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Fifth Circuit Resolves Split with Other Circuits on Standard of Review

Generally, when discretionary authority is delegated to the plan administrator of an ERISA plan, a court reviewing the denial of a benefits claim is limited to determining whether the plan administrator abused its discretion in denying the claim. In a prior seminal case, Firestone Tire & Rubber Co. v. Bruch, the U.S. Supreme Court held that, when there is no delegation of discretionary authority, a denial of benefits is to be reviewed de novo (i.e., without deference to the plan administrator’s previous decision). The U.S. Court of Appeals for the Fifth Circuit (whose jurisdiction includes Texas, Louisiana, and Mississippi) interpreted Firestone to only require de novo review of a denial of benefits based on an interpretation of plan language, but not denials based on factual determinations. The Fifth Circuit recently overturned its longstanding precedent in order to bring its interpretation of Firestone in line with eight other federal circuit courts… Continue Reading

IRS Reduces HSA Family Coverage Contribution Limit for 2018, Effective Immediately

On March 5, 2018, the IRS issued Revenue Procedure 2018-18 (“Rev. Proc. 2018-18”), which, among other things, reduced by $50 the maximum annual contribution that an employee who has elected family coverage under the employer’s high deductible health plan (“HDHP”) could make to his or her health savings account (“HSA”) for 2018. Under the Internal Revenue Code, the applicable limits for HSAs are adjusted annually for any cost-of-living adjustments (“COLA”). Prior to the recent enactment of the Tax Cuts and Jobs Act (H.R. 1) (the “Tax Act”), COLAs were based on the Consumer Price Index (“CPI”). The Tax Act changed the basis of COLAs to instead use the Chained Consumer Price Index for All Urban Consumers (“C-CPI-U”). The HSA family coverage contribution limit that was previously announced by the IRS for 2018 was $6,900, which reflected a CPI-based COLA. The revised limit, pursuant to Rev. Proc. 2018-18 and reflecting the… Continue Reading

New Federal Budget Impacts Qualified Retirement Plans

The recently enacted Bipartisan Budget Act of 2018 (the “Act”) modifies certain Internal Revenue Code provisions relating to hardship distributions from qualified retirement plans that (i) eliminate the requirement that a participant’s deferrals be suspended for six months following a hardship distribution, (ii) eliminate the requirement that participants take out all available plan loans before receiving a hardship distribution, and (iii) expand the sources available to fund hardship distributions to include QNECs and QMACs. These changes to the hardship distribution rules are effective for plan years beginning on or after January 1, 2019. In addition to the changes for hardship distributions, the Act provides additional relief for victims of the recent California wildfires that permits eligible plan participants to receive a distribution of up to $100,000, which will not be subject to the mandatory 20 percent income tax withholding or the 10 percent early withdrawal penalty. The participant may elect… Continue Reading

Settlement of HIPAA Privacy and Security Rule Violations Costs Covered Entities $3.5 Million

HHS recently entered into a $3.5 million settlement agreement with a health care provider (the “Provider”) on behalf of five entities under its common ownership and control for violations of the HIPAA privacy and security rules. Each of the five entities constituted a “covered entity” under HIPAA. In 2013, the Provider filed five breach reports with HHS, each of which pertained to a separate incident that implicated the “electronic protected health information” (“EPHI“) of one of those covered entities. HHS’s subsequent investigation of the breaches revealed a number of violations of the HIPAA privacy and security rules, including that certain of the covered entities: Failed to conduct an accurate and thorough risk analysis of potential risks and vulnerabilities to the confidentiality, integrity, and availability of EPHI; Provided unauthorized access to EPHI for a purpose not permitted by the HIPAA privacy rules; Failed to implement policies and procedures to address security… Continue Reading

U.S. Supreme Court Rules Lifetime Retiree Health Benefits Cannot be Inferred from CBA

In the case of CNH Industrial N.V. v. Reese, an employer and certain retirees disputed whether an expired collective bargaining agreement (“CBA”) covering union employees created a vested right to lifetime retiree health benefits. The retirees had successfully argued at the U.S. Court of Appeals for the Sixth Circuit that the duration of their retiree health benefits was ambiguous because the CBA was silent on that issue, which enabled the Sixth Circuit to consider other extrinsic evidence to support its finding that retiree health benefits were vested for life. The Supreme Court, however, disagreed, reasoning that (i) silence alone regarding the duration of retiree health benefits did not make the CBA ambiguous in that regard and (ii) ambiguity required the terms of the CBA to reasonably support an interpretation that retiree health benefits were intended to be vested for life before any extrinsic evidence could be applied. Consequently, the Supreme… Continue Reading

