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IRS Issues Regulations on Minimum Essential Coverage

The Internal Revenue Service (the ?Ç£IRS?Ç¥) issued proposed regulations regarding the individual mandate requirement under the Affordable Care Act.?á Specifically, the regulations address the requirement that individuals maintain ?Ç£minimum essential coverage.?Ç¥?á Beginning this year, a taxpayer is liable for a shared-responsibility payment if the taxpayer (or any nonexempt individual whom the taxpayer may claim as a dependent) does not have minimum essential health care coverage in a month included in that tax year.?á Married taxpayers filing a joint return are jointly liable for the payment.?á The IRS previously issued final regulations on the shared responsibility payment, but those regulations left a number of open issues, which the proposed regulations address.?á The proposed regulations apply to months beginning after December 31, 2013.?á The proposed regulations are available here.

Departments Issue New FAQs on Implementation of the Affordable Care Act and Mental Health Parity Act

The U.S. Departments of Labor, Health and Human Services, and Treasury published additional Frequently Asked Questions (?Ç£FAQs?Ç¥) clarifying certain provisions under the Affordable Care Act (?Ç£ACA?Ç¥) and the Mental Health Parity and Addiction Equity Act of 2008 (?Ç£MHPAEA?Ç¥).?á The FAQs provide guidance on several topics, including coverage of preventive services, cost-sharing limitations, expatriate health plans, wellness programs, fixed indemnity insurance, and the effects of the ACA on the MHPAEA.?á The FAQs are available here.

Appellate Court Finds Transfer of Interest under ERISA Successor Liability Test

A company that was managed by the owner?ÇÖs son went out of business while it was behind on payments to a multiemployer pension plan.?á The son then launched two new businesses. The first entity bought some of the equipment from the company, while the second entity serviced the company?ÇÖs former customers using the company?ÇÖs former equipment that it leased from the first entity.?á The pension plan sought to collect the overdue payments from the two new entities under ERISA?ÇÖs successor liability provisions.?á The U.S. Court of Appeals for the Seventh Circuit affirmed the district court?ÇÖs application of ERISA?ÇÖs two-pronged successor liability test, finding that successor liability attaches if (1) the successor had notice of the claim before the acquisition and (2) there is substantial continuity of operation of the business before and after the sale. Sullivan v. Running Waters Irrigation, Inc., No. 13-1308 (7th Cir. Jan. 9, 2014).

Appellate Court Holds that Plan Fiduciaries May Rely on Lawyers

After a law firm?ÇÖs underfunded pension plan terminated, a participant sued the directors who administered the plan, alleging that she was placed into the wrong pool of employees when her benefit was determined.?á The directors claimed that they relied on the advice of counsel in making their determination.?á The participant responded that they were not entitled to rely on that advice because it was based on a mistake of fact that they would have discovered had they undertaken an independent investigation.?á The U.S. Court of Appeals for the D.C. Circuit held that prudent fiduciaries making important decisions may rely on the advice of counsel and have no duty to independently investigate where the facts show there was no reason for the directors to question the advice of counsel.?á Clark v. Feder Semo & Bard, P.C., No. 12-7092 (D.C. Cir. Jan. 7, 2014).

Texas Supreme Court Limits The Scope Of The Contractual Liability Exclusion

On Friday, January 17, 2014, the Texas Supreme Court issued its opinion in Ewing Construction Company v. Amerisure Insurance Company?Çöholding that ?Ç£a general contractor who agrees to perform its construction work in a good and workmanlike manner, without more, . . . does not ?Çÿassume liability?ÇÖ for damages arising out of its defective work so as to trigger the Contractual Liability Exclusion.?Ç¥ ?áA copy of the Court’s opinion can be found here. The case came to the Texas Supreme Court on certified questions from the Fifth Circuit Court of Appeals arising out of Ewing?ÇÖs request for defense and indemnity from Amerisure for underlying allegations of faulty construction of a school tennis court.?á The district court granted summary judgment for Amerisure, concluding that despite allegations of negligence, the underlying claims against Ewing were only contractual in nature.?á Moreover, Ewing?ÇÖs entry into a contract to build the underlying tennis court constituted the… Continue Reading

