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In Barton v. Constellium Rolled Products-Ravenswood, LLC, No. 16-1103 (4th Cir. 2017), a class of retirees and their union filed this action after their former employer unilaterally altered its retiree health benefits program.  After reviewing the case, the Fourth Circuit Court of Appeals (the “Court”) ruled that, because the governing collective bargaining agreement (the “CBA”) does not provide for vested retiree health benefits, the Court must affirm the district court’s grant of summary judgment to the employer.

In analyzing the case, the Court noted that the Supreme Court has recently held courts must interpret collective-bargaining agreements, including those establishing ERISA plans, according to ordinary principles of contract law, at least when those principles are not inconsistent with federal labor policy, and where the words of a contract in writing are clear and unambiguous, its meaning is to be ascertained in accordance with its plainly expressed intent. Thus, said the Court, we must interpret the CBA’s provision governing the retiree health, namely its Article 15, using ordinary contract principles. And in doing so, we must recognize that these principles foreclose holding that the retiree health benefits have vested unless unambiguous evidence indicates that the parties intended that outcome.

Article 15 of the CBA states that the retiree health benefits “shall remain in effect for the term of this . . . Labor Agreement.” Article 15 also provides that the parameters of the retiree health benefits programs “shall be set forth in [the] booklet[] entitled . . . Retired Employees’ Group Insurance Program.” That booklet, which serves as the SPD for these benefits, similarly states that these benefits would last “for the term of the Labor Agreement.” It is undisputed that the term of the 2010 CBA, the most recent one relevant, ended in 2012. As such, the plain language of the CBA and SPD clearly indicates that the retiree health benefits did not vest. First, Article 15 contains explicit durational language stating that the retiree health benefits continue “for the term of” the governing CBA. Furthermore, the SPD echoes this language, reiterating the benefits continue “for the term of the” CBA. The retirees cannot overcome the clear language of Article 15 of the CBA and the SPD. Given this language, the retirees cannot demonstrate that their health benefits had vested.

In an April 4 News Release, the U.S. Department of Labor (the “DOL”) announces a 60-day extension of the applicability dates of the fiduciary rule and related exemptions, including the Best Interest Contract Exemption.  The announcement follows a Feb. 3, 2017, presidential memorandum which directed the DOL to examine the fiduciary rule to ensure that it does not adversely affect the ability of Americans to gain access to retirement information and financial advice.  Here is what the News Release says.

Under the terms of the extension, advisers to retirement investors will be treated as fiduciaries and have an obligation to give advice that adheres to “impartial conduct standards” beginning on June 9 rather than on April 10, 2017, as originally scheduled.  These fiduciary standards require advisers to adhere to a best interest standard when making investment recommendations, charge no more than reasonable compensation for their services and refrain from making misleading statements.

The DOL has requested comments on the issues raised by the presidential memorandum, and related questions.  The DOL urges commenters to submit data, information and analyses responsive to the requests, so that it can complete its work pursuant to the memorandum as carefully, thoughtfully and expeditiously as possible.

The U.S. Department of Labor (the “DOL”) has revised the ERISA claims procedures which apply to claims for disability benefits, in a Final Rule which changes the ERISA claims procedures regulations and which was published on December 16, 2016.  The revisions generally become effective after 2017.  Plans which provide disability benefits (both pension and welfare plans) will have to revise their summary plan descriptions, and change internal procedures for handling disability claims, prior to the end of 2017 to comply with the Final Rule.  The DOL has issued a Fact Sheet which describes the Final Rule.  Here is what the Fact Sheet says.

Background.  Section 503 of ERISA generally requires employee benefit plans to provide written notice to any participant or beneficiary whose claim for benefits has been denied, and to provide the claimant a full and fair process for review of the claims denial.  The Fact Sheet notes that proposed regulations-now finalized under the Final Rule- was published on November 18, 2015.

Overview of Final Regulation.  The Final Rule amends the DOL’s current claims procedure regulation at 29 C.F.R. §2560.503-1 for disability benefits to require that plans, plan fiduciaries, and insurance providers comply with additional procedural protections when dealing with disability benefit claimants.  Specifically, the Final Rule includes the following improvements in the requirements for the processing of claims and appeals for disability benefits:

DB Healthcare, LLC v. Blue Cross Blue Shield of Ariz., Inc., No. 14-16518, No. 14-16612 (9th Cir. 2017) is actually two cases, which involve reimbursement disputes between health care providers and employee health benefit plan administrators.  The Ninth Circuit Court of Appeals (the “Court”) decided the cases together, because they raise a common central issue: whether a health care provider designated to receive direct payment from a health plan administrator for medical services is authorized to bring suit in federal court under ERISA.  The Court considered two separate potential bases for such authority under ERISA’s civil enforcement provisions: direct statutory authority and derivative authority through assignment.  Although the contractual relationships between the health care providers and the plan administrators, and between the providers and the patients, under these two bases differ in relevant ways, the Court concluded that the providers cannot-under either base- enforce ERISA’s protections in federal court on either basis.

Why this conclusion?