PTAB Goes Off-Roading With Commercial Success and Teaching Away Analysis

Recently, in Polaris Industries, Inc., v. Arctic Cat, Inc., No. 2016-1807, 2016-2280 (Fed. Cir. February 9, 2018), the Court of Appeals for the Federal Circuit (“CAFC”) overturned a Patent Trial and Appeal Board (“Board”) decision that all claims of a patent directed to a side-by-side all-terrain vehicle (ATV) were unpatentable as obvious in a first inter partes review (IPR), while affirming the Board’s decision that the claims of the same patent were not unpatentable in view of a different combination of references in a second IPR. Specifically, the CFAC found that the Board failed to conduct a proper teaching away analysis and failed to weigh Polaris’s argument of commercial success when determining certain claims were obvious. This appeal stems from two IPR petitions filed by Artic Cat challenging the patentability of U.S. Patent No. 8,596,405 (“the ‘405 patent”) after Arctic Cat was sued by Polaris for infringing claims of that… Continue Reading

DOL Increases Civil Monetary Penalties for Certain Violations of ERISA

The DOL recently issued a final rule that adjusts for inflation the amounts of civil monetary penalties assessed or enforced in its regulations, including for certain violations of ERISA. The adjusted penalty amounts apply to violations occurring after November 2, 2015, and for which penalties are assessed after January 2, 2018. Below is a list of some of the penalties that were increased: The maximum penalty for failing to properly file a pension or welfare benefit plan’s annual Form 5500 increased from $2,097 per day to $2,140 per day The maximum penalty for failing to provide notices of blackout periods or notices of the right to divest employer securities increased from $133 per day to $136 per day (and each statutory recipient constitutes a separate violation) The maximum penalty for failing to provide employees with the required notices regarding coverage opportunities under the Children’s Health Insurance Program, or CHIP, increased… Continue Reading

Collateral Estoppel Springs From Final IPR Decisions and Applies to Proceedings Involving the Same Claims and Claims Not “Patentably Distinct”

In MaxLinear, Inc. v. CF CRESPE LLC., No. 2017-1039, 2018 U.S. App. LEXIS 1930 (Fed. Cir. Jan. 25, 2018), the Federal Circuit vacated and remanded the Patent Trial and Appeal Board’s (PTAB) final written decision in IPR2015-00592 (the ‘592 IPR).  The PTAB had found that all instituted claims were not shown to be unpatentable, but during the pendency of the appeal, the Federal Circuit affirmed a decision in another IPR finding the same patent’s independent claims unpatentable. The Federal Circuit then held that collateral estoppel applied and vacated the Board’s decision.  Because the PTAB focused solely on the now-invalid independent claims in its decision, the Court ordered the PTAB to consider on remand whether the dependent claims were “patentably distinct.” However, the Federal Circuit’s guidance on this point presents logical and procedural uncertainties for the PTAB, as it has been directed to consider prior art not of record in the… Continue Reading

Seventh Circuit Court of Appeals Holds that ERISA Does Not Pre-empt State Slayer Statutes

Anka Miscevic had a history of mental illness. While her husband Zelkjo was sleeping, she stabbed him in the chest and hit him over the head with a baseball bat, killing him. An Illinois state court found Anka not guilty by reason of insanity. The U.S. Court of Appeals for the Seventh Circuit, the first federal appellate court to address ERISA pre-emption of any state slayer statute, held that Illinois’s slayer statute was not pre-empted by ERISA. At the time of his death, Zeijko was a participant in a union pension fund. If a participant were married at the time of his or her death, the fund would pay a pre-retirement death benefit to the surviving spouse. If a participant were not married but had a minor child, the fund would pay a minor child benefit until the child turns 21. Both Anka and her minor child filed competing claims… Continue Reading

Deferred Effective Date of “Cadillac Tax” on High Cost Employer-Sponsored Health Coverage

In addition to maintaining the funding of the federal government through February 8, 2018, the recently enacted continuing resolution, H.R. 195, entitled the “Federal Register Printing Savings Act of 2017”, deferred by two additional years the date on which the excise tax on high cost employer-sponsored health coverage under the Affordable Care Act, the so-called “Cadillac Tax”, becomes effective. The effective date of the Cadillac Tax had previously been postponed until taxable years beginning after December 31, 2019 (see our prior blog post regarding that postponement). Under H.R. 195, the Cadillac Tax will now go into effect for taxable years beginning after December 31, 2021 (i.e., for calendar year health plans, January 1, 2022). View the text of H.R. 195.

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