Here is the IRS advice:

Employers that sponsor one-participant plans should take necessary steps to prevent a qualified retirement plan from becoming an orphan plan – a plan that no longer has a plan sponsor.

One of the most common reasons why a retirement plan becomes an orphan plan is because the plan sponsor no longer exists. For example, the individual employer/plan sponsor:

In  Rabinek v. United Bhd. Of Carpenters Pension Fund, No. 15-1717 (7th Cir. 2016), the situation was as follows. William Rabinak had worked full-time as a business representative for the Chicago Regional Council of Carpenters. By virtue of his position, he also served on the Council’s Executive Board. Rabinak received quarterly payments of $2,500 for his service on the Board. The Council made these quarterly payments in checks separate from those for Rabinak’s weekly salary.

When he retired, Rabinak qualified for a pension benefit from the United Brotherhood of Carpenters Pension Fund (the “Fund”). However, when he received the calculation of his pension benefit, he thought something was off. The annual salaries listed did not appear to take into account the $2,500 quarterly payments for serving on the Executive Board. Rabinak appealed and maintained that those payments should have been taken into account in the calculation. The Fund’s appeals committee denied his appeal.

Upon reviewing the case, the Seventh Circuit Court of Appeals (the “Court”) said the following. Controlled as we are by a standard of review that asks only whether the defendant’s decision was arbitrary and capricious, we affirm the denial by the Fund’s appeals committee. The Fund’s definition of compensation includes only “salary,” and the $2,500 quarterly payments for Board service were paid separately from Rabinak’s weekly salary payments and coded differently as well. The conclusion that the payments at issue were not salary payments under this particular Fund was not arbitrary and capricious.

In Alexandra H. v. Oxford Health Ins., No. 15-11513 (11th Cir. 2016), plaintiff Alexandra H. appeals from the district court’s grant of defendant Oxford Health Insurance, Inc.’s motion for summary judgment on Alexandra’s claim under ERISA. Alexandra sought benefits for continued partial hospital treatment for her anorexia, which were denied on the ground that the level of care she sought was not medically necessary. After her claim was initially denied through internal reviews by Oxford, she sought and obtained further review through an external process provided by the insurance contract between her employer and Oxford, of which she is a beneficiary. When the external review proved adverse to her claim, she initiated her ERISA suit in the district court.

Alexandra argues that the district court erred in holding that she is barred from litigating the issue of medical necessity in her ERISA case on the ground that the adverse external review of her medical necessity claim already and finally decided the issue against her. She challenges the district court’s decision on several grounds. First, she asserts that the record of the external review should be excluded from the ERISA proceedings. Second, she argues that the contract in suit must be interpreted pursuant to choice of law stated in the contract (New York), and that under New York law, the adverse external review decision is not binding on the medical necessity issue in her ERISA case. And third, she contends that if the record of the external review is properly in the record before the ERISA court, and if the result of the external review is deemed to bar her ERISA remedy, then the external review process is preempted by ERISA, with the effect of the preemption being that she may proceed with her ERISA case in district court as if the external review had not occurred.

Oxford counter argues that the record of the external review should be before the ERISA court, that the adverse decision of the external review should preclude further litigation of the medical necessity issue in the ERISA case, and that the external review process if thusly enforced in the district court is not preempted by ERISA.

IRS Health Care Tax Tip 2016-65, August 17, 2016  says the following:

In general, under the employer shared responsibility provisions of the Affordable Care Act, an applicable large employer may either offer affordable minimum essential coverage that provides minimum value to its full-time employees and their dependents or potentially owe an employer shared responsibility payment to the IRS.

Here is information to help you understand affordable coverage and minimum value coverage.

In Rollins v. Dignity Health, No. 15-15351 (9th Cir. 2016), plaintiff  Starla Rollins filed a putative class action against her former employer, defendant Dignity Health, and others (together “Dignity Health”), alleging that Dignity Health has not maintained its pension plan in compliance with ERISA.  Dignity Health concedes it has not complied with ERISA, but contends its plan qualifies for ERISA’s church-plan exemption, under ERISA sections 3(33) and 4(b)(2).

The district court held that a pension plan must have been established by a church, or by a convention or association of churches, to qualify as a church plan and thus be eligible for the exemption. It is not sufficient that the plan merely be maintained by any such entity or a related entity. Because the district court found that Dignity Health’s pension plan was not established by a church, or by a convention or association of churches, the court awarded partial summary judgment to Rollins, ruling that Dignity Health’s pension plan must comply with ERISA. The Ninth Circuit Court of Appeals (the “Court”) held that the district court was correct on this point. As such, the Court affirmed the district court’s decision on this matter.

In a note provided by the IRS, the IRS provides guidance on correcting required minimum distribution failures. Here is what the IRS says.

Plan sponsors can use the Employee Plans Compliance Resolution System (Rev. Proc. 2013-12, as modified) to voluntarily correct the mistake of not making required minimum distributions (RMDs) under Internal Revenue Code Section 401(a)(9) to affected participants and beneficiaries.

Self Correction Program (SCP) – Depending on the specific plan circumstances, you can use SCP to correct a RMD failure even if the plan is under an Employee Plans examination. However, the participant-owed excise tax under IRC section 4974 can’t be waived under the SCP.

