While many qualified retirement plans allow for the reimbursement of certain administrative expenses from plan assets, plan fiduciaries must ensure that plan assets are being used only to reimburse reasonable administrative expenses, and not expenses that could be considered personal or business expenses. This issue may arise in a variety of contexts, including, in particular, a plan’s reimbursement of travel expenses. The DOL has taken the position that no personal or business related expenses are payable from plan assets, even if the travel is related to the administration of the plan. The concern with using plan assets to reimburse travel expenses is being able to prove that the travel expenses relate solely to the administration of the plan, and are not merely a personal or business expense.
Employers sponsoring employee plans that provide “disability benefits” are reminded that the new disability benefit claims procedures, as issued by the DOL under ERISA (the “Disability Procedures“), are applicable to disability benefit claims filed after April 1, 2018. According to the DOL, a benefit is a “disability benefit” under ERISA’s claims regulations (including the Disability Procedures) if the plan conditions the availability of the benefit upon evidence of the participant’s disability. The Disability Procedures may thus apply not only to long-term and short-term disability plans that are subject to ERISA, but also to other types of ERISA benefit plans, such as group health plans and qualified and non-qualified retirement plans, if the plan provides benefits that are based upon a determination of disability that is made under the plan. (See our prior blog post for more details regarding impacted plans.) Plan sponsors should ensure that (i) the claims procedures of… Continue Reading
The U.S. Court of Appeals for the Fifth Circuit (whose jurisdiction includes Texas, Louisiana, and Mississippi) vacated the entire final Fiduciary Rule that was issued by the DOL in April 2016. The Fifth Circuit held that the definition of “fiduciary” in the final Fiduciary Rule conflicts with the plain text of ERISA and the common law definition of fiduciary. The Fifth Circuit further held that the DOL overstepped its authority in applying ERISA’s fiduciary standards to individual retirement accounts and that the DOL’s interpretations fail the reasonableness test under the standard set out in Chevron U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837 (1984). In response to the Fifth Circuit’s decision, the DOL announced that it will not be enforcing the rule at this time. Chamber of Commerce of the USA v. U.S. Dep’t of Labor, No. 17-10238 (5th Cir. Mar. 15, 2018).
Generally, when discretionary authority is delegated to the plan administrator of an ERISA plan, a court reviewing the denial of a benefits claim is limited to determining whether the plan administrator abused its discretion in denying the claim. In a prior seminal case, Firestone Tire & Rubber Co. v. Bruch, the U.S. Supreme Court held that, when there is no delegation of discretionary authority, a denial of benefits is to be reviewed de novo (i.e., without deference to the plan administrator’s previous decision). The U.S. Court of Appeals for the Fifth Circuit (whose jurisdiction includes Texas, Louisiana, and Mississippi) interpreted Firestone to only require de novo review of a denial of benefits based on an interpretation of plan language, but not denials based on factual determinations. The Fifth Circuit recently overturned its longstanding precedent in order to bring its interpretation of Firestone in line with eight other federal circuit courts… Continue Reading
The DOL recently issued a final rule that adjusts for inflation the amounts of civil monetary penalties assessed or enforced in its regulations, including for certain violations of ERISA. The adjusted penalty amounts apply to violations occurring after November 2, 2015, and for which penalties are assessed after January 2, 2018. Below is a list of some of the penalties that were increased: The maximum penalty for failing to properly file a pension or welfare benefit plan’s annual Form 5500 increased from $2,097 per day to $2,140 per day The maximum penalty for failing to provide notices of blackout periods or notices of the right to divest employer securities increased from $133 per day to $136 per day (and each statutory recipient constitutes a separate violation) The maximum penalty for failing to provide employees with the required notices regarding coverage opportunities under the Children’s Health Insurance Program, or CHIP, increased… Continue Reading
Anka Miscevic had a history of mental illness. While her husband Zelkjo was sleeping, she stabbed him in the chest and hit him over the head with a baseball bat, killing him. An Illinois state court found Anka not guilty by reason of insanity. The U.S. Court of Appeals for the Seventh Circuit, the first federal appellate court to address ERISA pre-emption of any state slayer statute, held that Illinois’s slayer statute was not pre-empted by ERISA. At the time of his death, Zeijko was a participant in a union pension fund. If a participant were married at the time of his or her death, the fund would pay a pre-retirement death benefit to the surviving spouse. If a participant were not married but had a minor child, the fund would pay a minor child benefit until the child turns 21. Both Anka and her minor child filed competing claims… Continue Reading
In Connecticut General Life Insurance Company v. Humble Surgical Hospital, L.L.C., the U.S. Court of Appeals for the Fifth Circuit, whose jurisdiction includes Texas, reversed a district court’s award to Humble Surgical Hospital, LLC, an out-of-network medical provider (“Humble”), of (i) over $11 million based on underpaid medical benefit claims administered by Cigna under ERISA-governed group health plans and private insurance policies, and (ii) over $2 million in penalties based on Cigna’s failure to comply with ERISA’s plan documentation disclosure requirements. (See our prior newsletter article regarding the district court’s decision in this case, including a discussion of background facts.) The Fifth Circuit found that the district court failed to apply ERISA’s required “abuse of discretion” analysis to Cigna’s decisions regarding benefit claims for Humble’s services, which decisions were based on exclusionary language in the plan documents and insurance policies. The Fifth Circuit stated that other courts had upheld Cigna’s… Continue Reading
The DOL has now officially delayed until April 1, 2018 its regulations that amend the claims review and appeal procedures applicable to ERISA-covered employee benefit plans providing disability benefits. Such regulations were originally scheduled to apply to disability benefit claims filed on or after January 1, 2018. We previously commented on the DOL’s proposal to delay these regulations here. The delay gives the DOL time to consider additional comments and data, reassess the impact of the new claims procedures, and revise the regulations as deemed appropriate. Employers should thus expect to receive additional guidance from the DOL before the April 1 effective date. View the final regulations that provide for the delay.
In this case, the summary plan description (“SPD”) described a participant’s ability to submit a second level appeal for a denied benefits claim under an employer-sponsored group health plan subject to ERISA and stated that failure to submit such an appeal would constitute a waiver of the participant’s right to review the decision. In addition, the denial letter received by the participant stated that she had a right to request a second level appeal. However, the court found neither the plan document, SPD, or denial letter obligated the participant to file a second level appeal before filing a lawsuit, thus resulting in the court’s denial of the defendant’s motion for summary judgment for failure to exhaust the plan’s administrative remedies. This case highlights the importance of reviewing plan and related documents to ensure they expressly state that submitting a second level appeal is required before a lawsuit over a denied… Continue Reading
In a case of first impression for a federal appellate court, the U.S. Court of Appeals for the Eleventh Circuit held that a fiduciary may affirmatively waive any defenses based on the six-year statute of repose in Section 413 of ERISA. In this case, the U.S. Secretary of Labor brought an action against the company and its owner/CEO who was also the trustee of the company’s employee stock ownership plan (“ESOP”), claiming that the owner engaged in prohibited self-dealing by causing the plan to purchase company stock at inflated prices. While attempting to negotiate a settlement, the Secretary of Labor agreed to delay filing suit in exchange for the defendants executing a series of tolling agreements, in which they agreed they would “not assert in any manner the defense of statute of limitations, the doctrine of waiver, laches, or estoppel, or any other matter constituting an avoidance of the Secretary’s claims… Continue Reading