Total Articles: 30
DOL Service Provider Fee Disclosure Regulations To Go Into Effect in Early 2012
As discussed in a previous alert, the Department of Labor (DOL) issued new rules that will require certain types of ERISA retirement plan service providers to disclose new fee information directly to plans. Since our last alert, there have been a few developments on these new rules.
DOL Issues Its Final Rule on Prohibited Transaction Exemption Procedures
The Department of Labor’s Employee Benefits Security Administration (EBSA) issued a final rule on October 27, 2011, governing the process for filing requests for administrative exemptions from the prohibited transaction provisions under the Employee Retirement Income Security Act (ERISA).
Ninth Circuit Holds that Third Party Insurers may be Sued Under ERISA
Executive Summary: Specifically overruling the holdings of four prior decisions, a full panel of the Ninth Circuit has held that ERISA permits the beneficiaries of an employee benefits plan to sue parties other than the plan administrator to recover benefits due under the plan.
Ninth Circuit En Bank Expands ERISA liability
The Ninth Circuit issued an "en banc" opinion to set the law in the Circuit regarding who is a proper defendant in certain ERISA cases.
Supreme Court Creates Confusion Concerning Availability of Equitable Relief Under ERISA Where An Employer Provides Inadequate and Misleading Information About a Plan's Terms
Last month, in Cigna Corporation v. Amara, 131 S. Ct. 1866 (2011), the United States Supreme Court held that a company will not have to abide by a summary plan description that conflicts with the terms of the plan it describes under Section 502(a)(1)(B) of ERISA, a provision that authorizes suits to enforce rights or recover benefits under the terms of a plan.
Supreme Court: Plan Participants Can Recover In ERISA Actions Without Showing Detrimental Reliance
On May 16, 2011, the Supreme Court clarified the showing of harm that a participant must demonstrate in order to recover on a claim involving a Summary Plan Description (SPD) that conflicts with the terms of its underlying plan document. The Supreme Court explained that the requisite level of harm for a particular case will be dependent upon the applicable equitable theory of relief. If a plaintiff can satisfy one of the standards, it may then be rebutted by the defendant – if the defendant can demonstrate that the inconsistency was a harmless error.
What's smart and what's legal don't always match
It's legal for me, an adult, to live on a diet of nacho cheese Doritos and Red Bulls, but probably not prudent. (Sounds kinda tasty, though.)
Companies Can Safely Fire Someone Who Alleges Internal ERISA Violations
At least under ERISA and at least in some states.
High Court Rules In ERISA Case.
The U.S. Supreme Court recently handed down an opinion interpreting Section 502(g)(1) of the Employee Retirement Income Security Act (ERISA) to grant district courts discretion to award attorneys' fees to either party, not just to a prevailing party. However, the Court also ruled that a district court's discretion to award attorneys' fees is triggered only if the party applying for the fee award "achieved `some degree of success on the merits.'" The Court noted that achieving a "purely procedural victory" does not satisfy this standard.
Supreme Court Holds that a Party Need Not be a "Prevailing Party" to be Awarded Attorney's Fees under ERISA § 502(g)(1).
On May 24, 2010, the U.S. Supreme Court held that a court may award attorney's fees under ERISA § 502(g)(1) to either party as long as the fee claimant "has achieved some degree of success on the merits." See Hardt v. Reliance Standard Life Ins. Co. (May 24, 2010). In reaching this decision, the Court overturned a decision of the Fourth Circuit, which held that fees under this provision are only available to "prevailing parties."
Supreme Court Holds ERISA-Based Attorneys' Fees Available.
On May 24, 2010 the U. S. Supreme Court held that a party does not need to be a "prevailing party" in order to be eligible for an attorneys' fees award under the Employee Retirement Income Security Act of 1974 (ERISA). In reaching this decision, the Court relied on the statutory language of the applicable statute, which does not include any "prevailing party" requirement, and noted that Congress is able to impose limitations on the availability of attorneys' fees when it deems fit. Hardt v. Reliance Standard Life Insurance Company.
Supreme Court Broadens Deference Granted to ERISA Plan Administrators.
Recognizing the complexities involved in the work of benefit plan administrators, the Supreme Court ruled that administrators of ERISA plans that provide for discretionary review are entitled to deferential judicial review of their plan interpretations, even if a previous interpretation of the same plan provision was unreasonable. “People make mistakes,” the Court acknowledged in Conkright v. Frommert, as five justices, in an opinion authored by Justice Roberts, applied the deferential standard of review for ERISA plan administrators’ interpretations.
High Court Rules ERISA Plan Administrator's Interpretation Is Entitled To Deference.
