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Sixth Circuit Rules Retiree Medical Benefits Were Vested for Employees and Spouses

In a recent opinion, the U.S. Court of Appeals for the Sixth Circuit held that a company violated the terms of two collective bargaining agreements in denying retirees and their spouses lifetime vested healthcare coverage following retirement.?á These union employees retired under 1994 and 1997 collective bargaining agreements and the company provided healthcare insurance for the retirees and their spouses after retirement.?á In mid-2006, the company communicated to the employees that it was instituting a new healthcare plan under which the company contributions to premiums would be reduced and the retirees subsequently filed suit.?á The district court issued a split decision that ruled in favor of the plaintiffs with respect to the retiree coverage, but in favor of the defendants with respect to the spousal coverage.?á The Court of Appeals reversed the district court?ÇÖs decision and ruled in favor of the plaintiffs with respect to both the retiree and spousal… Continue Reading

Denial Notice Guidance for Non-Federal Governmental Health Plans

The ERISA private right of action under section 502(a) is not available to participants or beneficiaries of non-federal governmental plans.?á However, the Patient Protection and Affordable Care Act requires non-federal governmental health plans to comply with the Department of Labor?ÇÖs claims procedure regulation and new model notices, including providing information on the ERISA private right of action under section 502(a).?á The U.S. Department of Health and Human Services recently issued an enforcement safe harbor pursuant to which the HHS will not enforce the requirement that non-federal governmental plans provide notice of the ERISA private right of action or provide contact information for the Employee Benefits Security Administration or a State Department of Insurance (unless the plan is fully-insured or such department otherwise provides assistance to such participants).?á However, such plans must provide other contact information for assistance provided by the plan and either the contact information for the state?ÇÖs Consumer… Continue Reading

A Tale of Two Lawsuits: Haynes and Boone Succeeds Before Texas High Court in Invasion of Privacy Case Involving Facebook Posts Attached to Court Pleading

The Supreme Court of Texas this month denied a former employee?ÇÖs petition for review of the dismissal of his invasion of privacy claims related to his former employer?ÇÖs use of posts from his Facebook page in a prior lawsuit. The saga began when the employer, a software company represented by Haynes and Boone, sued its former employee for violating his non-competition agreement by starting a competing software company shortly after leaving the former employer.?á During the course of the lawsuit, the employer discovered that the former employee was using online blogs and his Facebook page as a platform to negatively comment about the employer and its principals.?á The employer amended its petition to add a business disparagement claim, and attached copies of the posts at issue. Although the employer ultimately prevailed before the trial court in the underlying lawsuit for breach of the non-competition agreement, the former employee sued, among… Continue Reading

IRS Releases Guidance on Floor Segment Rates Available Under Recently Passed Pension Reforms

Notice 2012-55 provides guidance on the 25-year average segment rates that are applied to adjust the otherwise applicable 24-month average segment rates that are used to compute, among other things, funding targets under defined benefit plans.?á The guidance reflects changes to the Internal Revenue Code and ERISA made by the recently enacted Moving Ahead for Progress in the 21st Century Act (?Ç£MAP-21?Ç¥).?á MAP-21 included a pension funding stabilization provision which effectively puts a floor on the segment rates used for funding purposes, based on a historical 25-year average of segment rates (effectively decreasing the current funding costs).?á In the past, employers had to make pension fund liability calculations based on the segment rate average over the past two years.?á These rates have been historically low, which increases the amount employers need to commit to meet pension funding obligations.?á Under MAP-21, generally effective for plan years beginning on or after January… Continue Reading

Sixth Circuit Holds Stop-Loss Insurer Not Liable for Medical Expenses Incurred During Short-Term Disability Leave

Following a period of FMLA leave, an employee was placed by her employer on an approved short-term disability leave of absence (LOA), and she continued to be covered under her employer?ÇÖs group health plan for an additional six months.?á When her 6-month LOA expired, the employee was terminated and offered COBRA coverage.?á In the lawsuit between the employer and its stop-loss carrier over medical expenses incurred by the employee during her LOA, the U.S. Court of Appeals for the Sixth Circuit affirmed the federal district court?ÇÖs decision. ?áThe Sixth Circuit ruled that under the plain language of the plan, the employee was ineligible for coverage after her FMLA leave ended except through COBRA continuation coverage, which she was not offered until her LOA expired.?á As a result, the stop-loss carrier was not liable for claims incurred during the LOA. This problem could have been avoided if the plan and its… Continue Reading

Fifth Circuit Reverses Award of Benefits to Stepchildren and Rejects Imposition of Equitable Adoption into Plan?ÇÖs Definition of ?Ç£Children?Ç¥

