Employer Law Report

Archives: Employee Benefits/ERISA

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Supreme Court Time Travels with an ERISA Case

Supreme Court decisions about ERISA cases, while infrequent, typically contain some surprises, as demonstrated most recently in CIGNA Corp. v. Amara.

In 1997, CIGNA notified employees that it was freezing accruals under its traditional defined benefit plan, and converting the plan into a cash balance plan. A cash balance plan is a "hybrid" defined benefit plan with features similar to a defined contribution plan. The method for determining accruals under the cash balance plan is different from the method under the traditional defined benefit plan, and in many cases takes into consideration the benefits already accrued under the traditional …

Sixth Circuit Upholds Denial of ERISA-Based Income Protection Benefits; Plan Administrator Need Not Investigate Whether the Employer Violated FMLA

As demonstrated by the Sixth Circuit’s recent decision in Farhner v. United Transportation Union Discipline Income Protection Program, a well-drafted ERISA income protection or severance pay plan should enable the plan administrator to rely on the employer’s stated reason for termination of an employee, rather than conducting an independent review of the facts regarding the termination.

In May 2004, Mark Farhner, a trackman and conductor for the Kansas City Southern Railroad sought a three-month leave of absence for "medical reasons." KCSR’s human resources manager requested additional information from Farhner to justify his request. When Farhner’s vacation leave had been …

Health Care Reform Dilemmas for Employers Sponsoring Group Health Plans

Many employers sponsoring group health plans are asking ….

What employee benefit plan-related changes are required by the Patient Protection and Affordable Care Act?

When must these changes be implemented?

Will these changes raise costs, and what penalties and fees might my company face for non-compliance?

We have just issued a Law Alert that discusses these and other dilemmas facing employers sponsoring group health plans. We also have record attendance scheduled to attend our Employment Relations Seminar next Tuesday, May 4, 2010 at the Hilton Columbus at Easton Town Center, where we will be discussing "Health Care Reform: What Employers Need …

Congress Extends COBRA Subsidy for A Third Time–Until May 31, 2010

Last week, the President signed into law House Resolution 4851, which extends several government programs through May 31, 2010, including the ARRA COBRA subsidy. House Resolution 4851 is referred to as the Continuing Extension Act of 2010. It simply extends the previous COBRA subsidy cut-off date of March 31, 2010 to May 31, 2010. The text of the law briefly explains that those terminated between April 1 and 15 will be retroactively covered by the law similar to past extensions of the COBRA subsidy. 

Keep in mind that, as stated in my earlier posts on this subsidy, assistance eligible individuals who are involuntarily …

The Supreme Court Rejects Actuarial Heresy in Conkright v. Frommert

Rejecting actuarial heresy, the United States Supreme Court has refreshingly acknowledged that “People make mistakes. Even administrators of ERISA plans.” Specifically, the Court held that a single honest mistake in plan interpretation does not justify stripping the administrator of deference for subsequent related interpretations.

In Conkright v. Frommert, a case that has been winding through the courts for the past decade, rehired employees of Xerox Corporation alleged that the Xerox pension plan administrator improperly offset their benefit calculations for prior lump sum distributions of pension benefits. Their claims involved a series of plan amendments, communication to participants, and how the plan administrator …

The Health Reform Bill: What Do Employers Need to Know?

Following a year-long contentious debate, Congress finally passed the President’s top domestic agenda item: Health Reform.

Sunday, the House of Representatives passed the Senate version of the Health Reform Bill by a slim margin (three votes more than required) and no Republican support. The Bill contains broad reforms that make numerous significant changes to the ways in which healthcare is accessed, delivered and financed. Some of the noteworthy changes (and effective dates) for employers to consider are the following:

  •  Employers with 200 or more employees that sponsor a health plan must automatically enroll all employees in the employer-sponsored plan. Employees may

Congress passes temporary COBRA subsidy extension through March 31, 2010

Congress recently passed the Temporary Extension Act of 2010, which, in addition to extending unemployment benefits, extends and expands the COBRA premium subsidy originally provided by ARRA (the stimulus bill). The new law extends the end of the eligibility period for the COBRA subsidy from February 28, 2010 to March 31, 2010. This means that individuals involuntarily terminated between September 1, 2008 and March 31, 2010 are eligible for 15 months of subsidized COBRA premiums—with the employee paying only 35% of the actual COBRA premium.

The recent extension also expands the COBRA subsidy to those who lost their health insurance coverage as …

Ohio extends State Mini-COBRA Health Insurance Continuation Coverage From 12 to 15 Months

Governor Strickland just signed into law a bill (House Bill 300) that would extend Ohio’s state “mini COBRA” coverage for any policies delivered, issued, or renewed on or after February 25, 2010.