Agreeing with other circuits, the Court reaffirmed that health care providers are not health plan beneficiaries who have direct statutory authority to sue for declaratory relief and money damages under ERISA section 502(a)(1)(B) or injunctive relief under ERISA section 502(a)(3).  Rather, a health care provider must bring claims derivatively, relying on its patients’ assignments of their benefit claims.  The Court held that the health care providers here, however, lacked derivative authority to sue, given the nature of the governing agreements and of the purported assignments.  In one case, the governing employee benefit plans contained non-assignment clauses that overrode any purported assignments.  In the other case, although the provider agreement permitted assignment, and payment authorization forms could be construed as assigning the provider limited rights, the provider’s claims fell outside the scope of the assigned rights.

The case of Pharmaceutical Care Management Association v. Gerhart, No.15-3292 (8th Cir. Jan. 11, 2017) involves the question of whether ERISA expressly preempts section 510B.8 of the Iowa Code.  The district court determined that it did not and dismissed Pharmaceutical Care Management Association’s (“PCMA’s”) complaint seeking a declaration of preemption.  Upon review, the Eighth Circuit Court of Appeals (the “Court”) reversed the district court’s decision and remanded the case with direction that judgment be entered for PCMA.

Why did the Court rule that ERISA preempts the part of the Iowa Code in question?

Section 510B.8 of the Iowa Code regulates how pharmacy benefits managers (“PBMs”) establish generic drug pricing, and requires that certain disclosures on their drug pricing methodology be made to their network pharmacies as well as to Iowa’s insurance commissioner.  Shortly after the statute went into effect, PCMA brought this action against Iowa’s insurance commissioner and its attorney general (collectively, “the State”), seeking a declaration that the statute places restrictions and requirements on PBMs that impermissibly reference or are connected with ERISA plans, thus making the statute expressly preempted by ERISA.

Employee Benefits-IRS Provides Guidance On Extension Of Time To Provide Information Forms To Individuals Receiving Health Coverage

In IRS Health Care Tax Tip 2016-78, November 30, 2016, the Internal Revenue Service (the “IRS”) reminds employers and others that it has extended the 2017 due date for employers and coverage providers to furnish information statements to individuals.  However, the due dates to file those returns with the IRS are not extended. A chart is provided to help interested persons understand the upcoming deadlines.

The Tax Tip makes reference to IRS Notice 2016-70, in which the IRS formally announced the extension.

In Armani v. Northwestern Mutual Life Insurance Company, No. 14-56866 (9th Cir. 2016), the Court’s panel vacated in part the district court’s judgment in favor of the defendant in part in plaintiff’s action under ERISA, challenging a denial of benefits under a long term disability insurance policy.

In this case, the administrative record showed that the plaintiff could not sit for more than four hours a day. The district court, reviewing de novo, nonetheless upheld the insurer’s determination that the plaintiff could perform sedentary work. The Court’s panel held that the district court erred by rejecting the plaintiff’s proposed definition of “sedentary” work on the basis that it was drawn from the Social Security context. Agreeing with other circuits, the panel held that an employee who cannot sit for more than four hours in an eight-hour workday cannot perform “sedentary” work that requires “sitting most of the time.”

The Court’s panel vacated the part of the district court’s judgment denying the plaintiff his long term disability benefits and remanded for further proceedings.

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 Huang v. Life Insurance Company of North America, No. 14-3401 (8th Cir. 2015), plaintiff Yafei Huang (“Huang”) was appealing the district court’s grant of summary judgment on claims related to a denial of life insurance benefits by Life Insurance Company of North America (“LINA”), the ERISA plan administrator for her deceased husband’s former employer. LINA denied benefits, determining that Huang’s deceased husband, Ping Liu, breached a requirement in the application by failing to notify LINA of a cancer diagnosis he received after applying for insurance but before a policy issued. In granting summary judgment, the district court held LINA’s determination and the underlying interpretation of the plan were not unreasonable. The Eighth Circuit Court of Appeal affirmed the judgment of the district court.

In George v. Reliance Standard Life Insurance Company, No. 14-50368 (5th Cir. 2015), plaintiff Robert George (“George”) appeals from the district court’s final judgment affirming the decision of the ERISA plan administrator in relevant part. After reviewing the case, the Fifth Circuit Court of Appeals (the “Court”) reversed and rendered judgment for George. Further, the Court remanded the case to the district court to determine the amount of benefits to award to George.

In this case, George served as a helicopter pilot in the United States Army. In 1985 George was injured in a helicopter crash, and doctors were forced to amputate one of his legs at the knee. George retired from military service in 1987. After retiring, George began flying helicopters for PHI, Inc. (“PHI”). PHI purchased a long-term disability insurance policy (the “Policy”) for George from the defendant, Reliance Standard Life Insurance Co. (“RSL”). George flew for PHI for more than twenty years. But in 2008 he began experiencing severe pain at the site of his amputation, which prevented him from safely wearing his prosthetic limb. As a result, he was no longer able to operate the foot controls of a helicopter, and he was forced to retire from flying. At that time, he was earning $75,495 per year. George filed a claim for long-term disability benefits under the Policy with RSL.

The Policy contains a definition of “Total Disability”, which a claimant must satisfy to be entitled to long-term disability benefits. The Policy also contains a relevant limitation provision (the “Exclusion Clause”). The Exclusion Clause limits benefits to 24 months when mental conditions contribute to the disability. RSL determined that George did not meet the definition of Total Disability, and therefore is not entitled to the benefits claimed. RSL further determined that, even if George was Totally Disabled, the Exclusion Clause would apply to limit George’s long-term disability benefits to 24 months of payment. George brought this suit, challenging RSL’s determinations, under section 502(a)(1)(B) of ERISA.