(Following up on Blog post on May 22)

In Am. Orthopedic & Sports Med. v. Independence Blue Cross Blue Shield, 2018 U.S. App. LEXIS 12637 (3rd Circuit 2018), the Third Circuit Court of Appeals (the “Court”) held that an anti-assignment clause in an ERISA-governed health insurance plan was enforceable, since it was negotiated between the insurer and plan administrator.  As such, the district court properly held that a healthcare provider-to whom an assignment of a claim for benefits against the plan was purportedly made by the plan beneficiary/patient- lacked standing to bring suit against the plan for payment.  The Court felt that its ruling on the anti-assignment clause’s enforceability is in line with decisions from the First, Second, Fifth, Ninth, Tenth, Eleventh (cases cited therein).

In so ruling, the Court said that insurers did not waive their right to enforce the anti-assignment clause by accepting and processing a claim form, issuing a check to the plan beneficiary, and failing to raise the clause as an affirmative defense during the internal administrative appeals process.

In Eden Surgical Center v. Cognizant Technology Solutions Corp., No. 16-56422 (9th Cir.2018) (Unpublished), the plaintiff, Eden Surgical Center (“Eden”), was appealing the district court’s grant of summary judgment for the defendants on Eden’s claims under ERISA.

The Ninth Circuit Court of Appeals (the “Court”) analyzed the case as follows.  Eden-seeking payment for surgical services provided- concedes that its sole basis for standing to claim such payment is as an assignee.  It also concedes that the benefit plan, the potential payor here, contained a valid anti-assignment provision, which, if enforceable, would bar Eden’s suit. Eden argues, however, that the doctrines of equitable estoppel and waiver render the provision unenforceable.

As to the equitable estoppel argument, the Court said that reasonable reliance on a material misrepresentation is one of the requirements necessary to establish an equitable estoppel claim.   Eden contends that Aetna, the claims administrator, made two misrepresentations: First, a week or so before the surgery, Aetna incorrectly advised Eden regarding the applicable reimbursement rate; and second, roughly four months after the surgery, Aetna mistakenly told Eden that the benefit plan did not contain an anti-assignment provision.

In Field Assistance Bulletin No. 2018-01 (the “FAB”), the U.S. Department of Labor (the “DOL”) provides additional guidance on the exercise of shareholder rights, written statements of investment policy and economically targeted investments.  Here is what the FAB says:


The DOL’s longstanding position is that, under ERISA, the fiduciary act of managing plan assets that involve shares of corporate stock includes making decisions about voting proxies and exercising shareholder rights.  To assist plan fiduciaries in understanding their obligations under ERISA, the DOL issued Interpretive Bulletin (IB) 2016-01.  The DOL has a similarly longstanding position that ERISA fiduciaries may not sacrifice investment returns or assume greater investment risks as a means of promoting collateral social policy goals.  Interpretive Bulletin (IB) 2015-01 contains the DOL’s interpretation of ERISA sections 403 and 404 as applied to employee benefit plan investments in economically targeted investments (that is, investments selected for the economic benefits they create apart from their investment return to the employee benefit plan).

In IRS Tax Reform Tax Tip 2018-69, May 4, 2018, the IRS offers guidance on the tax credit available to employers for paid family and medical leave.  Here is what the Tax Tip says:

During National Small Business Week, the IRS focuses on educating employers about the employer credit for paid family and medical leave created by the Tax Cuts and Jobs Act passed last year. Employers may claim the credit based on wages paid to qualifying employees while they are on family and medical leave.

Here are some facts about this credit and how it benefits employers:

In Pizza Pro Equipment Leasing, Inc. v. Commissioner of Internal Revenue, No. 17-1297 (8th Cir. 2018) (Unpublished Opinion), Pizza Pro Equipment Leasing, Inc. (“Pizza Pro”) appeals a tax court decision upholding determinations by the Commissioner of Internal Revenue that it owes excise taxes and additions to tax related to its defined benefit pension plan.  After reviewing the case, the Eighth Circuit Court of Appeals (the “Court”) affirmed the district court’s ruling.