In a case involving a thrift plan subject to ERISA, the Fifth Circuit Federal Court of Appeals reversed the district court?ÇÖs decision to award benefits under the plan to a deceased participant?ÇÖs stepchildren. Prior to the challenge by the stepchildren, the plan administrator distributed the participant?ÇÖs benefits to the participant?ÇÖs siblings, based on the priority of distribution set forth in the plan document. Because the plan afforded the plan administrator with discretionary authority to determine the eligibility for benefits, the court determined whether there was an abuse of discretion in the plan administrator?ÇÖs interpretation. The court concluded that because the plan administrator?ÇÖs interpretation of the term ?Ç£children?Ç¥ was ?Ç£legally correct?Ç¥ and there is nothing in the plan or ERISA requiring the plan administrator to incorporate the concept of equitable adoption into the plan?ÇÖs definition of children, there was no abuse of discretion. As a result, the court reversed the district… Continue Reading

Departments Release Additional FAQs on Summary of Benefits Coverage Requirement

On August 7, 2012, the U.S. Departments of Labor, Health and Human Services and the Treasury issued Part X in the set of FAQs addressing implementation of the Patient Protection and Affordable Care Act.?á The latest FAQ provides that the Summary of Benefits and Coverage (SBC) does not have to provide for Medicare Advantage benefit packages.?á As a reminder, for group health plan coverage, for disclosures concerning participants who enroll or re-enroll through an open enrollment period (including late enrollees and re-enrollees), the SBC must be provided beginning on the first day of the first open enrollment period that begins on or after September 23, 2012.?á For disclosures with respect to participants who enroll in coverage other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees), the SBC must be provided beginning on the first day of the first plan year that… Continue Reading

Preliminary Injunction Granted Against Enforcement of Contraception Mandate

The U.S. District Court for Colorado granted a preliminary injunction which prevents the federal government from enforcing the Patient Protection and Affordable Care Act?ÇÖs (?Ç£PPACA?Ç¥) contraception mandate against one family-owned business.?á The judge found that the threatened harms to the family and its business, impingement of their right to freely exercise their religious beliefs and the corresponding public interest in that right, strongly favored injunctive relief.?á The judge found that the family?ÇÖs and business?ÇÖs challenge under the Religious Freedom Restoration Act (?Ç£RFRA?Ç¥) involved questions so serious, substantial, difficult, and doubtful as to make the issue ripe for litigation and deserving of more deliberate investigation, which satisfied the standard for granting an injunction.?á Generally, the RFRA prevents the government from substantially burdening a person?ÇÖs exercise of religion unless there is a compelling governmental interest and it is the least restrictive means of furthering that interest.?á The government failed to demonstrate why… Continue Reading

Texas Supreme Court Holds No Privilege in Communication between Workers?ÇÖ Compensation Insurer?ÇÖs Attorney and Employer

In a recent decision, the Texas Supreme Court held that communications between an attorney for a workers?ÇÖ compensation insurer and the insured employer were not privileged. In the case, an injured employee sought the communications between the insurer?ÇÖs attorney and the insured employer during the administrative proceedings. The insurer argued that the attorney-client privilege protected those communications. The Texas Supreme Court held that the communications were not privileged and thus were not protected from discovery. The court stated that since the communications were not made to the insured employer?ÇÖs attorney, and the insured was not a party to the pending action, the privilege did not apply. In light of this decision, employers should review communications with workers?ÇÖ compensation insurers and, if deemed appropriate, use legal counsel to handle such communications to preserve the attorney-client privilege. In re XL Specialty Insurance Co., No. 10-0960 (Tex. June 29, 2012). The full opinion… Continue Reading

New DOL Guidance Regarding Fee Disclosures and Brokerage Windows

Previously, the United States Department of Labor (“DOL”) issued guidance suggesting that a plan fiduciary may not have met its fiduciary obligations if there are no designated investment alternatives under a plan (i.e., it is solely a brokerage window) or if a significant number of participants select an investment through a brokerage window and the fiduciary does not treat such investment as a designated investment alternative. The DOL issued new guidance replacing this previous guidance. In reversing its prior position, the new guidance clarifies that the fee disclosure regulation does not require that a plan have a particular number of designated investment alternatives and the selection through a brokerage window of a particular investment by a significant number of participants does not impose such a requirement. However, the guidance notes a fiduciary?ÇÖs failure to designate investment alternatives to avoid disclosure requirements would raise questions under ERISA?ÇÖs fiduciary duties of prudence… Continue Reading

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