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.

In Kresich v. Metropolitan Life Ins. Co., No. 15-cv-05801 (N.D. Cal. Apr. 4, 2016), plaintiff John Kresich (the “Plaintiff”) asserted a claim for intentional infliction of emotional distress (“IIED”) arising from Defendant Metropolitan Life Insurance Company’s (the “Defendant”) conduct during the processing of his claim for long-term disability benefits. Defendant moves for judgment on the pleadings, arguing that Plaintiff’s complaint is preempted under section 514(a) of ERISA. After reviewing the case, the District Court (the “Court”) denied Defendant’s motion.

As to ERISA preemption, the Court said that there are two pieces to ERISA’s preemption rule. First, ERISA preempts state laws that “relate to” an ERISA plan. 29 U.S.C. § 1144(a). Second, ERISA preemption bars state-law causes of action that fall within the scope of ERISA’s comprehensive scheme of civil remedies to enforce ERISA’s provisions, even if those causes of action would not necessarily be preempted by § 1144(a). In this case, Defendant’s motion is based on the second piece. It argues there can be no dispute that Plaintiff’s action is for the alleged improper processing of a claim for benefits under an insured employee benefit plan and that his IIED claim therefore springs from the handling and disposition of his claim.

However, the Court did not accept this argument. The Court noted that there is no allegation in Plaintiff’s complaint that his benefits have been granted or denied, and Plaintiff’s suit is not based on the processing of his claim. It said that courts have denied preemption where the common law or state law claims are too tangentially related to the administration of the employee benefits plans. To avoid preemption, the Court must determine whether Plaintiff’s IIED claim relies on a legal duty that arises independently of ERISA and that would exist whether or not an ERISA plan existed. Reviewing case-law precedent, the Court found that Plaintiff’s allegations involve harassing and oppressive conduct independent of the duties of administering an ERISA plan and are only tangentially related to the administration of the plan in question. Therefore, no preemption.

To continue my blogs of the two previous days, the VCP Submission Kit, according to the IRS, is for plan sponsors that maintain a pre-approved defined contribution plan but failed to adopt a new plan document by April 30, 2016, and are correcting the failure by adopting a pre-approved defined contribution retirement plan that reflects the provisions of the Pension Protection Act (the “PPA”). The discussion about the VCP Submission Kit is here.

Continuing yesterday’s blog, in Employee Plans News, Issue No. 2016-5, April 4, 2016, the IRS announces a new way to correct the failure to timely adopt a pre-approved plan. Here is what the IRS says:

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.

In Employee Plans News, Issue No. 2016-5, April 4, 2016, the IRS discusses deadlines pertaining to pre-approved retirement plans. Here is what the IRS says:

April 30, 2016, is the deadline for employers using pre-approved retirement plan documents to sign an updated version of their 401(k), profit-sharing or other defined contribution retirement plans.

April 30, 2017, is the extended deadline for any defined contribution pre-approved plan adopted on or after January 1, 2016, other than a plan that is adopted as a modification and restatement of a defined contribution pre-approved plan that had been maintained by the employer prior to January 1, 2016. This extension is to facilitate a plan sponsor’s ability to convert an existing individually designed plan into a current defined contribution pre-approved plan. See Notice 2016-3.