In IR-2016-48, March 28, 2016, the IRS reminds taxpayers who turned 70½ during 2015 that in most cases they must start receiving required minimum distributions (RMDs) from Individual Retirement Accounts (IRAs) and workplace retirement plans by Friday, April 1, 2016. Here is what the IRS says:

The April 1 deadline applies to owners of traditional (including SEP and SIMPLE) IRAs but not Roth IRAs. Normally, it also applies to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

The April 1 deadline only applies to the required distribution for the first year. For all subsequent years, the RMD must be made by Dec. 31. So, a taxpayer who turned 70½ in 2015 (born after June 30, 1944 and before July 1, 1945) and receives the first required distribution (for 2015) on April 1, 2016, for example, must still receive the second RMD by Dec. 31, 2016.

The case of In Re: Lehman Bros. Sec. and ERISA Litig., No. 15-2229 (2d Cir. 2016) has returned to the Second Circuit Court of Appeals (the “Court”) for the second time since 2013. After the September 2008 bankruptcy of Lehman Brothers Holdings, Inc. (“Lehman”), the plaintiffs (“Plaintiffs”) brought suit on behalf of a putative class of former participants in an employee stock ownership plan (“ESOP”) invested exclusively in Lehman’s common stock. Plaintiffs alleged, among other things, that the defendants (“Plan Committee Defendants”), who were fiduciaries of this ESOP, breached their duty of prudence under ERISA by continuing to permit investment in Lehman stock in the face of circumstances arguably foreshadowing its eventual demise. The District Court had ruled in favor of the Plan Committee Defendants.

The Court reviewed the case history and noted that on June 25, 2014, the Supreme Court of the United States held in Fifth Third Bancorp v. Dudenhoeffer (“Fifth Third”) that ESOP fiduciaries are not entitled to any special presumption of prudence when the plan invests in employer stock, abrogating the so called Moench presumption of prudence. Nevertheless, even without this presumption, the Court ruled that the Plaintiffs have failed to state a claim of breach of fiduciary duty.

After reviewing the case, the Court stated that it agreed with the District Court that, even without the presumption of prudence rejected in Fifth Third, Plaintiffs have failed to plead plausibly that the Plan Committee Defendants breached their fiduciary duties under ERISA by failing to recognize the imminence of Lehman’s collapse. Plaintiffs have not adequately shown that the Plan Committee Defendants should be held liable for their actions in attempting to meet their fiduciary duties under ERISA while simultaneously offering an undiversified investment option for employees’ retirement savings.

In Stephanie C. v. Blue Cross Blue Shield of Massachusetts HMO Blue, Inc., No. 15-1531 (1st Cir. Feb. 17, 2016), Stephanie C. (“Stephanie”), individually and on behalf of her minor son M.G., challenges a decision of the claims administrator, Blue Cross Blue Shield of Massachusetts HMO Blue, Inc. (“BCBS”), partially denying her claim for benefits. The denial related to some charges incurred during M.G.’s stay at a residential/educational mental healthcare facility. The district court upheld the partial denial.

In this appeal, Stephanie asserts that the district court erred in failing to find that BCBS committed procedural violations (such as failing to engage in dialogue with her, to answer her questions, and to take into account the materials that she submitted); that the court appraised her benefits-denial claim through the wrong lens; and that the court, in all events, erroneously upheld the partial denial of benefits.

Upon reviewing the case, the Court of Appeals for the First Circuit (the “Court”) rejected Stephanie’s claims that BCBS committed procedural violations. It then said that from that point forward, however, the case raises important questions concerning what a claims administrator must do to reserve discretion in the handling of benefits claims. Specifically, in order for the decision of the claims administrator-here BCBS- to be given discretion by the courts, the plan must reflect a clear grant of discretionary authority to the claims administrator to determine eligibility for benefits. Here, in the Court’s view, the plan did not do so, stating only that BCBS “decides which health care services and supplies that you receive (or you are planning to receive) are medically necessary and appropriate for coverage.”

Here is what the IRS says on the multiemployer annual certification:

The multiemployer plan actuary must complete an Annual Actuarial Certification of the plan’s funding status. It must be submitted to the IRS no later than 90 days after the beginning of the plan year.

We’re receiving duplicate certifications from the same plan for the same plan year. Submitting duplicate certifications to ensure we’ve received it creates administrative issues because we now have duplicate entries.

In Stapleton v. Advocate Health Care Network, No. 15-1368 (7th Cir. 2016), the Seventh Circuit Court of Appeals (the “Court”) said that ERISA protects employees from unexpected losses in their retirement plans by setting forth specific safeguards for those plans. ERISA, however, exempts church plans from those requirements. This case explores the question that has been brewing in the lower federal courts: whether a plan established by a church-affiliated organization, such as a hospital, is also exempt from ERISA’s reach. The Court concluded that it is not. Why?

The Court said, as to what constitutes a church plan, that section 3(33) of ERISA requires the plan to be established by a church, as opposed to a church-affiliated organization. The plan in question was established by Advocate, which is possibly a church-affiliated organization offering heath care, but is not actually a church. Therefore, this plan is not a church plan.

In Cocker v. Terminal Railroad Association of St. Louis Pension Plan For Nonschedule Employees, No. 15-2690 (7th Cir. 2016), the plaintiff is a participant in a retirement plan (the “Terminal Plan”) governed by ERISA; the defendant is the Terminal Plan.

