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Required Minimum Distributions: A Tragedy in Three Acts

The SECURE Act and CARES Act made significant changes to required minimum distributions (?Ç£RMDs?Ç¥). What should you be doing to ensure your retirement plans are administered correctly? The first step is to understand your options. SECURE Act Shifts the Start Before the SECURE Act, RMDs had to begin by April 1st of the calendar year following the later of (i) the calendar year during which the participant retires or (ii) the calendar year in which the participant turns age 70??.?á Following the passage of the SECURE Act, the age cutoff in that rule changed from age 70?? to age 72, but only for individuals who turned age 70?? on or after January 1, 2020 (i.e., individuals born on or after July 1, 1949). In short, those terminated vested participants born before July 1, 1949 had to start their RMDs by April 1 of the year after turning 70??, while those… Continue Reading

Delegating Fiduciary Duties Under ERISA Plans

The recent decision in Hampton v. National Union by the U.S. District Court for the Northern District of Illinois highlights the importance of following the provisions in ERISA plan documents for delegating fiduciary duties to entities acting as plan fiduciaries, such as third-party service providers and insurers. Following the death of her husband, who was an employee of The Boeing Company (?Ç£Boeing?Ç¥), the plaintiff sought to recover accidental death and dismemberment benefits under insurance policies sponsored by Boeing, for which she was the sole designated beneficiary. After National Union, which underwrote and co-administered the policies with AIG Claims, Inc., denied the plaintiff?ÇÖs initial benefits claim, as well as her appeal of such denial, the plaintiff brought suit under ERISA. The plaintiff argued that the court should apply a de novo standard of review (i.e., no deference given to the plan fiduciary?ÇÖs prior decisions) because National Union did not have discretionary… Continue Reading

Reminder to Include Grants of Discretion in ERISA Plan and SPD Documents

An employee wanted to file a claim for disability benefits before his termination of employment, but the employer did not provide him with the necessary paperwork to file a claim under its disability benefits plan for covered employees. This plan was subject to ERISA. After his employment terminated, the former employee submitted claims and appeals for disability benefits, which were denied by the plan?ÇÖs insurer, Prudential. Prudential determined that the former employee had become disabled after his termination of employment and thus did not have plan coverage at that time. A U.S. District Court in Arizona found this denial of benefits should be reviewed de novo (i.e., without giving deference to the plan administrator?ÇÖs prior decision to deny benefits) because the plan did not contain an unambiguous grant of discretion to the plan administrator to interpret the terms of the plan and to make final benefit determinations. This discretion was… Continue Reading

Plan Administrators are Afforded Broad Discretion with Appropriate Language in ERISA Plan Documents

In the case of Hall v. Metropolitan Life Insurance Co., the U.S. Court of Appeals for the Eighth Circuit ruled that MetLife had not abused its discretion in denying a widow?ÇÖs claim for benefits under her husband?ÇÖs life insurance policy, which was subject to the Employee Retirement Income Security Act (?Ç£ERISA?Ç¥), where the plan document explicitly vested MetLife with the discretionary authority to interpret the terms of the plan and to make determinations concerning the eligibility for and entitlement to benefits under the plan. The court also noted that the ?Ç£substantial compliance?Ç¥ doctrine under federal common law could not deprive MetLife of its discretion to require strict compliance with the plan?ÇÖs terms. Although this case does not represent a break from prior law, it does serve as a reminder that plan sponsors should ensure that their plan documents give full discretion to plan administrators to interpret the plan?ÇÖs terms and… Continue Reading

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