The coverage under the Ohio mini-COBRA law will be extended from 12 months to 15 months so long as the employee is eligible for the federal COBRA subsidy. At present, the federal COBRA subsidy does not apply to any employees involuntarily terminated after February 28, 2010. This state extension was passed in anticipation of a federal extension of the COBRA subsidy beyond that date, which is presently under consideration in …

Department of Labor Announces that Sample Notices for Extended COBRA Subsidy Will Be Forthcoming

As you will recall from my earlier post, Congress and the President extended the COBRA subsidy, originally a part of the American Recovery and Reinvestment Act of 2009 (ARRA) (the stimulus bill), to individuals involuntary terminated through February 28, 2010 (from December 31, 2009) and the length of the subsidy to 15 months (from 9 months). 

This COBRA subsidy extension will require new notices be sent to individuals involuntarily terminated (and otherwise qualifying under ARRA as an “assistance eligible individual” (AEI)). These model notices were released yesterday, and, in many cases, AEIs must be notified by February 17, 2010. The Department of …

Facebook Photos Prompt Termination of Long Term Disability Benefits

CBC News in Canada is reporting that a Canadian long-term disability insurance carrier recently terminated the long-term disability benefits a Quebec woman was receiving for "major depression" after photos she posted on her Facebook page showed her "having a good time at a Chippendales bar show, at her birthday party and on a sun holiday." According to the CBC, the woman, 29-year-old Nathalie Blanchard, contends that her doctor recommended that she try "to have fun, including nights out at her local bar with friends and short getaways to sun destinations, as a way to forget her problems." Nevertheless, Manulife, the …

GINA Interim Final Regulations: Highlights and the Potential Impact on Group Health Plans

On October 7, 2009, the DOL, IRS, and HHS issued interim final regulations implementing Sections 101 to 103 of the Genetic Information Nondiscrimination Act of 2008 (GINA). For group health plans, these regulations become effective on the first day of the plan year beginning on or after December 7, 2009. For the individual market, the regulations are effective December 7, 2009. The new regulations broaden GINA’s general prohibition on requesting or requiring an individual or their family member to undergo genetic testing. Of note is the new rule that health plans may not provide incentives to induce participants to fill …

Breach Notification Under the HITECH Act: Action Points for Employers Who Sponsor Self-Insured Group Health Plans

As we previously have noted, the Department of Health and Human Services recently issued an interim final rule under the HITECH Act requiring HIPAA-covered entities to notify each individual whose unsecured PHI has been, or is reasonably believed by the covered entity to have been, accessed, acquired, used, or disclosed as a result of a breach of unsecured protected health information.  Employers who sponsor self-insured group health plans need to take immediate action to ensure compliance with the new rule. Among other things, employers should be modifying written HIPAA privacy policies and procedures, training plan sponsor workforce members who …

Michael Vick Gets Released From the ERISA Doghouse, But Could You be Next?

Sports fans, you can breath easier about your fantasy football lineups — Michael Vick is out of the doghouse with the U.S. Department of Labor, presuming he complies with a consent judgment. We had cautioned in an earlier post that Vick’s release from prison did not necessarily mark the end of his government obligations, given DOL allegations of ERISA violations. As explained in the DOL’s press release, the DOL’s complaint alleged that Vick and others improperly removed $1.35 million of pension plan assets to help pay the criminal restitution imposed on Vick after his conviction for unlawful dog fighting, and to …

More Case Law Regarding Documentation Required to Revise or Terminate Negotiated Retiree Healthcare Benefits

The Sixth Circuit has decided two new cases regarding ERISA lifetime retiree healthcare benefits under a collective bargaining agreement, continuing to put a thumb on the scale in favor of vested benefits, but recognizing that an employer may have the right to make “reasonable modifications” to those benefits. In an earlier post, we discussed the hurdles in place for employers attempting to reduce or eliminate these benefits.

In Reese v. CNH Am. LLC, No. 08-1234/1302/1912 (July 27, 2009), a group of retirees sought a declaration that they were entitled to lifetime healthcare benefits under a 1998 collective bargaining …

DOL Scrutinizes ERISA Plan Audits

Do you sponsor any employee benefit plans that are required to be audited on annual basis? If yes, you should be aware that the DOL is targeting certain auditors and is seeking penalties from the plan administrator (typically, the employer) of up to $1,100 per day, or $50,000 per annual report, when it believes that the audit work is deficient. There are a number of due diligence steps you can take in an effort to comply with ERISA responsibilities, and to reduce exposure in this area.  For a discussion of these steps, please read our recent Client Alert: DOL Scrutinizes ERISA Plan Audits.

HHS Publishes HITECH Interim Final Rule

On August 24, 2009, the U.S. Department of Health and Human Services ("HHS") published its interim final rule in the Federal Register, thereby implementing the HITECH Act. The Act’s breach notification rules will become effective on September 23, 2009 — fewer than 30 days away. 