In this case, in 1995, Pizza Pro established a defined benefit pension plan (the “Plan”).  This case involves a dispute about a limitation on the Plan’s annual benefit, see I.R.C. § 415(b)(2)(C), which in turn determines Pizza Pro’s deductible contributions to the Plan.  The Commissioner concluded that from 2002 to 2006 Pizza Pro incorrectly calculated the limitation on the annual benefit and therefore made nondeductible contributions to the Plan. See I.R.C. § 404(j)(1)(A).  Section 4972 of the Internal Revenue Code imposes “a tax equal to 10 percent of the nondeductible contributions.”  The Commissioner further imposed additions to tax for failure to file a return of excise taxes and to timely pay the excise tax owed. See I.R.C. § 6651(a)(1) & (a)(2).

Pizza Pro petitioned the tax court, challenging the excise tax and additions.  The tax court decided the case without trial based on the parties’ stipulated facts and expert reports, and it upheld the Commissioner’s determinations.  It also concluded that Pizza Pro did not make a valid election under I.R.C. § 4972(c)(7), which allows a taxpayer to disregard contributions to a defined benefit plan under certain conditions, thereby avoiding the excise tax on nondeductible contributions.  Pizza Pro timely appealed.

In Field Assistance Bulletin No. 2018-02 (the “FAB”), the U.S. Department of Labor (the “DOL”) announces a temporary enforcement policy on prohibited transaction rules that apply to investment advice fiduciaries, to help them handle the recent decision from the Fifth Circuit Court of Appeals vacating the DOL’s New Fiduciary Rule and related exemptive relief.  Here is what the FAB says:


This document announces a temporary enforcement policy related to the DOL’s rule defining who is a “fiduciary” under ERISA and the Internal Revenue Code (the “Code”), and the associated prohibited transaction exemptions, including the Best Interest Contract Exemption (the “BIC Exemption”), the Class Exemption for Principal Transactions In Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs (the “Principal Transactions Exemption”), and certain amended prohibited transaction exemptions (collectively, the “PTEs”).

In Girardot v. The Chemours Company, No. 17-1894 (3rd Circ. 2018), the plaintiffs, who were certain employees (the “Employees), brought claims under ERISA against their former employer, the Chemours Company (“Chemours”) related to an employee severance plan. Chemours moved to dismiss the claim pursuant to Fed. R. Civ. P. 12(b)(6), on the basis that the severance plan was not subject to ERISA. The United States District Court for the District of Delaware granted the motion, and the Employees now appeal the District Court’s decision. Upon reviewing the case, the Third Circuit Court of Appeals (the “Court”) affirmed the District Court’s decision.

In this case, in September 2015, Chemours announced a voluntary reduction-in-force program called the Chemours Voluntary Separation Program (“VSP”). Under the terms of the VSP, Chemours had sole authority and discretion to determine which employees would be eligible to participate in the VSP, and that it would approve all of the eligible employees no later than November 30, 2015. Participants were entitled to payment of a lump sum severance benefit of one week of base pay for each full year of service, with both a minimum benefit of two (2) weeks of base pay and a cap of twenty-six (26) weeks of base pay, i.e., a maximum benefit of six (6) months of base pay. They were also entitled to a lump sum payment equal to the costs of three (3) months of COBRA medical coverage and to the payment of a ‘prorated bonus for their year of separation to be made in accordance with Chemours’ procedures and based on Company performance.

Unhappy with this arrangement, the Employees brought ERISA claims related to the VSP against Chemours. However, as stated above, the District Court dismissed their claim, and the Employees appealed.

In Bakery & Confectionary Union & Industry International Pension Fund v. Just Born II, Incorporated, No. 17-1369 (4th Cir. 2018), Just Born II, Inc. (“Just Born”), a candy manufacturer, appeals the district court’s judgment requiring it to pay delinquent contributions into the Bakery and Confectionary Union and Industry International Pension Fund (the “Pension Fund”), as well as interest, statutory damages, and attorneys’ fees.  It contends, first, that the district court misapplied the federal statute governing multiemployer pension funds in critical status and, second, that the court erred in holding that it had failed to plead adequately its affirmative defenses.  Upon reviewing the case, the Fourth Circuit Court of Appeals (the “Court”) affirmed the district court’s rulings.

