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Federal Appeals Court Case Highlights Employer Actions for Defending Against Legal Claims Brought by Healthcare Providers

A recent decision by the U.S. Court of Appeals for the Ninth Circuit in two consolidated cases, one of which was Advanced Women’s Health Center, Inc. v. Anthem Blue Cross Life and Health Insurance Company, highlights several important points for employer-sponsors of group health plans when defending against legal claims brought by healthcare providers under ERISA. Advanced Women’s Health Center (“AWHC“) was an in-network provider of health services to participants under various group health plans subject to ERISA (collectively, the “Plans“), and Anthem served as the Plans’ third-party benefit claims administrator. In the course of a post-payment claims review, Anthem determined that certain claims for AWHC’s services had been overpaid and then pursued recoupment by offsetting such overpayments against other reimbursements payable to AWHC. AWHC brought suit against Anthem, based on its purported status as an ERISA “beneficiary,” seeking (i) a declaratory judgment that Anthem’s offsetting process violated ERISA’s claims… Continue Reading

DOL Final Rule Implements 60-Day Delay of New Fiduciary Duty Rule

The DOL recently published final rules that implement a 60-day delay in the effective date of the new fiduciary duty rule and related exemptions that the DOL proposed last March. Both the DOL and IRS previously announced enforcement relief from the new fiduciary duty rule in the event the DOL did not publish these final rules prior to April 10, 2017 (the enforcement relief is now moot since the final rules were published prior to that date). The final rules confirm that the new fiduciary duty rule’s effective date has been pushed back from April 10, 2017 to June 9, 2017. The 60-day delay is intended to give the DOL time to reconsider the fiduciary duty rule and to determine whether it may adversely affect the ability of individuals to gain access to retirement information and financial advice. View the final rules.

IRS Announces Enforcement Relief from Fiduciary Rule

Previously, the DOL, in Field Assistance Bulletin 2017-01, announced its temporary enforcement policy for the new fiduciary duty rule and related exemptions (the “Fiduciary Rule”). The IRS recently published Announcement 2017-4, stating excise taxes will not be assessed for violations of the Fiduciary Rule for the periods for which the DOL announced enforcement relief in Field Assistance Bulletin 2017-01. Excise taxes will not be assessed during the following periods: (i) if the DOL issues a final rule after April 10 delaying the effective date of the Fiduciary Rule, excise taxes won’t be assessed for non-compliance with the rule during the “gap” period between April 10 and the date a delay is implemented, and (ii) if the DOL decides not to delay the effective date of the rule, excise taxes won’t be assessed for non-compliance occurring between April 10 and a “reasonable” period after publication of the DOL’s decision. View Announcement… Continue Reading

DOL Announces Enforcement Relief from Fiduciary Rule

The U.S Department of Labor (“DOL“) recently published Field Assistance Bulletin 2017-01 (“FAB 2017-01“), in which it announced a temporary policy for enforcement of its new fiduciary duty rule and related exemptions (the “Fiduciary Rule“). On March 2, 2017, the DOL proposed regulations to delay the effective date of the Fiduciary Rule from April 10, 2017 to June 9, 2017. In response to concerns expressed by financial service institutions that uncertainty about whether the effective date of the Fiduciary Rule will actually be delayed could result in investor confusion and marketplace disruption, the DOL indicated in FAB 2017-01 that (1) in the event that it issues a final rule after April 10, 2017 to delay the effective date of the Fiduciary Rule, it will not initiate an enforcement action based on non-compliance with the rule during the “gap” period between April 10, 2017 and the date that the delay is… Continue Reading

Disability Plan Can Disclose Disputed Substance Abuse Problem to Employer Without Violating ERISA

A former employee alleged that Aetna, as administrator of FedEx’s short-term disability plan, breached its fiduciary duty under ERISA when Aetna reported to FedEx that the employee filed a disability claim for substance abuse and Aetna later failed to correct this report. FedEx’s drug policy stated that the disability vendor (Aetna) would notify FedEx when an employee sought benefits for substance abuse. The U.S. Court of Appeals for the Tenth Circuit found that compliance with FedEx’s policy could not constitute a breach of fiduciary duty and Aetna had not provided inaccurate information to FedEx and thus the appeals court upheld the district court’s summary judgment on the claim. Williams v. FedEx Corp. Services and Aetna Life Ins. Co., No 16-4032 (10th Cir. Feb. 24, 2017)

