ERISA.  Further, the Court held that the association plaintiffs lack constitutional standing to pursue their respective MHPAEA and ERISA claims because their members lack standing.

In Moyle v. Liberty Mutual Ret. Ben. Plan, 2016 U.S. App. LEXIS 9251 (9th Cir. 2016), the plaintiffs were former employees of Old Golden Eagle Insurance Company (“Golden Eagle”). Golden Eagle did not offer a retirement plan to its employees. When Liberty Mutual Insurance Company (“Liberty Mutual”) purchased Golden Eagle through a conservatorship sale, the plaintiffs became employees of Liberty Mutual. The plaintiffs state that while the sale was underway, Liberty Mutual told the plaintiffs that they would receive past service credit for the time they worked with Golden Eagle under Liberty Mutual’s retirement plan. But, after Liberty Mutual purchased Golden Eagle, Liberty Mutual denied the plaintiffs’ claims for past service credit. Liberty Mutual argues that it never made any representation to the plaintiffs that they would receive past service credit for their time with Golden Eagle. Liberty Mutual also argues that under the terms of the retirement plan, the plaintiffs are entitled only to past service credit for purposes of eligibility, vesting, early retirement, and spousal benefits, and not for retirement benefits accrual.

The plaintiffs then filed this class action against Liberty Mutual for ERISA. At the district court, the plaintiffs asserted four claims for relief: (1) the plaintiffs are entitled to past service credit under the terms of the retirement plan, under section 502(a)(1)(B) of ERISA, (2) the plaintiffs are entitled to equitable relief under section 502(a)(3) of ERISA, (3) Liberty Mutual violated its duty to provide the plaintiffs with documents relevant to their claim and (4) Liberty Mutual violated its duty to disclose information about past service retirement credit in its summary plan descriptions. The plaintiffs seek the equitable remedies of reformation and surcharge for both claims (2) and (4). The district court granted summary judgment in favor of Liberty Mutual on all four claims. The plaintiffs appealed on claims (1), (2), and (4).

Upon reviewing the case, the Ninth Circuit Court of Appeals (the “Court”) affirmed the district court’s ruling on claims (1) and (4), but it reversed the district court’s ruling as to claim (2). The Court said that the plaintiffs can seek equitable relief under section 502(a)(3) of ERISA, even though they also seek additional benefits under section 502(a)(1)(B) of ERISA.


The case of Perez v. Bruister, Nos. 14-60811 and 14-60816 (5th Cir. 2016), raises numerous issues involving the sales of closely-held stock from a corporation’s owner to its tax-preferred Employee Stock Ownership Plan. The dispute is whether individual defendants breached fiduciary duties under ERISA when allegedly acting as trustees for an Employee Stock Ownership Trust (“ESOT”) that purchased company stock from the owner for an Employee Stock Ownership Plan (“ESOP”). The plaintiffs claim that the defendants-when acting as trustees- paid too much for the stock.  There are also numerous valuation and remedies issues, over which the parties have fought bitterly.

Upon reviewing the case, the Fifth Circuit Court of Appeals (the “Court”) said that it largely affirmed the district court’s thorough and conscientious opinion under a clearly erroneous standard of review, but also clarified some of the legal issues surrounding leveraged ESOP sales presented by this case. Here is a summary of what the Court held:

–The owner, Bruister, who sold stock to the ESOP, was a fiduciary of the ESOP. Even though he abstained from voting on the sales, he undertook enough activity with respect to the ESOP, e.g., hiring and firing the appraiser and participating in related meetings, so that he exercised authority and control respecting management or disposition of ESOP assets for purposes of the ERISA definition of a fiduciary in section 3(21)(A)(i) of ERISA.

