In Trustees of the Suburban Teamsters of Northern Illinois Pension Fund v. E Co., No. 18-2273 (7th Cir. 2019), under the terms of a collective bargaining agreement, T&W Edmier Corporation (“T&W”) regularly contributed on behalf of its employees to the Suburban Teamsters of Northern Illinois Pension Fund (the “Pension Fund”). But in 2014, T&W ceased operations and cut off its pension contributions, prompting the Pension Fund to assess withdrawal liability of $640,900. The Pension Fund sought to collect payment by mailing a notice of the withdrawal liability to T&W and several affiliated entities, only to see their collection efforts ignored. The Trustees of the Pension Fund eventually sued to collect payment, and that action culminated in the district court ordering T&W, along with several other individuals and entities under common control, to pay the withdrawal liability. Now seeking to vacate the district court’s judgment, T&W and the other defendants argue that their due process rights were violated when the Pension Fund initiated collection of the withdrawal liability by mailing notice to some but not all of them.

Upon reviewing the case, the Seventh Circuit Court of Appeals (the “Court”) affirmed the district court’s judgment. The Court found that certain defendants forfeited all defenses to liability, including the defense that they were not members of a controlled group, by failing to arbitrate after receiving the Fund’s notice of withdrawal liability. The Court further found that other defendants had likewise forfeited all defenses, as they were not  unsuspecting defendants;  rather the Court found that none of these defendants had a credible claim of surprise (at being a member of a controlled group) that would allow it to sidestep ERISA’s arbitration requirement. Each defendant was a trade or business under common control with another party who received the notice. As such, each defendant was liable for the withdrawal liability under ERISA’s controlled group provision, and therefore became jointly and severally liable for payment.


In IRS Notice 2019-09 (the “Notice”), the Internal Revenue Service (“IRS”) has provided guidance on the excise tax imposed on a tax-exempt entity under Code section 4960 that pays excess remuneration (or an excess parachute payment) to an employee. Here are the highlights of the Notice.

The General Rule of Code Section 4960. Under Code section 4960, an applicable tax-exempt organization (an “ATEO”) that pays excess remuneration or makes an excess parachute payment to a covered employee during a taxable year is subject to an excise tax on this excess.  The rate of this excise tax is equal to the rate of tax under Code section 11. For taxable years beginning after December 31, 2017, this rate of tax is 21 percent.

What is An ATEO?  As provided in Code section 4960(c)(1), an ATEO is any organization which, for its taxable year:

The case of Rittinger v. Healthy Alliance Life Insurance Company, No. 17-20646 (5th Cir. 2019), involves a bariatric surgery gone wrong and the ensuing clash over insurance coverage.

In this case, Karen Rittinger was the beneficiary of an ERISA-covered plan. Healthy Alliance Life Insurance Company offered the plan and Anthem Blue Cross Blue Shield (“Anthem”) administered it. In October 2014, Rittinger underwent bariatric surgery. Complications arose requiring follow-up surgery and intensive care. Anthem denied preauthorization (and thus plan benefits) for both the bariatric surgery and the follow-up surgery, writing, “We cannot approve coverage for weight loss surgery (bariatric surgery) or hospital care after this surgery. Bariatric or weight loss surgery is an exclusion in your health plan contract.” The contract, though, had an exception to this exclusion for “excessive nausea/vomiting.” Arguably, the exception applied to Rittinger. Nevertheless, Anthem denied her claim for benefits in both a first and second-level appeal, on the basis of the plan’s exclusion of bariatric surgery. Having exhausted the plan’s internal remedies, Rittinger filed suit in district court. The district court overturned Anthem’s decision, on the grounds that Anthem did not interpret the plan correctly and did not give enough weight to Rittinger’s vomiting problem. Anthem appealed. Rittinger filed a cross-appeal to determine the exact dollar amount of the damages she is owed.

