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Proskauer's ERISA Practice Center Blog

The View from Proskauer on Developments in the World of Employee Benefits, Executive Compensation & ERISA Litigation

Retiree Health Benefits Case Remanded to District Court for Additional Fact Finding

Posted in Retiree Health Care Benefits

On remand from the Supreme Court, the Sixth Circuit sent the parties in Tackett v. M&G Polymers USA, LLC back to the district court for additional factual determinations on whether the retirees who commenced the lawsuit had vested in their health benefits.

Nearly a decade ago, a class of retirees sued their former employer’s successor, M&G Polymers, after it announced that it would begin requiring the retirees to contribute toward their health benefits.  The district court granted M&G Polymer’s motion to dismiss and held that the CBA clearly did not give the retirees a vested right to health benefits.  On appeal, the Sixth Circuit reversed; applying the principles it established more than three decades earlier in UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983), it held that the retirees had stated a plausible claim.  The district court subsequently ruled in favor of the retirees on remand, and the Sixth Circuit affirmed.  Continue Reading

IRS Significantly Liberalizes Permitted Mid-Year Changes to Safe Harbor Plans

Posted in 401(k) Plans, 403(b) Plans, IRS

On January 29, 2016, the IRS issued Notice 2016-16 that provides guidance on mid-year changes to a safe harbor plan under sections 401(k) and 401(m) of the Internal Revenue Code. The guidance provides that a mid-year change either to a safe harbor plan or to a plan’s safe harbor notice does not violate the safe harbor rules, provided that applicable notice and election opportunity conditions are satisfied and the mid-year change is not a prohibited mid-year change, as described in the IRS Notice.

The IRS Notice doesn’t require any additional notice or election conditions for changes to information that is not required safe harbor notice content, even if that information is provided in a plan’s safe harbor notice. For purposes of the guidance, a mid-year change is a change that is first effective during the plan year, but not effective as of the beginning of the plan year, or a change that is effective as of the beginning of the plan year, but adopted after the beginning of the plan year. Continue Reading

U.S. Supreme Court Holds ERISA Plan Cannot Enforce Equitable Lien Against Participant’s General Assets

Posted in Subrogation, Supreme Court

Earlier today, the U.S. Supreme Court reversed a decision by the Eleventh Circuit and held that when a ERISA plan participant obtains a third-party settlement subject to a plan’s subrogation provision, and then dissipates the settlement on “nontraceable” items, the plan cannot enforce a lien against the participant’s general assets under Section 502(a)(3) of ERISA.  In so holding, the Court made clear that: (i) a plaintiff could enforce an equitable lien only against specifically identified funds in the defendant’s possession, or traceable items purchased with the funds (e.g., a car); and (ii) expenditure of the entire identifiable fund on nontraceable items (e.g., food) destroys an equitable lien, and any personal claim against the defendant’s general assets would be a legal, not equitable, remedy, and thus not available under Section 502(a)(3).  Because the lower courts did not determine whether the plan participant kept his settlement monies separate from his general assets, or dissipated the entirety of the funds on nontraceable assets, the Court remanded the case to the district court to make that determination.  The case is Montanile v. Bd. of Trustees of Nat. Elevator Indus. Health Ben. Plan, 2016 WL 228344 (U.S. Jan. 20, 2016).

Stay tuned for Proskauer’s perspective on the implications of the Court’s decision.

Big Employer Win in Wellness Program Case EEOC v. Flambeau

Posted in ACA, ADA, EEOC, HRA, Wellness Programs

For the past couple of years, the U.S. Equal Employment Opportunity Commission (EEOC) has been challenging employer wellness programs for their alleged violations of the Americans with Disabilities Act (ADA).  The most recent EEOC challenge was in EEOC v. Flambeau, Inc., (No. 14-cv-638-bbc (December 31, 2015)).  In this case, the U.S. District Court for the Western District of Wisconsin handed the EEOC another loss in a wellness case (and handed employers a big win) by holding that the ADA “safe harbor” provision for bona fide benefit plans allowed the Wisconsin plastics manufacturer to condition participation in its self-funded group health plan on a requirement that employees complete a health risk assessment (HRA) and undergo “biometric screening.” Continue Reading

Eighth Circuit Holds Service Provider Is Not A Plan Fiduciary In Excessive Fee Case

Posted in Fiduciary Status

Continuing a trend in other Circuits, the Eighth Circuit held that a service provider that was contracted to provide the 401(k) plan’s investment options does not act as an ERISA fiduciary when, consistent with the terms of a contract it negotiated at arms’ length, it passes through operating expenses to participants.  The Court also rejected the plan’s remaining arguments that Principal was a fiduciary because there was no nexus between the fiduciary services and the plan’s allegations that Principal had charged it excessive fees. The case is McCaffree Financial Corp. v. Principal Life Ins. Co., No. 15-1007, slip op. (8th Cir. Jan. 8, 2016).

