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Practice Tip – Missing Participants Remain a Significant Concern for Retirement Plan Sponsors

When participants in qualified retirement plans are no longer current employees of the plan sponsor, it can be challenging to ensure that the contact information in the plan’s records is up to date and accurate. However, inaccurate contact information in the plan’s records is problematic for a variety of reasons, including causing operational failures when participants do not receive distribution of benefits by the plan’s required distribution date and increasing the possibility of fraud when a participant’s information is sent to the wrong address. Plan administrators should review their procedures for locating missing participants and ensure that they are (1) consistent with available guidance from the IRS and the DOL, (2) appropriate for the plan and its participant population, and (3) being followed consistently by the plan administrator or its delegate. Plan administrators should also document any steps undertaken to locate missing participants. The plan’s procedures should also address how… Continue Reading

Are Your Voluntary Benefits Programs Subject to ERISA?

An employer should be cautious to not “endorse” a voluntary benefits program that the employer wants to be exempt from ERISA. The DOL’s safe harbor exempting certain plans from ERISA (often called “voluntary plans”) requires the sole function of the employer to be, without endorsing the program, to permit the insurer to publicize the program to employees and to collect premiums and remit them to the insurer. Federal courts have found impermissible endorsements where employers either encouraged their employees to participate in their voluntary benefits program or selected the insurer and limited eligibility criteria. For example, in October 2018, the U.S. Court of Appeals for the Third Circuit decided a case involving whether the employer’s endorsement of a volunteer disability benefits program caused it to be subject to ERISA. The Court found that (i) a reasonable employee would not view the program as being merely a third-party offering and (ii)… Continue Reading

Patent Term Adjustment deductions for applicant delay are only appropriate when the Applicant could have taken steps to advance prosecution but failed to do so

In Supernus Pharmaceuticals, Inc. v. Iancu, No. 2017-1357 (Fed. Cir. Jan. 23, 2019), the Federal Circuit rejected the U.S. Patent and Trademark Office’s practice of deducting time from the patent term adjustment (PTA) for applicant delays during periods of time when the applicants had no reasonable steps to take to advance prosecution.  Slip op. at 19. The PTA statute provides that PTA will be reduced by the period of time during which the applicant failed to engage in reasonable efforts to conclude prosecution of the application.  35 U.S.C. § 154(b).  The U.S. Patent and Trademark Office (USPTO) promulgated regulations relating to PTA, including 37 C.F.R. § 1.704(c)(8), which states Submission of a supplemental reply or other paper, other than a supplemental reply or other paper expressly requested by the examiner, after a reply has been filed, in which case the period of adjustment set forth in § 1.703 [that extends the… Continue Reading

Practice Tip – Service Provider Contracts in M&A Due Diligence

In conducting due diligence in connection with a corporate transaction, it is common for buyers to request copies of the target’s current contracts with its benefit plan service providers like the recordkeeper and third party administrator. Buyers should also consider obtaining information regarding how long the target has been using their current service provider. If there has been a change in service providers in the prior several years, buyers should also consider requesting copies of contracts with the target’s previous service providers. This is true especially if there is a concern that there might be operational errors that would require correction, since information will likely have to be obtained from the plan’s prior service providers.

Puerto Rico Treasury Announces Qualified Retirement Plan Limits for 2019

The Puerto Rico Department of the Treasury recently issued Circular Letter Internal Revenue No. 18-21 (the “Circular”), which announced applicable qualified retirement plan limits for 2019, as required by the Puerto Rico Internal Revenue Code of 2011, as amended (the “PR Code”). For plans qualified only in Puerto Rico, the limits on elective deferrals, catch-up contributions, and after-tax contributions all remain unchanged for 2019, while the limits on annual benefits, annual contributions, plan compensation, and the highly compensated employee threshold all increased for 2019. For plans qualified in both Puerto Rico and the U.S. (including the Federal Government Thrift Plan), the limits on catch-up and after-tax contributions remain unchanged for 2019, while the limits on elective deferrals, annual benefits, annual contributions, plan compensation, and the highly-compensated employee threshold, all increased for 2019. The applicable plan limits are as follows: Annual Benefit Limit (All Defined Benefit Plans): $225,000 (increased from $220,000)… Continue Reading

PBGC Adds Fiduciary Breaches to Mediation Program

In 2017, the PBGC introduced a program that offered voluntary mediation with certain termination liability collection and Early Warning Program cases. The program was made permanent and was expanded to include fiduciary breach cases in 2019. Mediation is offered to eligible plan sponsors either with the demand letter (for fiduciary breach cases) or at the outset of mediation (for Early Warning Program cases) or after review of the information disclosed to the PBGC under 29 C.F.R. § 4062.6 (for termination liability cases). View the PBGC Mediation Program.

Texas Supreme Court Finds Coverage for Deepwater Horizon Defense Costs: Three Takeaways from Anadarko Petroleum v. Houston Casualty

Nearly nine years on, the Deepwater Horizon disaster continues to make law for policyholders and insurers—this time in a ruling from the Texas Supreme Court granting Anadarko Petroleum Corporation up to $150 million in coverage for defense expenses relating to underlying bodily injury and property damage claims arising out of the April 2010 blowout and oil spill. Anadarko’s London market underwriters relied on a “Joint Venture Provision” in their “energy package” insurance policy to argue that coverage for defense costs was limited to 25% of the policy’s $150 million limit, based on Anadarko’s 25% ownership interest in the joint venture operating the Deepwater Horizon rig. While the Joint Venture Provision includes three distinct clauses, which were all disputed in the ensuing coverage litigation, the provision that ultimately proved key to coverage contained the following language: [A]s regards any liability of [Anadarko] which is insured under this Section III and which… Continue Reading

Legal Requirements Triggered by HIPAA Breach

An impermissible acquisition, access, use, or disclosure of HIPAA “protected health information” (“PHI”) under an employer’s group health plan (which is a “Covered Entity” under HIPAA) is not uncommon. If such a breach occurs with respect to the PHI of a Covered Entity, the employer needs to know that the Covered Entity may be required by HIPAA’s breach notification rules (the “Breach Rules”) to issue certain notices and perform other tasks. Analysis of the Impermissible Acquisition, Access, Use, or Disclosure of PHI An impermissible acquisition, access, use, or disclosure of PHI is presumed to be a “breach” unless the Covered Entity demonstrates that there is a low probability that the PHI has been compromised. The Breach Rules outline the four-factor risk assessment that a Covered Entity must perform (and document) in order to make such a demonstration. If, after completing the step above, the Covered Entity determines that a “breach”… Continue Reading

Does Your TPA Use Cross-Plan Off-Setting? Eighth Circuit Questions Its Compliance with ERISA

The third-party administrator (“TPA”) in this case, UnitedHealth Group and its related entities (“UnitedHealth”), engaged in “cross-plan offsetting”, which involves not paying a claim under Employer A’s group health plan in order to recover an overpayment made by Employer B’s group health plan to the same healthcare service provider. For example, assume UnitedHealth overpaid a provider by $200 on behalf of Employer B’s group health plan, and a participant in Employer A’s group health plan incurred a $250 claim with that same provider. UnitedHealth would only pay the provider $50 on behalf of the participant in Employer A’s group health plan. The U.S. Court of Appeals for the Eighth Circuit agreed with the federal district court that UnitedHealth’s interpretation of the plans was unreasonable and cross-plan offsetting was not permitted under the plans because (i) interpretations that authorize practices that push the boundaries of what ERISA permits should be viewed… Continue Reading

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