In The Pioneer Centres Holding Company Employee Stock Ownership Plan and Trust v. Alerus Financial, N.A., No. 15-1227 (10th Cir. 2017), the Pioneer Centres Holding Company Employee Stock Ownership Plan and Trust (the “Plan” or “ESOP”) and its trustees sued Alerus Financial, N.A. (“Alerus”)  for breach of fiduciary duty in connection with the failure of a proposed employee stock purchase.  The district court granted summary judgment to Alerus after determining the evidence of causation did not rise above speculation.  The Plan appeals, claiming the district court erred in placing the burden to prove causation on the Plan rather than shifting the burden to Alerus to disprove causation once the Plan made out its prima facie case.  In the alternative, the Plan contends that even if the district court correctly assigned the burden of proof, the Plan established, or at the very least raised a genuine issue of material fact regarding, causation.

Upon reviewing the case, the Tenth Circuit Court of Appeals (the “Court”) affirmed the district court’s judgement. In doing so, the Court indicated that it found no error of law or abuse of discretion by the district court that would warrant reversal .

In Advocate Health Care Network v. Stapleton, Nos. 16-74, 16-86, 16-258 (Supreme Court June 5, 2017), the following matter arose. ERISA generally obligates private employers offering pension plans to adhere to an array of rules designed to ensure plan solvency and protect plan participants.  Church plans, however, are exempt from those regulations. See 29 U. S. C. §1003(b)(2).  From the beginning, ERISA has defined a “church plan” as “a plan established and maintained . . . for its employees . . . by a church.” §1002(33)(A).  Congress then amended the statute to expand that definition, adding the provision whose effect is at issue here: “A plan established and maintained for its employees . . . by a church . . . includes a plan maintained by an organization . . . the principal purpose . . . of which is the administration or funding of [such] plan . . . for the employees of a church . . . , if such organization is controlled by or associated with a church.” §1002(33)(C)(i). For convenience, the organizations described in that provision are referred to by the Supreme Court as “principal-purpose organizations.”

Petitioners, who identify themselves as three church-affiliated nonprofits that run hospitals and other healthcare facilities (collectively, “hospitals”), offer their employees defined-benefit pension plans. Those plans were established by the hospitals themselves, and are managed by internal employee-benefits committees. Respondents, current and former hospital employees, filed class actions alleging that the hospitals’ pension plans do not fall within ERISA’s church plan exemption because they were not established by a church.  The District Courts, agreeing with the employees, held that a plan must be established by a church to qualify as a church plan. The Courts of Appeals affirmed.

Upon analyzing the case, the Supreme Court ruled that a plan, which is maintained by a principal-purpose organization, qualifies as a “church plan,” regardless of who established it.  Accordingly, the Supreme Court reversed the judgments of the Courts of Appeals.

Yesterday (June 7) I receive an announcement from the DOL, that the DOL is withdrawing it’s informal guidance on joint employment and independent contractors. This withdrawal could impact coverage of individuals under an employee benefit plan. Here is what what the announcement says:

U.S. Secretary of Labor Alexander Acosta today announced the withdrawal of the U.S. Department of Labor’s 2015 and 2016 informal guidance on joint employment and independent contractors.  Removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, as reflected in the department’s long-standing regulations and case law. The department will continue to fully and fairly enforce all laws within its jurisdiction, including the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act.

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 Rhea v. Alan Ritchey, Inc. Welfare Benefit Plan, No. 16-41032 (5th Cir. 2017), Donna Rhea was the beneficiary of an employee benefit plan organized under ERISA (the “Plan”).  Rhea suffered injuries from medical malpractice.  The Plan covered some of her medical expenses.  After she settled the malpractice claim for more than the medical expenses paid by the Plan, the Plan sought reimbursement from Rhea.

The Plan used a single document as both its summary plan description (the “SPD”) and its written instrument.  That document had a reimbursement provision.  Rhea refused to reimburse the Plan, claiming that it did not have an enforceable written instrument. She sought a declaratory judgment on this matter in district court, and appeals the district court’s adverse summary judgment against her.

In reviewing the case, the Fifth Circuit Court of Appeals (the “Court”) noted that, when the Plan paid Rhea’s medical expenses, its SPD was functioning as both an SPD and a written instrument.  It said that this is nothing peculiar.   Plan sponsors commonly use a single document to satisfy both requirements, and courts have blessed the practice.  When a plan’s sponsor does not maintain a separate written instrument, as here, the Court must look to the SPD to define the plan’s terms. Under these terms, Rhea had a pre-existing obligation to reimburse the Plan for payments it made for her medical expenses in the event she received a third-party recovery. When Rhea settled her malpractice claim, an equitable lien by agreement was created. The Plan is entitled to reimbursement.

In Kennedy v. The Lilly Extended Disability Plan, No. 16-2314 (7th Cir. 2017), the following occurred.

Cathleen Kennedy (“Kennedy”) was hired by Eli Lilly and Company (“Lilly”) in 1982 and rose rapidly, eventually becoming an executive director in the company’s human resources division, with a monthly salary of $25,011.  But at the beginning of 2008, she was forced to quit work because of disabling symptoms of fibromyalgia.  As a participant in the Lilly Extended Disability Plan (the “Plan”), a self-funded employee benefit plan, she requested benefits upon ceasing to work, and effective May 1, 2009, was approved for monthly benefits of $18,972.44.  Three and a half years later, however, her benefits were terminated by the Plan’s plan administrator, on the grounds that fibromyalgia is not disabling within the meaning of the Plan, precipitating this suit by her against the Plan.