In this case, the plan document provides that “the retirement income benefit payable under this Plan shall be offset by the amount of retirement income payable under any other defined benefit plan … to the extent that the benefit under such other plan or plans is based on Benefit Service taken into account in determining benefits under this Plan.” The Terminal Plan based its calculation of the plaintiff’s plan benefits on his total years of work, including the years he’d spent working for Union Pacific Railroad. So it made sense for the plan to subtract from the plaintiff’s benefits under the Terminal Plan any benefits that Union Pacific had already given him for his years of working for that company. The Terminal Plan provides that if “the benefit under such another plan is paid in a form other than the form of payment under this Plan, including without limitation a single lump sum cash payment made prior to retirement, the amount of such offset shall be the dollar amount per month of the benefit that would have been payable under such other plan in the form of a Single Life Annuity commencing on the Participant’s Normal Retirement Date” (emphasis added).

The appeal revolves around the meaning of “payable” in the plan document. The plaintiff had taken early retirement from Union Pacific in 2006. His normal retirement date would have been in 2019, and had he waited until then to retire he would have received a retirement benefit of $2,311.73 a month. Instead he chose to begin receiving his benefits in 2009, in the form of a monthly benefit of $1,022.94. The two dollar figures are actuarially identical, in the sense that the present value of the two streams of money is the same because the smaller monthly benefit is received for 111 months longer than the larger one. After retiring from Union Pacific the plaintiff went to work for Terminal Railroad and became a participant in the Terminal Plan. When in 2010 he retired from Terminal Railroad, the Terminal Plan’s administrator calculated the monthly benefit owed him for his combined years of service to Terminal and Union Pacific to be $3,725.02, from which the Terminal Plan would deduct the monthly benefits payable under the Union Pacific Plan. The question is whether the amount to be deducted each month should be $2,311.73 or $1,022.94. The plaintiff argued to the plan administrator for the smaller deduction; the administrator rejected the argument. So the plaintiff sued the Terminal Plan under 29 U.S.C. § 1132(a)(1)(B). He won in the district court, precipitating the Plan’s appeal in this case.

In IRS Health Care Tax Tip 2016-31, March 15, 2016, the IRS discusses whether or not you have minimum essential coverage. Here is what the IRS says:

The individual shared responsibility provision requires you and each member of your family to have basic health coverage – also known as minimum essential coverage – qualify for a health coverage exemption, or make an individual shared responsibility payment for months without coverage or an exemption when you file your federal income tax return.

Many people already have minimum essential coverage and do not need to do anything more than maintain that coverage and report their coverage when they file their tax returns. Most taxpayers will simply check a box to indicate that each member of their family had qualifying health coverage for the whole year.

In Santana-Diaz v. Metropolitan Life Ins. Co., No. 15-1273 (1st Cir. Mar. 14, 2016), Appellant Dionisio Santana-Díaz (“Santana-Díaz”) challenges the district court’s dismissal of his suit as time-barred, arguing that he is entitled to equitable tolling, in part because the plan administrator, Appellee Metropolitan Life Insurance Company (“MetLife”), failed to include the time period for filing suit in its denial of benefits letter.

The First Circuit Court of Appeals (the “Court”) held that ERISA requires a plan administrator in its denial of benefits letter to inform a claimant of not only his right to bring a civil action, but also the plan-imposed time limit for doing so. Because MetLife violated this regulatory obligation, the plan’s limitations period in this case was rendered inapplicable, and Santana-Díaz’s suit was therefore timely filed. Accordingly, the Court reversed and remanded the case.

The Court said the following about the statute of limitations. ERISA itself does not contain a statute of limitations for bringing a civil action, so federal courts usually borrow the most closely analogous statute of limitations in the forum state. But where the employee benefit plan itself provides a shorter limitations period, that period will govern as long as it is reasonable. In this case, the plan contained a three-year limitations period that ran from the date proof of disability was due. MetLife included no mention of this time limit in its final denial letter. In failing to provide such notice, MetLife was not in substantial compliance with the ERISA regulations (see 29 C.F.R. § 2560.503-1(g)(1)(iv)) and that rendered the plan’s limitations period altogether inapplicable.

A new Frequently Asked Question (“FAQ”) regarding implementation of the Affordable Care Act has been issued (Affordable Care Act Implementation (Part 30)). This FAQ has been prepared jointly by the Departments of Labor, Health and Human Services, and the Treasury (collectively, the “Departments”). Like previously issued FAQs (available here), this FAQ answers questions from stakeholders to help people understand the Affordable Care Act and benefit from it, as intended. Here is what the new FAQ says.

Summary of Benefits and Coverage

Public Health Service (“PHS”) Act section 2715, as added by the Affordable Care Act and incorporated by reference into the Employee Retirement Income Security Act and the Internal Revenue Code, directs the Departments to develop standards for use by a group health plan and a health insurance issuer offering group or individual health insurance coverage in compiling and providing a summary of benefits and coverage (“SBC”) that “accurately describes the benefits and coverage under the applicable plan or coverage.” On June 16, 2015, the Departments published revised joint final regulations regarding the requirements for the SBC. Separately, on February 26, 2016, the Departments published a coordinated information collection request proposing a new SBC template and instructions, an updated uniform glossary, and other associated materials consistent with the requirements of the Paperwork Reduction Act.

In IRS Health Care Tax Tip 2016-29, March 9, 2016, the IRS discusses new reporting responsibilities for certain employers in 2016. Here is what the IRS says:

Under the Affordable Care Act, certain employers – known as applicable large employers or ALEs – may potentially be required to make an employer shared responsibility payment to the IRS if they do not offer health coverage that is “affordable” and that provides “minimum value” to full-time employees and their dependents.

Employers that are subject to the employer shared responsibility provisions have new information reporting responsibilities that require them to report information about health coverage offered to each full-time employee, or to report that the ALE didn’t offer coverage to the full-time employee. This includes the requirement to send information statements to full-time employees and to the IRS on new forms. This information will help the IRS determine whether an employer shared responsibility payment applies to the ALE and is also used in determining eligibility for the premium tax credit for the full-time employee and his or her family.