In Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, No. 14-723 (U.S. Supreme Court 2016), the Court faced the issue of subrogation rights of a health plan subject to ERISA. The Court noted that health plans often contain subrogation clauses requiring a plan participant to reimburse the plan for medical expenses, if the participant later recovers money from a third party for his injuries. In this case, the plan in question had a subrogation clause, and petitioner Montanile has signed a reimbursement agreement reaffirming his obligation to reimburse the plan from any recovery he obtained (the “Agreement”).

Montanile has been seriously injured by a drunk driver, and his ERISA health plan paid more than $120,000 for his medical expenses. Montanile later sued the drunk driver, obtaining a $500,000 settlement. Pursuant to the health plan’s subrogation clause and the Agreement, respondent plan administrator (the Board of Trustees of the National Elevator Industry Health Benefit Plan, or the “Board”), sought reimbursement from the settlement. However, Montanile’s attorney refused that request and subsequently informed the Board that the fund would be transferred from a client trust account to Montanile unless the Board objected. The Board did not respond, and Montanile received the settlement.

Six months later, the Board sued Montanile in Federal District Court under §502(a)(3) of ERISA, which authorizes plan fiduciaries to file suit “to obtain . . . appropriate equitable relief . . . to enforce . . . the terms of the plan.” 29 U. S. C. §1132(a)(3). The Board sought an equitable lien -which arises from the plan’s subrogation clause and the Agreement-on any settlement funds or property in Montanile’s possession and an order enjoining Montanile from dissipating any such funds. Montanile argued that because he had already spent almost all of the settlement, no identifiable fund existed against which to enforce the lien. The District Court rejected Montanile’s argument, and the Eleventh Circuit affirmed, holding that even if Montanile had completely dissipated the fund, the health plan was entitled to reimbursement from Montanile’s general assets.

In Grasso Enterprises, LLC v. Express Scripts, Inc., No. 15-1578 (8th Cir. 2016), the plaintiffs (the “Plaintiffs”) are compounding pharmacies that prepare and sell customized compound drugs in accordance with doctors’ prescriptions. The defendant, Express Scripts (“ESI”), is a pharmacy benefits manager that contracts with health plan sponsors and administrators to administer the pharmacy benefits provided in their group health plans, many of which are subject to ERISA. Plaintiffs have entered into separate Provider Agreements with ESI, under which, as members of ESI’s pharmacy provider network, Plaintiffs “look solely to ESI for payment of Covered Medications” provided to health plan participants and beneficiaries. ESI pays Plaintiffs pursuant to the Provider Agreements for the medicines Plaintiffs dispense; the health plans reimburse ESI.

In June 2014, ESI announced a program to reduce the increasing costs being incurred by health plans for compound drugs, and consequently began denying Plaintiffs’ claims for payment for medicines they dispensed. Plaintiffs commenced this action on November 18, 2014, alleging that ESI is systematically denying payment of compound drug claims without adhering to the procedural requirements of ERISA’s “Claims Regulation,” 29 C.F.R. § 2560.503-1. Plaintiffs asserted claims for relief under two ERISA remedial provisions, §§ 502(a)(1)(B) and (a)(3), codified at 29 U.S.C. §§ 1132(a)(1)(B) and (a)(3).

Plaintiffs amended their complaint and moved for a preliminary injunction declaring that ESI must pay all claims for compound medications until it is in compliance with the Claims Regulation. After hearing oral arguments, the district court denied the requested preliminary injunction on numerous grounds. Plaintiffs appeal. Concluding that Plaintiffs failed to meet the well-established standards for preliminary injunctive relief, the Eighth Circuit Court of Appeals (the “Court”) affirmed the district courts holding. Court’s primary finding was that there is no precedent for upholding a private plaintiff’s claim for injunctive relief mandating the future procedures an ERISA plan must follow to comply with the Claims Regulation.

