In IRS Health Care Tax Tip 2016-41, April 6, 2016, the IRS discusses how the ACA affects employers with less than 50 employees. Here is what the IRS says:

Most employers have fewer than 50 full-time employees or full-time equivalent employees and are not subject to the Affordable Care Act’s employer shared responsibility provision.

If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an ALE for the current calendar year. Therefore, the employer is not subject to the employer shared responsibility provisions or the employer information reporting provisions for the current year.

The discussion may be found here. In the discussion, the IRS says the following:

Previously, the only way an employer could correct not signing a pre-approved defined contribution (DC) retirement plan by the deadline was to complete a submission under the Voluntary Correction Program (VCP) as outlined in 1 below. A new option, 2 below, allows the financial institution or service provider that offers the plan document to request a closing agreement on behalf of all adopters who missed the deadline.

1. You make a VCP submission. You can restore the tax-favored status of your plan by adopting a restated plan document and filing a VCP submission with the IRS. If approved, the IRS treats the plan as entitled to tax-favored status. See sample VCP Submission kit to help you with your VCP submission.

In Grove, Sr. v. Johnson Controls, Inc., Civil No. 1:12-CV-02622 (M.D. Pa. March 31, 2016), in an action brought under ERISA and the LMRA, the plaintiffs allege that the defendants violated their rights to retiree health benefits. After reviewing the case, the District Court (the “Court”) granted summary judgment for the defendants.

In this case, every few years since 1973, the Union in question has negotiated a collective-bargaining agreement (“CBA”) with Johnson Controls, Inc. (“Johnson Controls” ) or its predecessors relating to, among other things, active and retiree health insurance benefits for both employees and former employees of the York Plant. Each CBA incorporated by reference a separate booklet, the “Group Insurance Program” (“GIP”), that specifically addressed health and welfare benefits. Throughout the years, these health benefits remained fairly consistent from agreement to agreement. However, in 2009, Johnson Controls unilaterally reduced retiree health benefits by instituting a $50,000.00 lifetime cap on benefits payable for each participant sixty-five years of age and older. As a result of the cap, some plaintiffs are no longer eligible for retiree healthcare benefits because they have reached the $50,000 lifetime coverage limit. This suit ensued.

In analyzing the case, the Court noted that, in its unanimous decision in the Tackett case, the U.S. Supreme Court rejected the inferences in favor of vesting set forth in the Sixth Circuit’s Yard-Man case and its progeny, and reaffirmed that collective bargaining agreements are to be interpreted according to ordinary principles of contract law, at least to the extent not inconsistent with Federal labor policy. The Supreme Court emphasized that a court’s objective when interpreting a collective bargaining agreement, as with any contract, is to give effect to the contractual rights and expectations of the parties.

In Kesting v. Kesting, Docket No. 42875, 2016 Opinion No. 35 (Supreme Court of Idaho, Boise, February 2016 Term), Appellant, Linda Kesting (“Linda”), obtained a judgment against Respondent, James Kesting (“James”), for breach of an alimony/spousal support agreement entered into during their divorce. When that judgment was returned without recovery, the magistrate judge issued a Judgment of Qualified Domestic Relations Order (“QDRO”). The subsequent judgment was intended to allow recovery of the unpaid spousal support and associated attorney fees from James’ pension plan. James appealed to the district court, which reversed.

The district court concluded that the QDRO was not valid because the spousal support agreement was not merged into the divorce decree and, therefore, the QDRO was not issued pursuant to the State’s domestic relations law as required under ERISA. Linda timely appealed.

Upon reviewing the case, the Supreme Court of Idaho (the “Court”) said that the district court erred in holding the QDRO invalid. It said that the central question is whether, as required to be valid under ERISA, the QDRO was made pursuant to a state domestic relations law. The Court ruled that it was, stating that a QDRO is issued pursuant to Idaho’s domestic relations law when, as here, it is issued to enforce a judgment for breach of a spousal support agreement and complies with the Title 11 of the Idaho Code. Thus, the Court reversed the district court’s decision and found the QDRO to be valid.

In Blue Cross Blue Shield of Minnesota v. Wells Fargo Bank, N.A., No. 14-3457 (8th Cir. 2016), the plaintiffs (“Plaintiffs”) are administrators of employee benefit plans governed by ERISA, who entered into securities lending agreements with Wells Fargo Bank (“Wells Fargo”). Plaintiffs alleged that they suffered substantial losses as a result of Wells Fargo’s improper and imprudent investment of their funds and asserted breach of fiduciary duty claims under ERISA. Plaintiffs are seeking to reverse the district court’s judgment that it was bound by collateral estoppel and thus required to find against Plaintiffs and in favor of Wells Fargo on their ERISA claims.

Following the trial, the parties simultaneously submitted Proposed Findings of Fact and Conclusions of Law with respect to the ERISA claims. In its submission, WellsFargo asserted that collateral estoppel should apply and that based on the jury verdict, the court was bound to find that there was no breach of fiduciary duty. The district court determined that it was constrained by collateral estoppel to render judgment on Plaintiffs’ claims consistent with the jury’s determination and issued judgment, dismissing Plaintiffs’ ERISA claims with prejudice. Plaintiffs appeal, arguing that the district court erred in failing to find that Wells Fargo waived any right to assert that the district court was bound by the jury’s findings.

Upon reviewing the case, the Eighth Circuit Court of Appeals (the “Court”) held that, the district court failed to consider whether the parties waived the application of collateral estoppel. As such, the case must be vacated and remanded to the district court to determine whether the waiver occurred.

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.