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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

Regulations Provide for More Cost Transparency in Health Coverage

The federal Departments of Health and Human Services, Labor, and the Treasury (collectively, the ?Ç£Departments?Ç¥) have jointly issued final regulations that are intended to provide for more transparency in health coverage (the ?Ç£Regulations?Ç¥). The Regulations have important implications for employer sponsors of certain group health plans (?Ç£Plans?Ç¥) and health insurers. The Regulations do not apply to health plans that are grandfathered under the Affordable Care Act, health reimbursement arrangements, certain other account-based group health plans, or short-term limited duration insurance. The Regulations require two key forms of disclosures (collectively, the ?Ç£Disclosures?Ç¥) in order to provide for this improved transparency: Self-Service Disclosure. First, the Regulations require Plans and insurers in the individual and group markets to disclose certain cost-sharing information upon request to a participant, beneficiary, or enrollee (or his or her authorized representative), including (a) an estimate of the individual?ÇÖs cost-sharing liability for covered items or services furnished by a… 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.

Employee Benefits as Payroll Costs under the Paycheck Protection Program

Businesses that received a loan under the Paycheck Protection Program (?Ç£PPP?Ç¥) are eligible for forgiveness of that loan if, among other things, the loan proceeds are used to cover ?Ç£payroll costs?Ç¥ incurred over the eight-week period after the loan is made. Payroll costs, capped at $100,000 on an annualized basis for each employee (i.e., $15,384 over the eight-week period), are broadly defined to include, among other things: Salary, wages, commissions, or tips; Employee benefits costs, such as for vacation or paid family or medical leave (other than wages for which a credit is received under the Families First Coronavirus Response Act), group health care costs, retirement plan contributions, and severance benefits; and State and local taxes assessed on employee compensation. As of the date of this posting, no guidance has been issued by the IRS or the Department of Treasury to further clarify what specific items qualify as payroll costs.… Continue Reading

Creating Uniformity Among Primary And Excess Policies: Using Contract Principles To Bind Excess Carriers To Arbitrate

Arbitration is often thought of as a procedure favored by carriers to the disadvantage of the corporate insured, because the insured usually prefers to have its coverage claims heard by a jury.?á There may also be remedies sought by the policyholder, which may not be available in arbitration.?á Alternatively, in certain circumstances, arbitration can be a powerful tool for the insured.?á For example, for parties seeking coverage under a Commercial General Liability (CGL) policy, a speedy resolution of any coverage disputes in arbitration (while the underlying litigation is pending) may encourage insurers to defend and settle claims promptly, reducing the risk of a judgment against the insured.?á This particular strategy may have limited value, however, if the primary policy provides for arbitration, but the applicable excess liability policies do not.?á Unless the insured can also require the excess carrier(s) to arbitrate, even a successful arbitration may leave the insured without… Continue Reading

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