In Central States, Southeast and Southwest Areas Pension Fund v. Bulk Transport Corp., Docket Nos. 15-3208 and 15-3346 (7th Cir. 2016), the plaintiff, Central States, Southeast and Southwest Areas Pension Fund (the “Fund”), is a multiemployer pension plan. The defendant, Bulk Transport Corp. (“Bulk”), is an employer and a member of the Fund, and has made contributions to the pension account in the Fund of Terry Loniewski (“Loniewski”), one of its employees. Bulk had certified that Loniewski was entitled by a collective bargaining agreement between Bulk and a Teamsters local to participate in the Fund, even though the agreement was limited by its terms to the drivers that Bulk employed and Loniewski was a mechanic—he had never been a driver in the more than 40 years that he had worked for the company.

Although for decades Bulk had treated Loniewski as though he were covered under the company’s collective bargaining agreements, it now denies that he was covered and has demanded that Central States refund the $49,000 that Bulk had contributed to Loniewski’s pension account between 2002 and 2012. (The rules of the Fund limit refunds to money contributed to the Fund during the ten years preceding the refund request.) The Fund denied the request and filed this suit, in which it seeks a declaratory judgment that Bulk is not entitled to the refund. Bulk counterclaimed, arguing that it is entitled to the refund, because it contributed to Loniewski’s account by mistake. The district judge rejected Bulk’s counterclaim. He concluded that Bulk was at fault for the erroneous contributions, and could not believe that Bulk had employed Loniewski for more than 40 years as a mechanic, contributing to the Central States Pension Fund on his behalf, without knowing he’d never been a driver. Bulk appeals the rejection.

There was a further issue, as to what rules govern the arbitration proceedings to determine Bulk’s withdrawal liability. ERISA imposes such liability on employers who withdraw, partially or completely, from an underfunded multiemployer pension fund. The Fund assessed Bulk with withdrawal liability of about $740,000 for the years 2010 through 2012, and Bulk contends that the amount is excessive. The issue of Bulk’s obligation to contribute to Loniewski’s pension account bears on (though it is distinct from) the issue of withdrawal liability because if Bulk was never obligated to make those contributions, it follows that it withdrew from the Fund completely in 2009, when the last member of the Teamsters local other than Loniewski retired, rather than in 2012, as the Fund contends. The consequence should Bulk prevail would be to reduce its withdrawal liability from $739,700 to $473,300.

In Employee Plans News, Issue No. 2016-5, April 4, 2016, the IRS cautions against the use of certain discriminatory plan designs. Here is what the IRS says:

Qualified retirement plans must ensure “the contributions or benefits provided under the plan do not discriminate in favor of highly compensated employees.” (Internal Revenue Code Section 401(a)(4)). A plan that meets statutory or regulatory checklists, but primarily or exclusively benefits highly compensated employees (HCEs) with little to no benefits for nonhighly compensated employees (NHCEs), may still discriminate and violate IRC Section 401(a)(4).

Discriminatory plan designs

The case of Youngblood v. Life Ins. Co. of North America, 2016 U.S. Dist. LEXIS 50081 (W.D. Ky 2016), came before the District Court (the “Court”) upon the motion to transfer venue filed by defendant Life Insurance Company of North America (“LINA”).

The case arises out of the claim of plaintiff Janice Youngblood (“Youngblood”), under ERISA, for long-term disability benefits from a policy issued and administered by LINA. Youngblood is a resident of Winfield, Alabama, which is located in the Northern District of Alabama. Youngblood worked for Joy Global, Inc. (“Joy Global”), a company headquartered in Milwaukee, Wisconsin. However, Youngblood worked for a Joy Global office located in Alabama. In support of her claim, Youngblood submitted medical records from her doctors who are also located in Alabama. LINA is a Pennsylvania company with its principal place of business in Philadelphia. Youngblood filed this action in the Western District of Kentucky. LINA now moves to transfer this case to the Northern District of Alabama. Youngblood request that this case remain in Kentucky or, alternatively, be transferred to the Eastern District of Wisconsin.

In analyzing the case, the Court noted that the law (28 U.S.C. § 1404(a)) provides that, for the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought. The Court then concluded that (i) venue is proper in both the Northern District of Alabama and the Eastern District of Wisconsin and (ii) the interest of justice and convenience to parties and witnesses weigh in favor of a transfer to the Northern District of Alabama.