In Cheney v. Standard Ins. Co., No. 15‐1794 (7th Cir. 2016), Carole Cheney was an attorney at Kirkland & Ellis, LLP (“Kirkland”) for approximately 20 years. She became a partner at the firm in 1997. She suffered from a spinal disease that first led her to seek accommodations in 1994, and ultimately resulted in a three‐level anterior cervical discectomy and fusion and removal of her vertebra in 2012.

Although Cheney had managed to work for many years despite her condition, by 2012 she had had enough, and so she submitted a claim for long‐term disability benefits in July 2012. Standard Insurance Company (“Standard”), Kirkland’s insurer, denied her claim based on a finding that her coverage had ended in March of 2012, and that she was able at least through March to perform her job. After Standard refused to reconsider its position, Cheney sued under ERISA in federal district court. The court found in favor of Cheney, and Standard appeals.

Upon reviewing the case, the Seventh Circuit Court of Appeals determined that  the district court made unsupported factual findings and misinterpreted the governing documents. Accordingly, the Court vacated the district court’s decision and remanded the case for a new trial.


Chesemore v. Fenkell, Nos. 14-3181, 14-3215 & 15-3740 (7th Cir. 2016), involved the following situation. Trachte Building Systems, Inc., a Wisconsin manufacturer, established an employee stock ownership plan (“ESOP”) in the mid-1980s when ESOPs were a popular employee-benefits instrument. In the late 1990s, David Fenkell and Alliance Holdings, Inc., a company he founded and controlled, developed a niche specialty in buying and selling ESOP-owned, closely held companies with limited marketability. In the typical transaction, Fenkell would merge the ESOP of an acquired company into Alliance’s own ESOP, hold the company for a few years with its management in place, and then spin it off at a profit (assuming everything went as planned).


In accordance with this business model, Alliance acquired Trachte in 2002 for $24 million and folded its ESOP into Alliance’s ESOP. Fenkell projected that the company would fetch around $50 million in five years. When the time came to sell, however, Trachte’s profits were flat, its growth had stalled, and no independent buyer would pay anywhere near that price. So Fenkell offloaded the company to its employees in a complicated leveraged buyout. When all was said and done, Trachte and the new Trachte ESOP had paid $45 million for 100% of Trachte’s stock and incurred $36 million in debt. The purchase price was inflated and the debt load was unsustainable. By the end of 2008, Trachte’s stock was worthless. The losers in this deal—the employee participants in the new Trachte ESOP—sued Alliance, Fenkell, his handpicked trustees, and several other entities alleging breach of fiduciary duty in violation of ERISA.


The district court held a bench trial and issued a comprehensive opinion finding the defendants liable. After an additional hearing, the judge crafted a careful remedial order making the class and a subclass whole. The judge later awarded attorney’s fees and approved settlements among some of the parties. Fenkell appealed. He concedes liability but raises many objections to the remedial order, the award of attorney’s fees, and the settlements by his codefendants. The only substantial issue on appeal is a challenge to the judge’s order requiring him to indemnify his cofiduciaries. As to this issue, the Seventh Circuit Court of Appeals (the “Court”) said that it held more than 30 years ago that ERISA allows this. Since then a circuit split has arisen on this subject, but the Court was not persuaded that its earlier decision should be overruled. Accordingly, the Court affirmed the district court’s rulings in all respects.

In Lebahn v. National Farmers Union Uniform Pension Plan, No. 15-3201 (10th Cir. 2016), the Tenth Circuit Court of Appeals (the “Court”) faced an appeal involving claims under ERISA. Mr. Trent Lebahn and his wife had claimed that a pension-plan consultant breached a fiduciary duty by misstating the amount of the monthly pension payments that Mr. Lebahn would receive if he were to retire.

However, noted the Court, under ERISA, the plan consultant could be considered a fiduciary only if she exercised discretionary authority over the plan’s administration. On appeal, the Court asked: Does a consultant exercise discretionary authority in administering the plan simply by making a calculation of benefits at the request of a plan participant?  The Court conclude that a consultant does not exercise discretionary authority under these circumstances, and therefore could not be a fiduciary or breach fiduciary duty.

In Kelley v. Fidelity Management Trust Company, No. 15-1445 (1st Cir. 2016), the First Circuit Court of Appeals (the “Court”) faced an appeal from the district court’s dismissal of a putative class action filed by retirement-plan participants and one plan administrator. They had claimed that defendants are dealing with plan assets in breach of fiduciary duties imposed by ERISA. Upon reviewing the case, the Court affirmed the district court’s decision.

In this case, the defendants are various Fidelity entities that had trust agreements with the several 401(k) plans (collectively “Fidelity”).   As part of its duties, Fidelity effected withdrawals from the plans. In turn, as part of the withdrawal process, when a participant requested a withdrawal from the plan, any shares of a mutual fund, in which his or her account was then invested, were redeemed by the mutual fund’s payment of money in an amount equal to the market value of the shares. Fidelity would earn and retain interest on the “float” resulting from the mutual fund payment. Plaintiffs allege that Fidelity breached its fiduciary duties under ERISA, particularly the duties requiring a trustee to act in the best interest of participants and beneficiaries and to avoid self-dealing, in earning and retaining this interest.  That is, Fidelity breached its fiduciary duty by using the float to earn interest for itself, rather than for the benefit of the plans by giving the plans the interest.

However, the Court said that, for the plaintiffs’ claim to go forward, the float would have to be a plan asset for ERISA purposes. The float is not a plan asset, since the payout from the mutual fund does not go, and is not intended to go, to the plan. The plan has no claim to the float. Consequently, the plaintiffs’ claims must be dismissed.