Therefore, as the Act relates to employer-sponsored group health plans and health care providers, any breaches of protected health information (PHI) that occur on or after September 23rd must be reported to the affected individuals and, when the breach impacts 500 or more individuals, to HHS and the media. Covered entities must make annual reports of breaches of …

Supreme Court Issues Decision in AT&T v. Hulteen

On May 18, 2009, the Supreme Court of the United States issued its opinion in AT&T v. Hulteen. Reversing the Ninth Circuit’s decision, the Court held that AT&T did not violate the Pregnancy Discrimination Act of 1978 (PDA) by calculating the accrual of pension benefits in a way that gives less retirement credit to employees who took pregnancy leave before enactment of the PDA than to employees who took other kinds of medical leave.

AT&T offered pension benefits based on Net Credited Service, which was calculated based on an employee’s date of hire and adjusted for any time the employee …

Michael Vick Now in the Doghouse with DOL for Alleged ERISA Violations

As discussed in its press release, the U.S. Department of Labor has sued former — and likely future — NFL quarterback Michael Vick (and two of his financial advisors) to recover assets removed from the ERISA pension plan sponsored by his celebrity marketing company for the benefit of the company’s employees. The DOL’s Complaint, filed in federal court in Virginia, alleges that Vick and his advisors improperly removed the funds, and used the plan assets to pay criminal restitution charges stemming from his conviction for dog fighting charges. They also allegedly used the assets to pay Vick’s bankruptcy attorney. …

One More Year to Protect Certain Executive Compensation Plans from Tax Penalties

Many executive compensation arrangements, including nonqualified deferred compensation plans, employment agreements, and equity compensation plans, are subject to strict deferral election and payment timing rules under Internal Revenue Code Section 409A. Failure to comply with these rules results in an employee incurring immediate income inclusion of amounts deferred, an additional 20% penalty tax on these amounts, and interest. The IRS and Treasury Department required all plans subject to Code Section 409A to be amended no later than December 31, 2008. More recently, the Department of Treasury and the IRS have issued proposed regulations that explain how to calculate amounts includible …

Ohio Mini-COBRA Law Changes

Small employers providing health care benefits to employees residing in Ohio need to take note of changes in Ohio’s continuation coverage law, sometimes referred to as “mini-COBRA.”

The trigger for this law change was the COBRA premium subsidy provision included in the recent federal economic stimulus bill, which we have discussed in a series of prior posts and a recent webinar. But the changes in the Ohio mini-COBRA law extend beyond the premium subsidy issue, and continuation coverage will now be now be available to more individuals, as follows:

  • Coverage has been extended from 6 months to 12 months
  • Entitlement

An Important Reminder: Collective Bargaining Agreements Can Prevent Employers from Reducing or Terminating Retiree Medical Benefits

Struggling employers have been asking, can we reduce or eliminate retiree medical benefits? The Supreme Court has held that welfare benefits regulated by the Employee Retirement Income Security Act (ERISA) do not usually vest, and courts have generally followed the Sixth Circuit’s presumption that retiree medical benefits are not vested, unless the plan documents confer vesting. Thus, with proper reservation of the right to amend and terminate the plan, and consistent communications, an employer may be able to terminate these benefits without much risk of successful challenge.

But what if employees are unionized? In that case, the plan documents are not enough; courts …

IRS COBRA Guidance: What is an “Involuntary Termination?” Potential Disputes Lurk in Definitions

On Tuesday, March 31, 2009, the IRS issued its Notice 2009-27 providing additional guidance under the American Recovery & Reinvestment Act of 2009 (“ARRA”) relating to premium subsidies for COBRA coverage. The Notice addresses a number of issues, including the question of who is eligible for the subsidy, the method for calculating the premium reduction, and the length of the entitlement to the subsidy. [View the notice here.]

Of particular interest to employers is the guidance concerning what will be considered an “involuntary termination” entitling persons to the premium subsidy. The IRS gives this broad definition: “An involuntary termination means a severance …

Sixth Circuit Holds that Plant-Closure Decision Did Not Interfere with ERISA-Protected Pension Rights

The Sixth Circuit recently held that, even though eliminating labor costs (and by implication, costs of retirement benefits) was an incidental factor in a plant-closure decision, the decision did not violate the Employee Retirement Income Security Act (ERISA) because the motivating factor in the employer’s decision was production overcapacity.  In doing so, the Court declined to fashion a bright-line rule that plant closures are never actionable under ERISA.  Instead, the Court held that, where affected employees can show that interference with attainment of ERISA-covered benefits is the motivating factor behind the closure, the decision violates ERISA.

Automotive supplier TRW …