Court Allows ERISA Claims to Proceed against Employer?ÇÖs ?Ç£Church?Ç¥ Plan

The U.S. District Court for the Northern District of California held that for a pension plan to be a ?Ç£church plan,?Ç¥ exempt from ERISA?ÇÖs requirements, it must have been established by a church or convention of churches.?á The court reasoned that even though ERISA had been amended to permit a church plan to be ?Ç£maintained?Ç¥ by a church-associated organization, the amendment did not obviate the requirement that the church plan be ?Ç£established?Ç¥ by a church or convention of churches.?á The court declined to defer to the IRS?ÇÖs interpretation, set forth in a series of private letter rulings, on the grounds that those rulings only apply to the persons who request them and are not entitled to judicial deference.?á As a result, the court did not dismiss an employee?ÇÖs claim that the employer?ÇÖs plan was subject to, and not in compliance with, ERISA. Rollins v. Dignity Health, No. C13-1450 TEH (N.D.… Continue Reading

What Does the Fox Case Say? No Standing to Assert Fiduciary Breach without Showing of Personal Harm

The U.S. District Court for the District of Columbia reminds plaintiffs that they may have standing under ERISA for their suit, but they also must have standing to sue under Article III of the U.S. constitution.?á Article III requires plaintiffs to allege a personal stake in the outcome in order to have standing to sue.?á The court followed previous cases which have held that multiemployer plan participants do not have Article III standing to sue plan trustees for breach of fiduciary duty unless the financial viability of the plan is at stake.?á The trustees had failed to collect contributions from the long-delinquent employer, but there was no allegation that those failures adversely affect the plaintiff?ÇÖs benefits under the plan. Although the employees sued on behalf of the Plan, because they could not show that the trustees?ÇÖ failure directly harmed their benefits, there was no injury, and the suit was dismissed… Continue Reading

Participant Awarded $3.8 Million as Disgorgement of Profits Made on Unpaid Benefit

A former employee sued for denied benefits and breach of fiduciary duty when his employer-provided long-term disability insurance benefits were denied.?á The U.S. Court of Appeals for the Sixth Circuit affirmed the district court?ÇÖs award of the denied benefits.?á The Sixth Circuit also affirmed disgorgement of $3.8 million of the insurer-defendant?ÇÖs profits on the unpaid disability amount.?á The disgorgement was appropriate as ?Ç£equitable relief?Ç¥ for breach of fiduciary duty to prevent defendant?ÇÖs unjust enrichment.?á The $3.8 million was calculated based on defendant?ÇÖs return on average equity, as opposed to returns on investment income, because the defendant held the unpaid benefits in its general account where it could be used for any business purpose, as opposed to a segregated investment account. Rochow v. Life Insurance Co. of North America, No. 12-2074 (6th Cir. Dec. 6, 2013).

PBGC Modifies Payment Due Date for Large Pension Plan Flat-Rate Premiums

The PBGC, on January 3, 2014, moved the flat-rate premium due date for large single-employer and multiemployer pension plans (i.e., those with 500 participants or more) to the same date as the variable-rate premium due date for single-employer plans.?á The 2014 plan year flat-rate premiums for large calendar-year plans will be due by October 15, 2014, instead of February 28, 2014. ?áOther changes to make the premium rules more effective and less burdensome will be implemented through separate final regulations.?á A copy of the Final Regulations is available here.

Proposed Regulations Issued on Exemption for Limited Scope Dental/Vision and EAPs

Proposed regulations issued by the Departments of Treasury, Labor and Health and Human Services (the Departments) modify the excepted benefit exemption for limited scope vision and dental benefits, as well as employee assistance programs (EAPs).?á The regulations also add a new exemption for ?Ç£limited wraparound coverage.?Ç¥?á Coverages that satisfy the exemption are not subject to some of the requirements imposed by the Health Insurance Portability and Accountability Act (HIPAA) and the Patient Protection and Affordable Care Act (PPACA).?á The proposed regulations eliminate the additional employee contribution requirement for a self-insured limited scope dental or vision plan to be considered an excepted benefit, and provide specific criteria that EAPs must meet to be considered excepted benefits.?á In addition, the regulations provide a new excepted benefit exemption for ?Ç£limited wraparound coverage.?Ç¥?á Until the proposed regulations are finalized, through at least 2014, the Departments will consider dental and vision benefits, and EAPs meeting… Continue Reading

January 2014