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Are Your Voluntary Benefits Programs Subject to ERISA?

An issue that many employers face is whether their so-called “voluntary benefits programs” should be considered ERISA plans. Voluntary benefits programs are characterized by employee-only paid premiums and limited employer involvement in a fully insured product. For the benefits provided under such a voluntary benefits insurance policy to be exempt from ERISA, the employer’s involvement in administering the policy must satisfy the requirements set out in the ERISA safe harbor regulation, as interpreted by the DOL and various courts. 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.  A recent case decided by a federal district court in Kentucky applied the above principles to determine whether a voluntary accidental death insurance policy was subject to… 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

Extending Health Plan Coverage for Furloughed Employees

Due to the COVID-19 pandemic, many employers have placed a portion of their workforces into a furloughed status. Some employers want to keep furloughed employees covered under the employer?ÇÖs group health plan. For a self-funded plan, many stop-loss insurers have approved keeping furloughed employees covered under the plan in covered employment status (as opposed to offering COBRA coverage) for up to six months. In addition, many insurance companies have offered similar coverage extensions under fully-insured, group health plans. As the pandemic continues, some employers want to continue covering furloughed employees beyond the original six-month period. Before providing extended coverage for furloughed employees, it is critical that the employer first obtain written approval from the stop loss carrier for any self-funded benefits, as well as from the insurer for any fully-insured benefits, before granting such an extension, in addition to timely amending the affected plans and communicating such amendments to participants.

Cross-Plan Offsetting Practice is Challenged in Class Action Lawsuit

This class action lawsuit, styled Scott, et al. v. UnitedHealth Group, Inc., et al., was filed in the U.S. District Court for the District of Minnesota on July 14, 2020. This lawsuit follows the decision of the U.S. Court of Appeals for the Eighth Circuit in Peterson v. UnitedHealth Group Inc. that was issued last year. In Scott, the plaintiffs, who were participants in the plans at issue in Peterson, filed, on behalf of a class of plaintiffs (the ?Ç£Class?Ç¥), a class action against UnitedHealth Group, Inc. and its wholly-owned subsidiaries (collectively, ?Ç£UHC?Ç¥), in their capacities as an insurer and/or third-party claims administrator of employer-sponsored group health plans. The lawsuit alleges the breach of UHC?ÇÖs fiduciary duties under ERISA as related to UHC?ÇÖs practice of ?Ç£cross-plan offsetting.?Ç¥ The Class consists of participants and beneficiaries in all group health plans that are administered by UHC and contain ?Ç£cross-plan offsetting?Ç¥ (collectively, the… Continue Reading

COVID-19 Relief ?Çô Added Flexibility to Code Section 125 Cafeteria Plans

Prospective Mid-Year Election Changes IRS Notice 2020-29 allows employers to amend cafeteria plans to permit employees to make the following prospective mid-year election changes (including an initial election) for employer-sponsored health coverage, health flexible spending accounts (?Ç£FSAs?Ç¥), and dependent care FSAs during calendar year 2020, regardless of whether the basis for the election change satisfies the ?Ç£change in status?Ç¥ rules under Treas. Reg. ?º 1.125-4: Make a new election for employer-sponsored health coverage, if the employee initially declined to elect employer-sponsored health coverage; Revoke an existing election for employer-sponsored health coverage and make a new election to enroll in different health coverage sponsored by the same employer (including changing enrollment from self-only to family coverage); Revoke an existing election for employer-sponsored health coverage, provided the employee attests in writing that the employee is enrolled, or immediately will enroll, in other health coverage not sponsored by the employer; and Revoke an… Continue Reading

CARES Act: Calculating Qualified Health Plan Expenses for Purposes of the Employee Retention Credit

Under the CARES Act, employers are eligible to claim an employee retention credit if certain conditions are met (see our prior blog post on the employee retention credit, as well as other employee benefits and executive compensation changes made by the CARES Act, here). The tax credit is equal to 50% of ?Ç£qualified wages?Ç¥ paid to employees of up to $10,000. Qualified wages include (i) wages actually paid to covered employees (other than qualified paid sick and family leave wages for which a credit is allowed under the Families First Coronavirus Response Act) and (ii) the ?Ç£qualified health plan expenses?Ç¥ allocable to such employees. On May 11, 2020, the IRS published new FAQs clarifying how qualified health plan expenses should be calculated for purposes of the employee retention credit. Notably, the FAQs provide guidance on how to calculate such expenses when an employer sponsors more than one health plan (e.g.,… Continue Reading

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