As to the ruling which requires Just Born to pay the delinquent contributions and more, the case developed as follows:

Just Born and the Bakery, Confectionary and Tobacco Workers International Union, Local Union 6 (the “Union”) were parties to a collective bargaining agreement (the “CBA”) governing employment at Just Born’s Philadelphia, Pennsylvania, confectionary plant from March 1, 2012, to February 28, 2015.  The CBA required Just Born to contribute to the Pension Fund, a multiemployer pension plan.  According to the CBA, these contributions were to be paid from the first day the employee begins working in a job classification covered by the CBA.  While the CBA was still in effect, the Pension Fund’s actuaries certified it to be in critical status, a designation which, under ERISA, requires the plan sponsor to adopt and implement a rehabilitation plan designed to restore the plan’s financial stability and bring it out of critical status.

In Notice 2018-24 (the “Notice”), the Internal Revenue Service (the “IRS”) requests comments on the potential expansion of the scope of the determination letter program for individually designed plans during the 2019 calendar year, beyond provision of determination letters for initial qualification and qualification upon plan termination.  Here is what the IRS says:

INTRODUCTION:  In reviewing comments submitted in response to this Notice, the Department of the Treasury (the “Treasury Department”) and the IRS will consider the factors regarding the scope of the determination letter program set forth in section 4.03(3) of Revenue Procedure 2016-37, 2016-29 I.R.B. 136.  The Treasury Department and the IRS will issue guidance if they identify any additional types of plans for which plan sponsors may request determination letters during the 2019 calendar year.

BACKGROUND:  Revenue Procedure 2016-37 sets forth procedures for issuing determination letters and describes an extension of the remedial amendment period for individually designed plans.  Effective January 1, 2017, the sponsor of an individually designed plan may submit a determination letter application only for initial plan qualification, for qualification upon plan termination, and in certain other limited circumstances identified in subsequent published guidance.  Section 4.03(3) of Rev. Proc. 2016-37 provides that the Treasury Department and the IRS will consider each year whether to accept determination letter applications for individually designed plans in specified circumstances other than for initial qualification and qualification upon plan termination.

In Stein v. Atlas Industries, Inc., No. 17-3737 (6th Cir. 2018) (Unpublished Opinion), the following took place.  A few years back, Robert Stein, an employee of Atlas Industries, Inc. (“Atlas”), had two misfortunes.  First, his son became very ill, and barely survived.  Second, Stein tore his meniscus.  That injury required surgery, so Stein took medical leave to have an operation and recover.  About ten weeks into his recovery, Stein went for a checkup.  There, Stein says that he was told that he would not be released to work until August 10.  However, Stein concedes that he was given a release slip from the doctor’s office that released him to work as of July 20, but to perform only office work until August 10.  Stein gave that release slip to Atlas’s workers’ compensation office.  After that visit, the doctor’s office notified Atlas that Stein could return to work with light-duty restrictions in just two days.  As a result of all this, Atlas expected Stein to return to work the following Monday, but Stein thought he was on leave for several more weeks.

On Monday, Stein neither showed up for work nor called in.  Tuesday and Wednesday were no different—Atlas heard nothing from Stein.  So on Thursday, Atlas fired him.  Company policy, his bosses said: Employees who missed three workdays without notification to Atlas were subject to automatic termination.  No exceptions.  Stein sued, claiming that Atlas violated the Family and Medical Leave Act (the “FMLA”) and ERISA by firing him.  The district court granted Atlas summary judgment, and Stein now appeals.

The Sixth Circuit Court of Appeals (the “Court”) reviewed the case.  The Court noted that the FMLA guarantees eligible employees up to twelve weeks of unpaid, job-protected leave to recover from a serious medical condition.  Stein claims that by firing him while he was on leave after his knee surgery, Atlas interfered with the exercise of his FMLA rights and retaliated against him for exercising them.  However, said the Court, the FMLA provides that an employee who has a serious health condition can take up to twelve weeks of leave per year. See 29 U.S.C. § 2612(a)(1)(D).  But the FMLA does not grant an unconditional right to leave.  To qualify, an employee must comply with his employer’s usual and customary notice and procedural requirements, including internal call-in policies. 29 C.F.R. § 825.302(d).  Having failed to so comply; Stein cannot prevail on his claims of interference in violation of the FMLA.  His claim of retaliation in violation of the FMLA also fails, since he could not establish a causal connection between the retaliatory action (the firing) and the protected activity (the right to FMLA leave).  There was no temporal proximity between the firing and the start of Stein’s absence from employment, as he was terminated ten weeks after that absence began.  As such, the Court affirmed the district court’s summary judgment as it pertains to the FMLA claim.