In a recent seven-to-two opinion in the case of Little Sisters of the Poor Saints Peter and Paul Home v. Pennsylvania, et al., the U.S. Supreme Court upheld the rights of certain employers to claim exemption from providing contraceptive care under the preventive care mandate of the Affordable Care Act (“ACA”) based on religious or moral objections. General Background of the Case The ACA requires covered employers to provide women with “preventive care and screenings” without any cost sharing requirements (the “Preventive Care Mandate”). The ACA relies on “preventive care guidelines” (“Guidelines”) supported by the Health Resources and Services Administration (“HRSA”), an agency of the federal Department of Health and Human Services, to determine what “preventive care and screenings” should include. The Guidelines mandate that health plans provide coverage for all FDA approved contraceptive methods. When the Departments of Health and Human Services, Labor, and the Treasury (collectively, the “Departments”)… Continue Reading
The U.S. Supreme Court’s recent decision in Bostock v. Clayton County, Georgia held that Title VII of the Civil Rights Act of 1964 protects the employment rights of individuals who are gay, lesbian, or transgender because “sex plays a necessary and undisguisable role” in discrimination based on sexual orientation and gender identity. Although this case addressed whether an employer could fire an individual based on sexual orientation or gender identity, there could also be important implications for benefit plans. For example, employees could use the Bostock decision to seek coverage under group health plans for certain procedures that have traditionally been excluded from coverage, such as gender-affirmation surgery, arguing that such exclusions violate the protections under Title VII. If the plan covers implants after a mastectomy but would not cover the same procedure for an individual who is transitioning, the exclusion for transitioning individuals may also be challenged based on… Continue Reading
The Supreme Court Holds Participants in Fully-Funded Defined Benefit Plans Cannot Sue for Fiduciary Breach
The U.S. Supreme Court held Monday that participants in a fully-funded defined benefit plan have no standing to bring a lawsuit against plan fiduciaries for a breach of ERISA’s fiduciary requirements. In Thole, plan participants alleged that the plan fiduciaries had mismanaged funds and invested in imprudent investments causing the plan to lose approximately $748 million more than it otherwise should have during the 2008 recession. Subsequent to that date, the plan sponsor contributed an additional $311 million to the plan resulting in the plan becoming fully funded. The Court held that because the participants would receive the same benefits whether they won or lost the lawsuit, there was no controversy and, therefore, the participants had no standing under Article III of the U.S. Constitution to bring a civil action under Sections 502(a)(2) or 502(a)(3) of ERISA. Thole v. U.S. Bank N.A., No. 17–1712 (U.S. June 1, 2020) can be… Continue Reading
In a per curiam opinion, the U.S. Supreme Court vacated the decision of the U.S. Circuit Court of Appeals for the Second Circuit in favor of a group of IBM retirement plan participants who alleged that IBM, in its capacity as plan sponsor of the IBM Company Stock Fund (which is an ESOP governed by ERISA), breached its duty to prudently manage the ESOP’s assets. The participants alleged that IBM had a duty to disclose enormous losses being incurred by its microelectronics business and that the company’s failure to disclose such losses resulted in an artificially high stock price, which dropped significantly once those losses were eventually disclosed (see our prior blog post on the Second Circuit’s opinion here). In its opinion, the Supreme Court remanded the case back to the Second Circuit so that court could consider new arguments briefed by IBM in its appeal to the Supreme Court… Continue Reading
In the case of CNH Industrial N.V. v. Reese, an employer and certain retirees disputed whether an expired collective bargaining agreement (“CBA”) covering union employees created a vested right to lifetime retiree health benefits. The retirees had successfully argued at the U.S. Court of Appeals for the Sixth Circuit that the duration of their retiree health benefits was ambiguous because the CBA was silent on that issue, which enabled the Sixth Circuit to consider other extrinsic evidence to support its finding that retiree health benefits were vested for life. The Supreme Court, however, disagreed, reasoning that (i) silence alone regarding the duration of retiree health benefits did not make the CBA ambiguous in that regard and (ii) ambiguity required the terms of the CBA to reasonably support an interpretation that retiree health benefits were intended to be vested for life before any extrinsic evidence could be applied. Consequently, the Supreme… Continue Reading