On April 21, with Chief Justice John Roberts writing for the majority, the U.S. Supreme Court upheld its Firestone Tire & Rubber Co. v. Bruch standard for reviewing the decisions of plan administrators where those decisions are made following a court determination that a previous interpretation of the same plan terms was arbitrary and capricious. Under Firestone and the terms of the Xerox Corporation pension plan at issue in this case, pension plan administrators would normally be entitled to deference when interpreting the plan. The Court held that the same deference also should apply where the administrator made a good faith error in its previous interpretation. The Court reversed the Second Circuit Court of Appeals' decision crafting an exception to Firestone deference and holding that a court need not apply a deferential standard when a plan administrator's previous construction of the same plan terms was found to violate the Employee Retirement Income Security Act (ERISA). Conkright v. Frommert, No. 08–810, U.S. Supreme Court (April 21, 2010).
ERISA Strategist: Final ESPP Regulations Issued.
The Internal Revenue Service (“IRS”) recently issued final regulations that govern the terms of employee stock purchase plans (“ESPPs”) under Section 423 of the Internal Revenue Code. These final regulations will be effective January 1, 2010 and apply to statutory options granted before that date. The final regulations retain most of the rules in the proposed regulations as well as provide new guidance and clarification in some areas. The regulations clarify that the plan document requirements (under which the written plan document must contain certain information) may be satisfied by the terms of the plan document or of the offering under the plan.
Reality Check: Valuing ERISA Plan Investments In PE Funds.
Many ERISA retirement or pension plan managers have plan money invested in limited partnership positions in private equity forms. The plan manager has a fiduciary duty to the employees whose funds are included in the plan to ensure that the plan's money is prudently invested.
Federal Court Finds ERISA-Covered Plan May Be Comprised of Individual Rather than Group Insurance Policies.
Employers should be aware that an employee welfare benefit plan may be comprised of individual, rather than group, insurance policies, as illustrated by a recent federal court decision from Tennessee. In Alexander v. Provident Life and Accident Insurance Co., No. 1:09-CV-27 (E.D. Tenn. Oct. 16, 2009), the court held that a medical practice group established and maintained an employee welfare benefit plan within the meaning of section 3(1) of ERISA through the purchase of insurance for its physician employees. The opinion clarifies that if a class of employees acquires individual policies and, by virtue of their employment relationship with the employer, obtains a benefit that they could not otherwise have obtained – such as a discount on premiums payable under the policies – the employer will be deemed to have established an ERISA plan.
Michelles Law Expands Health Plan Coverage And Notice Obligations For Employers.
On October 9, 2009, an important new law affecting employer-sponsored group health plans will become effective. The new law is known as “Michelle’s Law” (Pub. L. No. 110-381) and expands employers’ coverage and notice obligations for eligible college students. You should begin preparing now to meet these obligations.
Legal Alert: Second Circuit Reassesses Standard of Review Governing Challenges to Conflicted ERISA Plan Administrators' Benefits Decisions.
Citing the U.S. Supreme Court's decision in Metropolitan Life Insurance Co. v. Glenn, the Second Circuit recently issued one of the first major opinions to "reassess [the] standard of review governing cases … that challenge an Employee Retirement Income Security Act ('ERISA') plan administrator's decision to deny disability benefits, where the administrator has a conflict of interest because it both has the discretionary authority to determine the validity of the employee's claim and pays the benefits under the policy."
New Michelle’s Law Extends Coverage for Dependent College Students.
In another federal coverage mandate, employer health plans and group health insurers will be required to continue coverage for one year for any dependent college student who would otherwise lose coverage due to a medically necessary leave of absence under an amendment to the Employee Retirement Income Security Act (ERISA) that was signed by President George W. Bush on October 9.
Dual-Role Administrators, Conflicts of Interest, and ERISA’s Deferential Standard of Review.
The Employment Retirement Income Security Act (ERISA) permits a person denied benefits under an employee benefit plan the opportunity to challenge that denial in federal court. Under ERISA, if an administrator has been given discretion to determine eligibility for benefits under the terms of the benefit plan in question, federal courts can overturn eligibility determinations only if they find that the administrator has “abused its discretion.” ERISA jurisprudence has long recognized that if an administrator is operating under a conflict of interest, that conflict of interest must be weighed as a factor in determining whether the administrator’s decision to deny benefits was an abuse of discretion. When the entity that administers an employee benefit plan is also the entity that funds the plan, the courts view that as giving rise to a conflict of interest.
Supreme Court’s Anticlimactic Decision in Glenn does not Streamline ERISA Litigation.