Upon reviewing the case, the Fifth Circuit Court of Appeal (the “Court”) noted that Anthem’s decision is entitled to a highly deferential standard of review.  The Court concluded that, given this level of review, the Court could not say that Anthem, the plan administrator, abused its discretion in either the first or second internal appeal. Therefore, the Court overturned the district court’s decision. Because the Court agrees with Anthem, it also held that Rittinger’s cross-appeal is moot.


So, you and your family are receiving COBRA continuation health care coverage, and you or a family member becomes disabled.  How does the disability affect the COBRA coverage?

A. Normal Period of COBRA Coverage.

COBRA provides a temporary extension of the group health care coverage that you and your family are receiving because of your job, but would otherwise be lost due to certain life events.

In Torres v. Bella Vista Hospital, Inc., No. 16-2316 (1st Cir. 2019), Olga Torres and Pedro Bonilla are former employees of Bella Vista Hospital (“Bella Vista”), a Mayaguez, Puerto Rico-based hospital operated by the General Conference of Seventh Day Adventist Church. In 1982, the hospital created a pension program, advising its employees that the plan was subject to ERISA.

Certain types of plans are exempt from ERISA’s requirements, including plans which meet the statutory definition of “church plan,” 29 U.S.C. § 1003(b)(2). In 2000, the Internal Revenue Service, which is empowered to issue rulings to parties as to the status of their plans, advised Bella Vista that its pension plan met the definition of “church plan” and so was exempt from ERISA. In 2003, Bella Vista terminated the plan. Torres and Bonilla had become disabled some years earlier, and certain benefits they were receiving from the hospital ended. In November 2006, Torres and Bonilla sued in federal district court in Puerto Rico to recover lost benefits. Although the plaintiffs claimed federal subject matter jurisdiction under ERISA, the district court found that the church plan exception applied so ERISA did not govern the hospital’s pension regime. The court granted summary judgment in favor of the defendants, dismissing the case on May 21, 2009, for lack of subject matter jurisdiction—there being no federal claim in the case outside of the purported ERISA count. Torres and Bonilla did not appeal that decision and took no further action in court for five years. On November 24, 2014, Torres and Bonilla filed a motion in the district court to set aside the 2009 judgment, invoking the court’s authority to vacate a judgment procured by “fraud on the court” based material false statements by lawyers and others made during the proceedings.

After, reviewing the case, the First Circuit Court of Appeals (the “Court”), dismissed the motion and upheld the decision of the district court.  The Court said that claims of false statements by lawyers or parties are a serious matter and might meet some definitions of “fraud,” but the phrase “fraud on the court” has a special, well-understood and limited office. Inaccurate assertions in lawsuits are commonplace and to allow all such claims to be presented as “fraud on the court,” with no time limit, would undermine the finality of judgments and the need for all litigation to come to an end. Thus “fraud on the court” is limited to fraud that seriously affects the integrity of the normal process of adjudication, defiles the court itself, and prevents the judicial machinery from performing its usual function—for example, in bribery of a judge or jury tampering. severity is present in the plaintiffs’ allegations.

In 84 Fed. Reg. 213 (Jan. 23, 2019), the Department of Labor (the “DOL”) lists the Federal civil penalty amounts for 2019. The list, normally due out by January 15 of the year, was delayed this year due to the government shutdown and apply to penalties assessed after January 23, 2019 (an effective date that is later than usual). These adjustments include:

–Under ERISA section 502(c)(2), the penalty for each failure to properly (e.g., timely) file the annual Form 5500 is increased from $2,140 to $2,194 per day;

— Under ERISA section 502(c)(4), the penalty for each failure to disclose certain documents upon request under ERISA section 101(k) and (l) (information pertaining to multiemployer plans), and for each failure to furnish notices under 101(j) (notice about funding restrictions on distributions) and 514(e)(3) (notice under automatic contribution arrangements) increased from $1,693 to $1,736 per day;

In Notice 2018-76 (the “Notice”), the Internal Revenue Service (the “IRS”) provides transitional guidance on the deductibility of expenses for certain business meals under § 274 of the Internal Revenue Code (the “Code”).