Texas Supreme Court Provides Guidance On The Recoverability Of Judgments Entered Against An Insured By Third-Party Plaintiffs
In a much anticipated decision, the Texas Supreme Court has given direction to policyholders and third-party plaintiffs on the circumstances under which a judgment entered against the policyholder will be recoverable from the judgment debtor’s insurer. The case is important to insureds defending against third-party claims because it offers instruction on how to transfer liability appropriately to an insurer for an adverse judgment. The decision is equally important to plaintiffs seeking to maximize recovery of judgments against parties, whose greatest asset may be a liability policy. In Great American Insurance Company v. Hamel, 2017 WL 2623067 (Tex. June 16, 2017), homeowners obtained a judgment against a builder for defective workmanship in a bench trial held after the homeowners agreed with the builder not to pursue the builder’s owner or the owner’s personal assets in satisfaction of a judgment entered against the builder. After trial, the builder assigned all claims against… Continue Reading
Supreme Court Holds that Church Plan Exemption Applies to Church-Affiliated Hospital Retirement Plans
In an eight to zero decision, the U.S. Supreme Court held that ERISA’s church plan exemption applies to plans maintained by a church-affiliated organization whose principal purpose is the administration or funding of a retirement plan covering employees of a church or a church-affiliated organization (which the Court dubbed principal-purpose organizations), even if the retirement plan was not originally established by a church. Church plans are generally exempt from ERISA, including its fiduciary and minimum funding requirements. Multiple lower courts previously held that the church plan exemption did not apply to the retirement plans of Advocate Healthcare Network, Dignity Health, and St. Peter’s Healthcare System, which are church-affiliated healthcare systems, because their plans were not originally established by a church, but rather by the healthcare systems. Applying a plain-text reading of the statute and noting that the federal government had long agreed the exemption applied to such retirement plans, the Supreme Court… Continue Reading
On December 2, the U.S. Supreme Court agreed to hear appeals in three ongoing lawsuits challenging the “church plan” status of the pension plans of Advocate Healthcare Network, Dignity Health, and St. Peter’s Healthcare System, which are religiously affiliated healthcare systems. In each of those cases, the lower courts held that the pension plans did not qualify as “church plans” because they were not established and maintained by a church or a convention or association of churches, but rather by a non-profit organization merely affiliated with a religious organization. Church plans are generally exempt from ERISA, including its fiduciary and minimum funding requirements. If the Supreme Court agrees with the lower courts’ rulings, the pension plans of the three healthcare systems, and potentially many other religiously affiliated employers, would have to comply with all of ERISA’s requirements. The Court’s order granting certiorari for the three cases is available here.
On Wednesday, September 21, the U.S. Supreme Court ordered a stay in the ongoing church plan litigation involving the pension plan of Dignity Health, a healthcare system affiliated with the Catholic Church. Earlier this year, the U.S. Court of Appeals for the Ninth Circuit held that Dignity Health’s pension plan did not qualify as a church plan because it was not established and maintained by a church or a convention or association of churches, but rather by a non-profit organization merely affiliated with a religious organization. Consequently, Dignity Health’s plan would no longer be exempt from ERISA. Dignity Health appealed the Ninth Circuit’s ruling to the U.S. Supreme Court, but the Court has yet to announce whether it will hear that appeal or the appeals filed in two other church plan cases involving the pension plans of Advocate Health Care Network and Saint Peter’s Health System. The Supreme Court’s order… Continue Reading
The U.S. Supreme Court held last week, in Obergefell v. Hodges, that the U.S. Constitution requires all states to perform same-sex marriages and recognize same-sex marriages lawfully performed in another state. We recommend employers review their employee benefit plans to determine whether they offer coverage to all legally married couples. Additionally, employers may want to consider whether to continue offering domestic partner benefits. Obergefell v. Hodges, No. 14-556, ___ U.S. ___ (June 26, 2015) can be found here.