 

Defined Benefit Plan Participant’s Action Mooted by ERISA Plan’s Improved Financial Condition

Posted in Standing

A federal district court in Minnesota dismissed a plan participant’s allegations that plan fiduciaries mismanaged a defined benefit plan — and thus caused it to be underfunded — because the plan’s financial condition improved during the course of the litigation.  As reported here, the court previously held that these allegations were sufficient to establish that plaintiffs suffered an injury in fact sufficient to confer Article III standing.  In its most recent opinion, the court held that plaintiffs’ claims were now moot because the plan had become overfunded.  As a result, “any money that could be awarded would simply add to the Plan’s now-existing surplus, in which Plaintiffs have no legal interest.”  The court also held that “to the extent that the Plan becomes underfunded again in the future, raising anew concerns about the security of Plan participants’ future stream of benefits, the causal connection between the new increased risk of default and the Defendants’ alleged violations in 2007 through 2010 would be tenuous at best.”  The case is Adedipe v. U.S. Bank, N.A., No. 13-2687, slip op. (D. Minn. Dec. 29, 2015).

 

Is a Qualified Retirement Plan Required to Apply Windsor Retroactively?

Posted in Defense of Marriage Act, DOMA, Pension Plans, Same-Sex Marriage, Windsor

Following the Supreme Court’s 2013 decision in U.S. v. Windsor (in which the Court held that Section 3 of the federal Defense of Marriage Act (“DOMA”) was unconstitutional), one of the questions facing sponsors of tax-qualified retirement plans was whether the plans were required to recognize same-sex spouses on a retroactive basis for purposes of entitlement to spousal benefits.  The IRS answered that question in Notice 2014-19, in which it stated that, for tax-qualification purposes, such plans are required to treat same-sex marriages in the same manner as opposite-sex marriages effective as of June 26, 2013 (the date of the Windsor decision). The IRS also clarified that plans could be amended to recognize same-sex marriages prior to that date, but such earlier recognition was not required for qualification purposes. Continue Reading

Another Post-Tackett Ruling Denying Retiree Health Benefits

Posted in Retiree Health Care Benefits

A district court in West Virginia recently held that retirees were not entitled to lifetime health benefits under the clear and unambiguous language of the relevant collective bargaining agreements.  Shortly after Constellium modified retiree health benefits to provide less favorable coverage, the retirees sued, alleging that they had a vested right to the prior level of health benefits.  The court held that the retirees were not entitled to lifetime benefits in light of clear and unambiguous durational clauses in the CBAs that limited retiree health benefits to the term of the labor agreement.  Since the language was clear, the court also found that it should not consider extrinsic evidence.  The case is Barton v. Constellium Rolled Products-Ravenswood, LLC, 13-cv-03127, 2016 WL 51262 (S.D. W. Va. Jan. 4. 2016).

An Ounce of Prevention…Is Tax-Free: IRS Expands Tax Relief to Pre-Data Breach Identity Theft Protection Services

Posted in Data Breach, Identity Theft, IRS

As reported on Proskauer’s Tax Talks Blog, after last year’s customer data security breaches at major U.S. corporations, the IRS announced special tax relief for identity protection services provided to individuals affected by a security breach.  In response to comments solicited in connection with that announcement, the Treasury Department and IRS have in Announcement 2016-02 extended that relief to no-cost identity protection services provided before a data breach. Continue Reading

IRS Extends Deadlines for Affordable Care Act Reporting

Posted in Affordable Care Act

Today, the IRS released Notice 2016-4, which extended the distribution and filing deadlines for the Affordable Care Act (ACA) reporting requirements set forth in Sections 6055 and 6056 of the Internal Revenue Code (the “Code”).  Under Code Section 6055, health coverage providers are required to file with the IRS, and distribute to covered individuals, forms showing the months in which the individuals were covered by “minimum essential coverage.”  Under Code Section 6056, applicable large employers (generally, those with 50 or more full-time employees and equivalents) are required to file with the IRS, and distribute to employees, forms containing detailed information regarding offers of, and enrollment in, health coverage.  In most cases, employers and coverage providers will use Forms 1094-B and 1095-B and/or Forms 1094-C and 1095-C. Continue Reading