IRS Health Care Tax Tip 2015-85, December 29, 2015 says the following:

The Affordable Care Act requires applicable large employers to file:

Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns • Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

In IRS Health Care Tax Tip 2016-05, January 13, 2016, the IRS says the following:

Some of the provisions of the Affordable Care Act only affect your organization if it’s an applicable large employer. An ALE is generally one with 50 or more full-time employees, including full-time equivalent employees.

The vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions.

In W.A. Griffin v. Verizon Communications, No. 15-13525 (11th Cir. 2016) (Unpublished), Dr. W.A. Griffin was appealing the dismissal by the district court of her complaint under ERISA. The Eleventh Circuit Court of Appeals (the “Court”) affirmed the district court’s decision.

In this case, Dr. Griffin, who operates a dermatology practice in Atlanta, Georgia, treated two patients insured under a Verizon Communications Inc. (“Verizon”) health plan (the “Plan”). The patients executed assignments that “assign[ed] and convey[ed]” to Dr. Griffin “all medical benefits and/or insurance reimbursement, if any, otherwise payable to me for services rendered from [Dr. Griffin].” The assignments further stated that they were “valid for all administrative and judicial review under . . . ERISA.” However, the Plan never consented to the assignments. Pursuant to these assignments, Dr. Griffin requested that the Plan pay for the services she rendered to the patients. When the Plan refused to pay the full amount requested, this suit ensued.

In explaining its decision, the Court said that Section 502(a) of ERISA provides that only plan participants and plan beneficiaries may bring a private civil action to recover benefits due under the terms of a plan. A health care provider is not a participant or beneficiary, and thus generally does not have to right to sue the plan under Section 502(a). However, this Court has recognized an exception, under which the health care provider can obtain the right to sue by securing a written assignment from a ‘beneficiary’ or ‘participant’ of his right to payment of benefits under the plan. However, the Plan, in this case, contained an anti-assignment provision, and this Court has enforced such provisions to block the assignment of a claim, so that the health care provider cannot sue. The Court decided to uphold the Plan’s anti-assignment, so that Dr. Griffin cannot sue the Plan.

In Mulholland v. Mastercard Worldwide, No. 15-1211 (8th Cir. 2015) (Unpublished), Brenda Mulholland was appealing the district court’s adverse grant of summary judgment in her action under ERISA. The district court had determined that Mulholland’s lawsuit challenging the termination of her long term disability (“LTD”) benefits was time-barred, based on the Supreme Court’s decision in Heimeshoff v. Hartford Life & Accident Ins. Co. (“Heimeshoff“).

Under Mulholland’s LTD plan, legal action of any kind could not be brought more than three years after proof of disability was required to be filed “unless the law in the state where [the plan participant] live[s] allows a longer period of time.” Upon de novo review, the Eighth Circuit Court of Appeals (the “Court”) agreed with Mulholland that the district court overlooked the critical distinction between the contractual limitations provision in this case and the provision addressed in Heimeshoff. Specifically, the provision in Heimeshoff did not contain the additional language allowing a participant to file suit beyond three years if the law of the state provided for a longer period. As such, the Court concluded that the instant suit was not time-barred.

In so holding, the Court noted that it had previously held that in Missouri the applicable limitations period for ERISA actions is the ten-year limitations period in Mo. Rev. Stat. § 516.110(1). See Johnson v. State Mut. Life Assurance Co. of America (because ERISA contains no statute of limitations for actions to recover benefits under an employee benefit plan, looking to state law for most analogous statute of limitations) (“Johnson“). This Court subsequently determined that Johnson was binding, where the ERISA-governed benefit plan contained a contractual limitations period nearly identical to the one here. See Harris v. The Epoch Group, L.C. (applying § 516.110(1)’s longer limitations period where contractual limitations provision prohibited filing suit unless it was brought within three years from expiration of time within which proof of loss was required “or such longer period as required by applicable state laws”). Accordingly, the Court reversed the judgment of the district court and remanded the case back to the district court to consider the case’s merits.

