A former employee alleged that Aetna, as administrator of FedEx’s short-term disability plan, breached its fiduciary duty under ERISA when Aetna reported to FedEx that the employee filed a disability claim for substance abuse and Aetna later failed to correct this report. FedEx’s drug policy stated that the disability vendor (Aetna) would notify FedEx when an employee sought benefits for substance abuse. The U.S. Court of Appeals for the Tenth Circuit found that compliance with FedEx’s policy could not constitute a breach of fiduciary duty and Aetna had not provided inaccurate information to FedEx and thus the appeals court upheld the district court’s summary judgment on the claim. Williams v. FedEx Corp. Services and Aetna Life Ins. Co., No 16-4032 (10th Cir. Feb. 24, 2017)
In proposed regulations recently released, the DOL delayed the effective date of its new fiduciary duty rule and related exemptions by 60 days, from April 10, 2017 to June 9, 2017. The DOL’s announcement follows a presidential memorandum issued on February 3, 2017, directing the DOL to reconsider the new fiduciary duty rule to determine whether it may adversely affect the ability of individuals to gain access to retirement information and financial advice. The 60-day extension is intended to give the DOL time to collect information and to consider comments it receives related to issues raised in the presidential memorandum before the rule and exemptions become effective. For additional information on the fiduciary duty rule in its current form, please see our blog post. View the proposed regulations.
Within three years following the acquisition of Anheuser-Busch Companies (the “Company”) which resulted in a change-in-control, the Company sold its entertainment division. The Company’s pension plan provided that a plan participant “whose employment with the Controlled Group is involuntarily terminated within three (3) years after the Change in Control” would be eligible for enhanced pension benefits. The Company determined that the employees of the entertainment division were not eligible for enhanced pension benefits because they continued working with the successor entity after the sale and therefore did not terminate employment. The district court and the Eighth Circuit disagreed. Applying a plain-text analysis to the plan, the Eight Circuit determined that because the employees were no longer employed with the controlled group, their “employment with the Controlled Group” had terminated. Although the plan granted the Company discretion to interpret terms and decide benefits, it was an abuse of discretion to not… Continue Reading
Last December, we reported on the DOL’s release of final regulations revising ERISA’s claims procedures for disability benefits. A more in-depth review of the types of benefit plans affected by these final regulations is available on our companion blog, HB Health and Welfare.
The U.S. Court of Appeals for the Ninth Circuit, sitting en banc, recently held that plaintiffs’ breach of fiduciary duty claims were not barred by ERISA’s six year limitations period, even when the retirement plan investments in question were selected by the plan’s fiduciary more than six years prior to plaintiffs’ suit. The Ninth Circuit applied the U.S. Supreme Court’s recent decision in this case, which confirmed that fiduciaries have an ongoing fiduciary duty to monitor investments in retirement plans and to remove imprudent ones. (For additional information on the Supreme Court’s decision, please see our prior post.) The Ninth Circuit distinguished between a fiduciary’s duty to prudently select investment alternatives from the fiduciary’s duty to prudently monitor them. Consequently, a fiduciary’s ongoing duty to monitor plan investments could result in a series of breaches as an investment alternative is retained over time. The Ninth Circuit remanded the case back… Continue Reading
A recent federal district court case demonstrates the risk to an ERISA fiduciary’s personal assets when he commits a fiduciary breach. The court previously held that the former owner of a privately-held company engaged in a prohibited transaction and breached his fiduciary duties when he sold shares of company stock to his company’s leveraged ESOP at prices in excess of its fair market value. The district court required the owner to provide assets, including several cars, as security in conjunction with his motion to stay enforcement of the judgment pending appeal, stipulating that if the judgment were upheld, the security would be transferred to the plaintiffs. When the U.S. Court of Appeals for the Fifth Circuit upheld the judgment, the owner refused to turn over the assets. The district court is now ordering the owner to turn over the assets despite any hardship that it may cause the owner. Perez… Continue Reading
Safeguards to Defend Against Conflict of Interest Allegations in the Administration of ERISA Welfare Benefit Claims
In cross-motions for summary judgment in Geiger v. Aetna Life Insurance Company, the U.S. Court of Appeals for the Seventh Circuit considered whether Aetna, the designated claims fiduciary and insurer of disability benefits provided under an employer-sponsored ERISA welfare benefit plan, abused its discretion when it terminated the plaintiff’s disability benefits. The plaintiff was a former employee of the employer-plan sponsor. The terms of the plan specifically granted discretionary authority to Aetna with respect to determining benefits and construing the terms of the plan. However, the plaintiff alleged that Aetna had operated under a conflict of interest, as the party that both determined eligibility for and paid plan benefits, and thus abused its discretion in denying her claim. In deciding that Aetna did not abuse its discretion, the Court considered the following four safeguards that Aetna had undertaken to minimize any conflict of interest: (i) Aetna obtained numerous independent physician… Continue Reading
The U.S. Department of Labor issued final regulations revising the ERISA claims procedures that apply to employee benefit plans offering disability benefits. Generally, these final regulations extend certain procedural rules applicable to claims submitted under group health plans to disability benefit claims submitted under ERISA plans that provide disability benefits. The final regulations apply to claims for disability benefits filed on or after January 1, 2018. View the final regulations here.
The DOL has issued the first of several FAQs addressing the DOL’s new fiduciary rule, which was finalized in April 2016 (the “Rule”). The Rule, which will generally become effective on April 10, 2017, prohibits parties that provide fiduciary investment advice to plan sponsors, plan participants, and IRA owners from receiving payments that create conflicts of interest, unless the parties comply with a prohibited transaction exemption (“PTE”). The FAQs generally address how the Rule will be implemented and clarify a number of issues related to the new “best interest contract” and “principal transactions” PTEs. View the FAQs. View the DOL’s announcement of the FAQs.
The DOL issued a press release announcing its recent settlement with fiduciaries of a group health plan (the “Plan”) sponsored by Sierra Pacific Industries, a major western lumber producer. The press release followed the conclusion of a DOL investigation that determined the Plan did not comply with the Affordable Care Act (“ACA”) and ERISA in certain respects. In particular, the DOL found problems with the Plan’s claims processing, with the clarity of the Plan’s documents, and with the application of the Plan’s procedures for deciding claims. In addition, the DOL found the Plan had been administered erroneously under ACA “grandfathered status” since January 1, 2013. As a result of this investigation, the Plan’s fiduciaries agreed to (i) revise the Plan’s documents and internal procedures; (ii) re-adjudicate past claims for preventive services, out-of-network emergency services, claims affected by an annual limit, and pay claims in compliance with the ACA and ERISA;… Continue Reading