A recent case decided by a federal district court in California highlights that employer action other than a direct payment of premiums may constitute an “employer contribution” for purposes of determining whether a group insurance program is exempt from ERISA. Under the so-called “Voluntary Plan Exemption”, generally such a program will be exempt from ERISA if (i) there are no employer contributions toward coverage, (ii) participation in the program is completely voluntary, (iii) the employer does not endorse the program, and (iv) the employer receives no consideration for the program. In Bommarito v. Northwestern Mutual Life Ins. Co., the plaintiff, who was the sole owner of her company, and nine of her employees applied for individual policies of disability insurance to be issued by Northwestern Mutual Life Insurance Company (“Northwestern”). In the submission of her application to Northwestern, the plaintiff included the nine employee applications and a request for a… Continue Reading
A U.S. District Court in the 11th Circuit certified as a class action a case in which the plaintiff argued that her former employer, the Marriott International hotel chain, violated federal law by failing to: (1) provide a COBRA notice in Spanish; (2) adequately explain the procedures to elect healthcare coverage; (3) identify itself as the plan administrator; and (4) provide a notice that an average plan participant would understand. There are over 15,000 potential class members who received the allegedly deficient COBRA notice. Employers subject to COBRA are required to offer employees the option to continue their group health plan coverage after employment termination (among other COBRA qualifying events). These notices need to comply with language and other requirements. Employers that fail to comply with COBRA may face penalties of up to $110 per day for each individual who is sent a defective notice. Vazquez v. Marriott Int’l, Inc.,… Continue Reading
A recent case decided by the U.S. Court of Appeals for the Sixth Circuit provides yet another example of the importance of ensuring that plan documents and summary plan descriptions (“SPDs”) accurately and consistently describe plan benefits. In Pearce v. Chrysler Group LLC Pension Plan, the plan document provided that a participant who was not actively employed at retirement would be ineligible to receive an early retirement supplement. In contrast, the SPD stated that a participant did not need to be actively employed at retirement to remain eligible for the early retirement supplement. This discrepancy became an issue when an employee accepted a termination incentive, and the employer, relying on the language in the plan document, argued that this made the employee ineligible for the early retirement supplement. The employee requested that the lower court (i) grant equitable estoppel to prevent the employer from relying on the plan document, and… Continue Reading
New Jersey recently enacted a law that is intended to address the issue of “surprise out-of-network charges” to patients who obtain healthcare from healthcare providers in New Jersey. The law, entitled the “Out-Of-Network Consumer Protection, Transparency, Cost Containment and Accountability Act” (the “NJ Act”), applies with respect to patients who have insured health coverage, but may also apply to patients who participate in employer-sponsored, self-funded health plans subject to ERISA (each, a “Self-Funded Health Plan”) if such plans voluntarily “opt in” to the NJ Act. The NJ Act imposes numerous new disclosure obligations on healthcare providers in New Jersey regarding information to be posted on their websites or delivered directly to patients who will receive their services. Such information includes (i) the provider’s network status with respect to the patient’s health benefit plan, (ii) a listing of the standard charges for items and services provided by a healthcare facility and… Continue Reading
The DOL released final regulations expanding the groups of employers that may participate in one ERISA-covered employee group health plan (an “Association Health Plan”). Generally, employers (including working owners with no employees) may participate in an Association Health Plan as long as they are in the same industry, state, or metropolitan area. A major benefit of joining together to participate in one ERISA-covered group health plan, as opposed to being treated as maintaining separate ERISA group health plans, is that the total number of employees participating in the Association Health Plan, from all participating employers, will determine whether the Association Health Plan is treated as “large group,” “small group,” or individual coverage for purposes of the mandates under the Affordable Care Act (the “ACA”). The ACA places a number of requirements on small group and individual coverage that do not apply to large group health plans. An Association Health Plan… Continue Reading
Many employers maintain policies for compliance with the various laws governing document retention. In developing such a policy, it is important for employers to consider the rules applicable to documents related to plans subject to ERISA: Section 107 of ERISA mandates a six-year document retention period for purposes of its reporting and disclosure requirements (e.g., documents supporting the content of a Form 5500 must be retained for six years after the filing date). Section 209 of ERISA requires an employer to retain benefits records for each employee sufficient to determine the benefits which are or may become due to that employee. No end date is specified, but a proposed DOL regulation specifies that pension records must be retained for “as long as any possibility exists that they might be relevant to a determination of benefit entitlements.” Employers should ensure that their document retention policies have been reviewed for consistency with… Continue Reading
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