DOL Delays New Fiduciary Duty Rule

In proposed regulations recently released, the DOL delayed the effective date of its new fiduciary duty rule and related exemptions by 60 days, from April 10, 2017 to June 9, 2017. The DOL’s announcement follows a presidential memorandum issued on February 3, 2017, directing the DOL to reconsider the new fiduciary duty rule to determine whether it may adversely affect the ability of individuals to gain access to retirement information and financial advice. The 60-day extension is intended to give the DOL time to collect information and to consider comments it receives related to issues raised in the presidential memorandum before the rule and exemptions become effective. For additional information on the fiduciary duty rule in its current form, please see our blog post. View the proposed regulations.

En Banc Ninth Circuit Applies Ongoing Duty to Monitor Investments Standard in Tibble

The U.S. Court of Appeals for the Ninth Circuit, sitting en banc, recently held that plaintiffs’ breach of fiduciary duty claims were not barred by ERISA’s six year limitations period, even when the retirement plan investments in question were selected by the plan’s fiduciary more than six years prior to plaintiffs’ suit. The Ninth Circuit applied the U.S. Supreme Court’s recent decision in this case, which confirmed that fiduciaries have an ongoing fiduciary duty to monitor investments in retirement plans and to remove imprudent ones. (For additional information on the Supreme Court’s decision, please see our prior post.) The Ninth Circuit distinguished between a fiduciary’s duty to prudently select investment alternatives from the fiduciary’s duty to prudently monitor them. Consequently, a fiduciary’s ongoing duty to monitor plan investments could result in a series of breaches as an investment alternative is retained over time. The Ninth Circuit remanded the case back… Continue Reading

Federal District Court Orders Owner to Disgorge His Cars

A recent federal district court case demonstrates the risk to an ERISA fiduciary’s personal assets when he commits a fiduciary breach. The court previously held that the former owner of a privately-held company engaged in a prohibited transaction and breached his fiduciary duties when he sold shares of company stock to his company’s leveraged ESOP at prices in excess of its fair market value. The district court required the owner to provide assets, including several cars, as security in conjunction with his motion to stay enforcement of the judgment pending appeal, stipulating that if the judgment were upheld, the security would be transferred to the plaintiffs. When the U.S. Court of Appeals for the Fifth Circuit upheld the judgment, the owner refused to turn over the assets. The district court is now ordering the owner to turn over the assets despite any hardship that it may cause the owner. Perez… Continue Reading

Safeguards to Defend Against Conflict of Interest Allegations in the Administration of ERISA Welfare Benefit Claims

In cross-motions for summary judgment in Geiger v. Aetna Life Insurance Company, the U.S. Court of Appeals for the Seventh Circuit considered whether Aetna, the designated claims fiduciary and insurer of disability benefits provided under an employer-sponsored ERISA welfare benefit plan, abused its discretion when it terminated the plaintiff’s disability benefits.  The plaintiff was a former employee of the employer-plan sponsor.  The terms of the plan specifically granted discretionary authority to Aetna with respect to determining benefits and construing the terms of the plan. However, the plaintiff alleged that Aetna had operated under a conflict of interest, as the party that both determined eligibility for and paid plan benefits, and thus abused its discretion in denying her claim.  In deciding that Aetna did not abuse its discretion, the Court considered the following four safeguards that Aetna had undertaken to minimize any conflict of interest: (i) Aetna obtained numerous independent physician… Continue Reading

DOL Provides Updated Guidance on Proxy Voting by Employee Benefit Plans

On December 28, 2016, the DOL released Interpretive Bulletin 2016-01 (the “Bulletin“), which provides updated guidance for ERISA plan fiduciaries with respect to the voting of proxies on individual securities held in employee benefit plan portfolios and the appropriateness of active engagement with corporate management by plan fiduciaries. In publishing the Bulletin, the DOL withdrew Interpretive Bulletin 2008-2 and generally reinstated the language of Interpretive Bulletin 94-2, with certain clarifications. The DOL was concerned that Interpretive Bulletin 2008-2 had been misunderstood in a manner that dissuaded plan fiduciaries from voting proxies and otherwise prudently exercising shareholders’ rights, particularly with respect to areas concerning environmental, social, and governance issues and active engagement with corporate management. View the Bulletin here. View a news release related to the Bulletin here.

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