Section 274 was amended by the Tax Cuts and Jobs Act (2017) (the “Act”).  As so amended, § 274(a)(1) generally disallows a deduction for expenses with respect to entertainment, amusement, or recreation.  However, the Act does not specifically address the deductibility of expenses for business meals.  This deductibility could be lost to the extent the business meals constitute entertainment expenses.  The Notice provides guidance on this topic, on which taxpayers may rely for now, and announces that the IRS and Treasury intend to publish regulations to provide permanent guidance.

The Act did not change the definition of entertainment under § 274(a)(1); therefore, the regulations under § 274(a)(1) that define entertainment continue to apply.  The Act did not address the circumstances in which the provision of food and beverages might constitute entertainment.  However, the legislative history of the Act clarifies that taxpayers generally may continue to deduct 50 percent of the food and beverage expenses associated with operating their trade or business, in accordance with pre-Act law.

In Schwartz v. Bogen, No. 17-3812 (8th Cir. 2019). Bruce Schwartz filed an action against Ardis Bogen, his ex-wife, alleging violations of the anti-alienation provisions of ERISA, that arose from payments he made to her for almost three decades. Bogen moved for dismissal on the ground of res judicata, and the district court dismissed the matter with prejudice. On appeal, Schwartz argues the district court erred in granting Bogen’s motion.

Upon reviewing the case, the Eighth Circuit Court of Appeals (the “Court”) affirmed the district court’s dismissal of the case. The Court found that Schwartz had the opportunity to litigate the question of whether the state court had jurisdiction to hear ERISA claims, but he did not do so. Therefore, the Court held that the state court’s judgment is entitled to res judicata and will not be overturned by a district court.


As discussed in yesterday’s blog, in Notice 2018-99 (the “Notice”), the Internal Revenue Service (the “IRS”) provides interim guidance: (1) for taxpayers to determine the amount of parking expenses treated as qualified transportation fringes (“QTFs”) (under Code section 132(f) that is nondeductible under § 274(a)(4) of the Internal Revenue Code (the “Code”) and (2) for tax-exempt organizations to determine the corresponding increase in the amount of unrelated business taxable income (“UBTI”) under § 512(a)(7) of the Code attributable to the nondeductible parking expenses.

The Notice provides interim guidance how to calculate the amounts in (1) and (2) above.  The IRS intends to issue regulations in the future to provide more permanent rules.

Yesterday’s blog discussed the Notice’s interim guidance pertaining to the determination by taxpayers of the amount of parking expenses treated as QTFs that is nondeductible under § 274(a)(4).  Today’s blog summarizes the Notice’s interim guidance on the determination by tax-exempt organizations of the increase in the amount of UBTI under § 512(a)(7) of the Code attributable to the nondeductible parking expenses.

In Notice 2018-99 (the “Notice”), the Internal Revenue Service (the “IRS”) provides interim guidance: (1) for taxpayers to determine the amount of parking expenses, which are treated as qualified transportation fringes (“QTFs”) (under Code section 132(f); generally being “qualified parking” for these purposes), and which are nondeductible under § 274(a)(4) of the Internal Revenue Code (the “Code”) and (2) for tax-exempt organizations to determine the corresponding increase in the amount of unrelated business taxable income (“UBTI”) under § 512(a)(7) of the Code attributable to the nondeductible parking expenses.  The Notice provides interim guidance on how to determine the amounts described in (1) and (2) above.  The IRS intends to issue governing regulations in the future.

Changes To The Law.  Sections 274 and 512 were amended by the Tax Cuts and Jobs Act (2017) (the “Act”), effective for amounts paid or incurred after December 31, 2017.

Determining The Nondeductible Amount Of Parking Expenses.  Under the Notice, the method of determining this amount depends on whether the taxpayer pays a third party to provide parking for its employees, or the taxpayer owns or leases a parking facility where its employees park.