Employee Benefits & Executive Compensation Blog

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

Honeywell Defeats Retirees’ Class Action Suit for Lifetime Health Benefits

A federal district court in Ohio dismissed retirees’ claims for lifetime healthcare benefits from Honeywell.  Honeywell provided healthcare benefits to plaintiffs through a series of collective bargaining agreements and, although it continued to do so for several years after the final CBA expired, Honeywell eventually notified plaintiffs that it would terminate contributions toward their healthcare benefits.  Applying the principles set forth in M&G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (2015) and the Sixth Circuit’s subsequent decision in Gallo v. Moen, Inc., 813 F.3d 265 (6th Cir. 2016), the district court held that plaintiffs’ healthcare benefits did not vest because the CBAs were for three-year terms and did not expressly state that the healthcare benefits vested, whereas the CBAs did expressly vest pension benefits for life.  Although, unlike in Gallo, there was no reservation-of-rights clause, the court held that such a clause was not required to find that the CBAs unambiguously did not provide lifetime health benefits to plaintiffs.  The case is Watkins v. Honeywell Int’l, Inc., No. 16-1925, 2016 WL 7325161 (N.D. Ohio Dec. 16, 2016).

UPDATE: District Court Denies Preliminary Injunction in AARP Suit to Block Final Rules on Employee Wellness Programs

The U.S. District Court for the District of Columbia (Judge Bates) has denied AARP’s request to block the implementation of the EEOC’s final wellness regulations pending a decision on the merits. As we have discussed previously, the regulations address the extent to which an employer may offer incentives to participate in a wellness program without violating the Americans with Disabilities Act (ADA) or the Genetic Information Nondiscrimination Act (GINA).  The final rules have taken effect as of January 1, 2017.

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District Court Rejects Retirees’ Claim for Lifetime Healthcare Benefits

A federal district court in Michigan dismissed retirees’ claims for lifetime, unalterable healthcare benefits from BorgWarner.  BorgWarner provided healthcare benefits to Plaintiffs through a series of collective bargaining agreements  and health insurance agreements.  After BorgWarner unilaterally modified the available retiree healthcare benefits, Plaintiffs filed suit.  Applying the principles set forth in M&G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (2015) and the Sixth Circuit’s subsequent decision in Gallo v. Moen, Inc., 813 F.3d 265 (6th Cir. 2016), the district court granted BorgWarner’s motion for summary judgment and held that Plaintiffs’ healthcare benefits did not vest under ordinary principles of contract interpretation.  In so holding, the court first observed that the agreements were for three-year terms and did not expressly state that the healthcare benefits vested, whereas the pension plan documents stated that Plaintiffs’ pension benefits were lifetime benefits.  Next, the court observed that several of the agreements restated and sometimes redefined the healthcare benefits available going forward, which would be unnecessary if the benefits had vested.  Lastly, the court observed that the agreements contained: (i) a reservation of rights provision granting BorgWarner the right to modify, amend, suspend, or terminate the plan, and (ii) a termination of coverage provision that limited the healthcare benefits to the term of the governing agreement.  The case is Sloan v. BorgWarner, Inc., No. 09-cv-10918, 2016 WL 7107228 (E.D. Mich. Dec. 5, 2016).

D.C. Court of Appeals Denies Emergency Request to Halt Conflict of Interest Rule and Related Exemptions

On December 15, 2016, the U.S. Court of Appeals for the District of Columbia Circuit denied the emergency request from the National Association for Fixed Annuities (“NAFA”) for an injunction blocking the implementation of the Department of Labor’s conflict of interest rule and related exemptions.  Nat’l Ass’n for Fixed Annuities v. U.S. Dep’t of Labor, D.C. Cir., No. 16-5345, per curiam order 12/15/16.  In a one-paragraph order, the panel ruled that NAFA “has not satisfied the stringent requirements for an injunction pending appeal.”  NAFA’s challenge to the rule had already been rejected twice by Judge Moss in the U.S. District Court for the District of Columbia (see our blog here).

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Repealing and Replacing the ACA: Five Developments Likely to Occur in the Years Ahead

On the back of the 2016 United States presidential election results, the health care industry ponders how a Republican president and Congress will transform the business environment. The health care industry has a number of important questions which need to be examined. Proskauer’s Health Care Group looks at key issues, including: the meaning of “repeal and replace,” the future of Medicare and Medicaid, the rigor of antitrust enforcement, and the viability of insurance exchanges in their Client Alert: Five Developments Likely to Occur in the Years Ahead.

DOL Prevails in Kansas Litigation Challenging Conflict of Interest Rule and Related Exemptions

On November 28, 2016, Judge Crabtree in the U.S. District Court for the District of Kansas ruled in favor of the U.S. Department of Labor and denied the motion for a preliminary injunction filed by the Market Synergy Group, Inc., challenging implementation of the Department’s conflict of interest rule and related exemptions.  Mkt. Synergy Grp., Inc. v. United States Dep’t of Labor, No. 16-CV-4083-DDC-KGS, 2016 WL 6948061 (D. Kan. Nov. 28, 2016).  The court held that Market Synergy was not likely to prove that:

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DOL Prevails Again and NAFA Moves on to the Circuit Court Challenging the Conflict of Interest Rule and Related Exemptions

On November 23, 2016, Judge Moss in the U.S. District Court for the District of Columbia again ruled in favor of the Department and denied the renewed motion for a preliminary injunction brought by the National Association for Fixed Annuities (“NAFA”) challenging implementation of the Department’s conflict of interest rule and related exemptions. Nat’l Ass’n for Fixed Annuities v. Perez, No. CV 16-1035 (RDM), 2016 WL 6902113 (D.D.C. Nov. 23, 2016). Here, the Court applied both standards that the appellate court might apply when evaluating a preliminary injunction motion, and concluded that NAFA could not satisfy either standard. First, the court observed that it already had rejected NAFA’s claims on the merits in a final judgment (see our blog available here). Second, the court found that the potential for irreparable harm, balance of equities, and public interest did not weigh so heavily in NAFA’s favor as to outweigh NAFA’s inability to establish a likelihood of success on the merits. The court explained that the types of irreparable harm alleged – e.g., the fixed indexed annuity industry will incur substantial compliance costs, business practices will change when the new rules take effect, and the fixed indexed annuities industry will sustain economic losses from receiving lower commissions – while not insignificant, were outweighed by the potential harm to retirement investors should the rules not be implemented. NAFA has filed an Emergency Motion for an Injunction Pending Appeal with the U.S. Court of Appeals for the District of Columbia urging the Court to stay the April 10, 2017 applicability date of the rule pending appeal of the district court’s rulings in favor of the Department.

IRS Extends Distribution (Not Filing) Deadline for ACA Reporting and Continues Good Faith Standard

Today, the IRS announced (see Notice 2016-70) an extension to the distribution (but not filing) deadline 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

DOL Prevails In First Challenge to the Conflict of Interest Rule and Related Exemptions

On November 4, 2016, Judge Moss in the U.S. District Court for the District of Columbia granted the U.S. Department of Labor’s motion for summary judgment and dismissed claims brought by the National Association for Fixed Annuities (“NAFA”) challenging the Department’s conflict of interest rule and related exemptions. Nat’l Ass’n for Fixed Annuities v. Perez, No. CV 16-1035 (RDM), 2016 WL 6573480 (D.D.C. Nov. 4, 2016).  The decision is the first to be issued among the four pending cases asserting similar challenges. (Our earlier blog posts on the cases are available here.)

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