In McCaffree Financial Corp. v. Principal Life Insurance Company, No. 15-1007 (8th Cir. 2016), McCaffree Financial Corp. (“McCaffree”) was maintaining a retirement plan covered by ERISA. McCaffree brought a class action lawsuit on behalf of those participating employees against Principal Financial Group (“Principal”), the company with whom McCaffree had contracted to provide the plan’s investment options. McCaffree alleged that Principal had charged McCaffree’s employees excessive fees in breach of a fiduciary duty Principal owed to plan participants under ERISA. The district court granted Principal’s motion to dismiss for failure to state a claim. Upon reviewing the case, the Eighth Circuit Court of Appeals (the “Court”) affirmed. Why?

In so affirming, the Court said that, in order to state a claim that a service provider to an ERISA-governed plan breached a fiduciary duty by charging plan participants excessive fees, a plaintiff first must plead facts demonstrating that the provider owed a fiduciary duty to those participants. The Court concluded that the plaintiff fails to do this here, since Principal owed no duty to plan participants during its arms-length negotiations with McCaffree under which the fees were set, and McCaffree did not otherwise plead a connection between any fiduciary duty Principal may have owed and the excessive fees Principal allegedly charged.

In IR-2015-126, Nov. 12, 2015, the IRS suggests that now is the time to plan to use health flexible spending arrangement in 2016. Here is what the IRS said.

The Internal Revenue Service (“IRS”) today reminded eligible employees that now is the time to begin planning to take full advantage of their employer’s health flexible spending arrangement (FSA) during 2016.

FSAs provide employees a way to use tax-free dollars to pay medical expenses not covered by other health plans. Because eligible employees need to decide how much to contribute through payroll deductions before the plan year begins, many employers this fall are offering their employees the option to participate during the 2016 plan year.

In Revenue Procedure 2016-6, the IRS updates it procedures for issuing determination letters on the qualified and tax exempt status of retirement plans and their trusts. One important topic of discussion is the curtailment of the IRS’s practice of providing determination letters. Here is what the Rev. Proc. says on this topic:

Announcement 2015-19, 2015-32 I.R.B. 157, describes changes to the Employee Plans determination letter program for qualified plans. Effective January 1, 2017, the staggered 5-year determination letter remedial amendment cycles for individually designed plans, as described in Rev. Proc. 2007-44, will be eliminated (except that sponsors of Cycle A plans will be permitted to submit applications during the period beginning February 1, 2016, and ending January 31, 2017). The scope of the determination letter program for individually designed plans will be limited to initial plan qualification, qualification upon plan termination, and certain other limited circumstances. As of July 21, 2015, the Service ceased accepting off-cycle determination letter applications (as defined in section 14 of Rev. Proc. 2007-44), except with respect to new and terminating plans.

In anticipation of future changes to the Employee Plans determination letter program eliminating the 5-year remedial amendment cycles, this revenue procedure provides that, effective as of January 4, 2016, determination letters issued to individually designed plans will no longer contain an expiration date (currently required under section 13.02 of Rev. Proc. 2007-44). In response to comments submitted with respect to Ann. 2015-19, the Department of the Treasury and the Service intend to issue guidance with respect to the status of existing expiration dates on determination letters issued prior to January 4, 2016.

According to Notice 2016-03 (the “Notice”), in anticipation of the elimination, effective January 1, 2017, of the 5-year remedial amendment cycle system for individually designed plans under the Employee Plans determination letter program, the IRS says the following:

Determination Letter Applications. Rev. Proc. 2007-44 will be modified to provide that controlled groups and affiliated service groups that maintain more than one plan are permitted to submit determination letter applications during the Cycle A submission period beginning February 1, 2016, and ending January 31, 2017, provided that a prior Cycle A election with respect to the controlled group or affiliated service group had been made by January 31, 2012 (the last day of the previous Cycle A submission period).

Expiration Date For Determination Letters. Rev. Proc. 2007-44 will be modified to provide that expiration dates included in determination letters issued prior to January 4, 2016, are no longer operative. Future guidance will clarify the extent to which an employer may rely on a determination letter after a subsequent change in law or plan amendment.