Yesterday, the U.S. Supreme Court issued its decision in Metropolitan Life Ins. Co. v. Glenn (June 19, 2008), which many had hoped would provide more clarity with regard to a court’s role in reviewing a plan administrator’s decision denying benefits, where the plan administrator also pays benefits under the plan. However, the Court’s decision in Glenn merely “elucidates” the standards announced by the Court in Firestone Tire & Rubber Co. v Bruch, 489 U.S. 101 (1989), which held that a conflict of interest is a factor to be considered in determining whether to affirm a plan administrator’s benefits determination. The Court did clarify that an entity administering an employee benefit plan, which both determines whether an employee is eligible for benefits and pays those benefits out of its own pocket, operates under an inherent conflict of interest, a question that was not specifically addressed by the Court’s earlier decision in Bruch.
Pennsylvania Court Holds ERISA Preempts Pennsylvania Law Revoking Ex-Spouse’s Benefits.
On May 9, 2008, the Pennsylvania Superior Court, in a 2-1 decision, ruled that the Employee Retirement Income Security Act (“ERISA”) preempts a Pennsylvania law that mandates the revocation of beneficiary designations upon divorce. In re Estate of Sauers, Pa. Super. Ct. (No. 1060 MDA 2007). At issue in the case was a 1997 policy of life insurance that was issued to certain employees of C.S. Davidson, including Paul Sauers. In June 1998, following the issuance of the policy, Paul Sauers married Jodie Sauers. Later that same year, Paul named Jodie as the primary beneficiary of the insurance policy, and named his nephew as the contingent beneficiary.
Eleventh Circuit Panel Urges Court to Reconsider Heightened Review Standard.
A three-judge panel of the Eleventh Circuit recently issued a decision urging the Court to reconsider the heightened review standard the Court currently applies in reviewing ERISA plan administrators’ benefits determinations in conflict of interest situations. See Doyle v. Liberty Life Assurance Co. (11th Cir. Jan. 7, 2007). Although the Court in Doyle applied the Eleventh Circuit’s current standard and reversed the trial court’s grant of summary judgment in favor of the plan administrator, the panel urged the Court to reconsider this standard, which it described as “unworkable.”
DOL Issues Proposed Regulation Regarding ERISA Penalties.
The Department of Labor (DOL) recently issued a proposed regulation that would establish procedures relating to the department’s assessment of penalties for failure to disclose certain documents to plan participants, beneficiaries and others as required by ERISA. The proposed regulation reflects amendments contained in the 2006 Pension Protection Act (PPA), which gives the DOL the authority to assess civil penalties.
DOL Issues Proposed Regulations Relating to Service Provider Disclosures.
The Department of Labor published two proposed rules in today’s (Dec. 13) Federal Register relating to service provider disclosures required by ERISA § 408(b)(2). One proposed regulation redefines what constitutes a “reasonable contract or arrangement” for purposes of the exemption from ERISA’s prohibited transaction provisions. The other proposed regulation provides for a class exemption for plan fiduciaries who enter into contracts with service providers that are not “reasonable” under ERISA because, unknown to the fiduciary, the service provider failed to comply with its disclosure obligations under the new companion regulation.
Claims Brought By Individuals Who Are Not Participants In ERISA Plan Are Not Preempted By ERISA.
The Ninth Circuit recently held that ERISA does not preempt claims brought by individuals who are not participants of the ERISA plan at issue. See Miller v. Rite Aid Corporation (9th Cir. October 11, 2007). In Miller, the Ninth Circuit vacated the decision of the federal trial court and remanded the case for further proceedings.
High Court Upholds Plan Sponsors' Right To Seek Reimbursement (pdf).
Reimbursement actions under ERISA.
U.S. Supreme Court Supports Subrogration-with Limits (pdf).
To no one’s surprise, the confi rmation hearings for Chief
Justice Roberts provided no insight into his views on
ERISA. But now he has authored the Supreme Court’s
unanimous ERISA decision in Sereboff v. Mid Atlantic
Medical Services, Inc. (May 15, 2006).
Benefits Alert: Supreme Court Strengthens Plan's Ability to Seek Reimbursement from Plan Beneficiaries.
The U.S. Supreme Court has held that plan fiduciaries can seek reimbursement from plan beneficiaries for medical expenses paid to cover injuries caused by third parties, if the beneficiaries recover damages from the third parties, so long as there are specifically identifiable funds in the possession and control of the beneficiaries.
Tennessee Employee's Retaliation Suit Moves Forward (pdf).
A federal judge in Tennessee recently
held that a worker who was fired
shortly after he underwent treatment
for Crohn’s disease may proceed with
his retaliation lawsuit. According to
the court, a reasonable jury could find
that the employer terminated the worker
because his treatments had caused
their insurance premiums to increase.
