Employer Law Report

Tag Archives: ERISA

Final association health plan regulations provide opportunity for small employers…maybe

In February, we reported that the Department of Labor (DOL) issued a proposed rule that could make it easier for small businesses to join together to purchase health insurance. That proposed rule sparked considerable debate on the general merits of association health plans (AHPs), as well as on the nuances of the proposed rule. Some commentators and experts remained skeptical of such arrangements, citing to the history of AHPs being used as a vehicle for fraud. Others were clearly in favor of any rule that might provide small employers with a new avenue to provide health coverage to their employees. …

Hurry up and wait: ERISA fiduciary rule delayed

While it took longer than many expected, the Department of Labor (DOL) issued a proposed rule that would provide a 60-day delay to the application of the new fiduciary rule and related prohibited transaction exemptions. As we reported in our previous blog, the rule was set to impose new fiduciary obligations on those who provide participant investment advice, which would have a trickle-down effect on the sponsors of qualified retirement plans in which those individuals participate. In anticipation of the original April 10, 2017 applicability date, many service providers and plan sponsors have already taken significant steps towards compliance.…

ERISA Section 510: wanting to be a participant, versus being a participant

Editor’s Note:  This blog first appeared last Thursday on our sister blog – Employee Benefits Law Report.

My assistant informed me that my patience is shot and I need to do something about that, so I am channeling my energy into one issue. Since health care reform was enacted, I have been hearing about how we should anticipate a flood of ERISA Section 510 (29 U.S.C. Section 1140) discrimination cases from people who are not participants under the plan terms, but want to be participants. I don’t get it.

ERISA Section 510 provides, “[i]t shall be unlawful for any …

U.S. Supreme Court decision: U.S. Airways, Inc. v. McCutchen

The United States Supreme Court issued an opinion earlier this week in an ERISA case regarding the breadth of Section 502(a)(3) relief, and the common-fund doctrine. While the decision was unanimous on the primary issues, the Court surprised us with a 5-to-4 split on a secondary issue. Overall, the decision in U.S. Airways, Inc. v. McCutchen is favorable for employers sponsoring health care plans. The decision is also favorable for health care plan participants in the aggregate because it allows for control of plan costs, and premiums, at a critical time when plans are gearing up for 2014 health care …

Sixth Circuit Decision Reminds Employers: Get Your Ducks in a Row at the EEOC Charge Stage and, for Goodness Sake, Know Your Own Policies

Gaglioti v. Levin Group, Inc. (6th Cir. Dec. 13, 2012), serves as a good reminder to employers to pin down their reasoning for terminating an employee at the start, and stick to it. In addition, all reasons for terminating an employee should be included in the termination meeting with the employee, or at the very least, at the EEOC charge stage, even if it might bruise the employee’s ego. Any change or supplementation to the original reason can make put the entire termination decision seem made up and send the employer to trial. It is also imperative that employers know …

The Fiduciary Exception to the Attorney-Client Privilege — “Document Everything” is a Best Practice, Except When It Isn’t

 The following was posted by our associate Seth Hanft on our sister blog Employee Benefits Law Report last Friday. It provides a great reminder to in-house counsel addressing employee benefit claims that their communications with their benefits personnel regarding employee benefits claims may not be protected by the attorney-client privilege. Keep in mind that both counsel and benefits managers often wear fiduciary and non-fiduciary hats when addressing benefits plans issues and it is not always clear which hat they are wearing when. Therefore, to avoid potential spill over of this fiduciary exception to their other areas of responsibility, in house

Porter Wright Launches Employee Benefits Blog

Employer Law Report is pleased to share with you the launching of Porter Wright’s latest blog – Employee Benefits Law Report – which we have created as a resource to help guide employers of all sizes through the complex administrative and legal challenges facing their employee benefit plans.

This blog – edited by my partners Ann Caresani and Rich Helmreich – will provide the latest information in a wide range of areas related to Employee Benefits including:

  • ERISA and employee benefits litigation
  • Health care reform
  • Retirement plans
  • Audits and correction
  • Benefits issues related to mergers and acquisitions
  • Employee Stock Ownership

ERISA Time Travel Continues

We recently blogged about an infrequent ERISA surprise from the US Supreme Court, in CIGNA v. Amara, and now we have a second ruling from the Supreme Court in that case, granting Amara certioria and remanding.  This is a procedural twist that is more interesting to lawyers than employers, but it underscores the point we made about uncertainty in this area:  we don’t really know what remedies are other "appropriate equitable relief" under ERISA, or know how much exposure employers face regarding their ERISA plans.  Establishing procedures for compliance with ERISA’s disclosure and other requirements is …

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 …

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 …

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.

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. …

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 …

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 …

Revenue-Sharing of 401(k) Plan Fees Did Not Breach Fiduciary Duty Under ERISA

In the first federal appellate decision addressing the new breed of ERISA “excess fee” cases, the U.S. Court of Appeals for the Seventh Circuit last week held, in Hecker v. Deere & Co that the Employee Retirement Income Security Act (“ERISA”) does not require an employer that sponsors 401(k) plans for its employees to disclose to plan participants that the plans’ investment advisor shared revenue with the affiliated plan trustee. According to the court, nothing in ERISA prohibits a fiduciary from selecting funds from one management company, or requires a fiduciary to scour the market to find the cheapest funds. The court …

The Supreme Court Upholds the Sixth Circuit in ERISA Conflict of Interest Case

The Supreme Court recently issued a decision in Metlife v. Glenn, U.S., No. 06-923 where it considered: (1) whether a plan administrator has a conflict of interest when it both evaluates a claim for benefits and pays that benefit claim; and (2) how that conflict of interest should be taken into account by a court reviewing a discretionary benefit determination.

To answer the first question, the Court relied on its decision in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989). The Court noted that in Firestone it held that a conflict of interest exists where the administrator …