The Plan states that an employee has a “disability” if unable to engage, for remuneration or profit, in any occupation commensurate with the employee’s education, training, and experience.  The district court judge granted summary judgment in favor of Kennedy, granting her past benefits of $537,843.81 and reinstating benefit payments retroactively to December 2012.  The Plan appeals.

In McCulloch Orthopaedic Surgical Services, PLLC v. Aetna Inc., No. 15-2150 (2nd Cir. 2017), the Second Circuit Court of Appeals (the “Court”) was asked to decide whether ERISA  completely preempts an “out-of-network” health care provider’s promissory-estoppel claim against a health insurer, where the provider: (1) did not receive a valid assignment for payment under a health insurance plan and (2) received an independent promise from the insurer that he would be paid for certain medical services provided to the insured.  The Court held that ERISA does not completely preempt such a claim.

In this case, the plaintiff, treated as being a doctor named McCulloch, filed this action against defendant, Aetna Inc. and several of its wholly-owned subsidiaries (“Aetna”).  In New York State Supreme Court, McCulloch, an orthopedic surgeon, seeks reimbursement from Aetna for performing two knee surgeries on a patient who is a member of an Aetna administered health care plan that is governed by ERISA (the “Plan”).  McCulloch is an “out-of-network” provider under this Plan, that is, he has no arrangement with Aetna setting his fee.  The insured attempted to assign his benefits to McCulloch.  However, the Plan did not permit an assignment of benefits to out-of-network providers.  However, an Aetna representative, found at a phone number on the patient’s insurance card, informed McCulloch’s staff that the Plan provided for payment to out-of-network physicians, and that the Plan covered the intended surgical procedures.

Aetna paid McCulloch some, but not all, of the amount McCulloch billed for the surgeries.  McCulloch brought suit in New York State Supreme Court for the difference, based on a claim of promissory-estoppel.  Aetna removed the suit to United States District Court for the Southern District of New York, based on federal-question jurisdiction.  McCulloch filed a motion to remand back to state court.  Ultimately, the district court denied McCulloch’s motion, and dismissed McCulloch’s complaint.  McCulloch appeals.

In Field Assistance Bulletin No. 2017-02 (the “FAB”) , the U.S. Department of Labor (the “DOL”) announces a temporary enforcement policy related to the DOL final rule defining who is a “fiduciary” under ERISA, and the related 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”).  Here is what the FAB said.


Items Previously Issued.  The final rule, entitled “Definition of the Term ‘Fiduciary’; Conflict of Interest Rule — Retirement Investment Advice,” was published in the Federal Register on April 8, 2016, became effective on June 7, 2016, and had an original applicability date of April 10, 2017.  The PTEs also had an original applicability date of April 10, 2017, with a phased implementation period ending on January 1, 2018, for the BIC Exemption and the Principal Transactions Exemption.  The President, by Memorandum to the Secretary of Labor dated February 3, 2017, directed the DOL to examine whether the fiduciary duty rule may adversely affect the ability of Americans to gain access to retirement information and financial advice and to prepare an updated economic and legal analysis concerning the likely impact of the rule as part of that examination.  On March 2, 2017, the DOL published a notice proposing a 60-day delay in the applicability date of the fiduciary duty rule and the related PTEs and seeking public comments on the questions raised in the Presidential Memorandum, and generally on questions of law and policy concerning the fiduciary duty rule and PTEs.

In Jones v. Aetna Life Insurance Company, No. 16-1714 (8th Cir. 2017), Lisa E. Jones submitted a claim for disability benefits. Her plan administrator denied it. She then sued under ERISA for denial of benefits and breach of fiduciary duty. The district court dismissed the fiduciary claim as “duplicative” of the denial-of-benefits claim. It then granted summary judgment against Jones on the denial-of-benefits claim. Upon reviewing the case, the Eighth Circuit Court of Appeals (the “Court”) affirmed the summary judgment in part, and reversed it in part, and remanded the case back to the district court.

In analyzing the case, the Court noted that two of ERISA’s theories of recovery are relevant here. First, under section 502(a)(1)(B) of ERISA, a plan participant or beneficiary may sue to recover benefits due to him under the terms of his plan. Second, under section 502(a)(3) of ERISA, a participant or beneficiary may sue to obtain other appropriate equitable relief  to enforce any provisions of ERISA- including those provisions that impose liability on fiduciaries that breach their statutory duty to exercise a prudent man standard of care (per sections 1104(a) and 1109(a) of ERISA).

The Court then asked whether a participant may sue for benefits under both sections? The Court said yes, after reviewing prior Eighth Circuit decisions, at least so long as the claims under each section assert different theories of liability (which is the situation in this case), and even if the relief sought is similar.

In a private letter ruling, the IRS reminds us that a Health FSA may not reimburse a participant’s health insurance premiums.  Here is what the letter says.

The IRS was asked about the rules on submitting Medicare premium expenses as claims under a health flexible spending arrangement (a “health FSA”).  The IRS was also asked why a participant was required to enroll in the Medicare program after experiencing renal failure.

The participant had submitted her Medicare premium expenses to her health FSA for reimbursement.  The administrator of her health FSA denied her claims, citing to an IRS regulation that prohibits the reimbursement of medical premiums.  See Prop.Treas. Reg. 1.125-5(k)(4).  As stated in the proposed regulation and IRS Publication 969, a health FSA cannot reimburse health insurance premium payments.  Medicare premiums are premiums for other health coverage and thus are not reimbursable expenses.  While health insurance premiums, including Medicare premiums, are medical expenses for purposes of the itemized deduction for medical expenses (see Publication 502), the rules for health FSAs do not allow them to be reimbursed by a health FSA.