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Fifth Circuit Reverses Established Circuit Precedent, Holding that Make-Whole Monetary Damages are an Available Remedy Under ERISA

The U.S. Court of Appeals for the Fifth Circuit (whose jurisdiction covers Texas), became the second federal appeals court to reverse established precedent by ruling that make-whole money damages are an available remedy under ERISA, citing the recent Supreme Court decision in Cigna Corp. v. Amara. Prior to Amara, the Fifth Circuit, and others, held that ?Ç£other equitable relief?Ç¥ permitted under ERISA section 502(a)(3) was limited to traditional equitable remedies, such as injunctions or restitution, and not to make-whole money damages. The Fifth Circuit concluded that its prior precedent had been overruled by Amara and remanded the case back to the district court. Gearlds v. Entergy Services, Inc., No. 12-60451 (5th Cir. Feb. 19, 2013).

Deferred Compensation Reminder

Section 409A of the Internal Revenue Code, regulating deferred compensation arrangements, can create traps for employers in situations where the employer wants to offset against amounts owed to the employer, unpaid amounts owed by the employee. For instance, if an employee has an obligation to reimburse an employer for certain expenses, that obligation cannot provide that the employer can offset that obligation against amounts of deferred compensation the employee is entitled to receive in the future. These types of offsets are considered prohibited accelerations of the deferred compensation payments, in violation of Section 409A. There is a limited exception for an offset of future deferred compensation amounts so long as the offset does not exceed $5,000. An employer also is not prohibited from making offsets from deferred compensation amounts at the time those amounts are otherwise payable.

March 2013