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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

Eighth Circuit Says That Considerations Of Health Care Cost Savings Could Be Proxy For Age In ADEA Suits

Posted in Reduction in Force

The Eighth Circuit recently concluded that an employer may violate the ADEA by terminating an older employee in order to reduce its health care premiums.  Tramp v. Associated Underwriters, Inc., 2014 WL 4977396 (8th Cir. 2014).  Plaintiff Marjorie Tramp brought claims of discrimination and retaliation under the ADEA, arguing that Defendant Associated Underwriters, Inc. terminated her to reduce its health care costs and in retaliation for her refusal to rely on Medicare benefits in lieu of employer-sponsored benefits. Continue Reading

A Court’s Review of a Disability Benefit Claim May Hinge on the Meaning “Satisfactory to Us”

Posted in Disability Benefit Claims

Twenty-five years ago, the U.S. Supreme Court ruled that courts should review an ERISA participant’s claim for benefits under a de novo standard of review unless the plan gives the plan fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.  Since then, courts have considered what type of plan language suffices to grant plan fiduciaries discretionary authority to warrant the more deferential arbitrary and capricious standard of review.

The issue has garnered a fair amount of attention in the context of employer-provided disability insurance plans.  Courts have been particularly focused on whether the requisite discretion is conferred when the plan requires that claimants present “proof satisfactory to us” (e.g., the plan administrator) to receive benefits.  Four circuits [the Sixth, Eighth, Tenth and Eleventh Circuits] have ruled that such language clearly grants discretionary authority to the plan administrator, and claim denials in those cases have been subject to an arbitrary and capricious standard of review.  However, six circuits [the First, Second, Third, Fourth, Seventh and Ninth Circuits] have held that such language does not provide a clear grant of discretionary authority to a plan administrator and thus claim denials in these cases were subject to de novo review by a court.

Whether a court reviews a benefit claim denial (i) de novo, thus empowering the court to substitute its own judgment for that of the plan fiduciary, or (ii) under the highly deferential arbitrary and capricious standard of review, can sometimes be outcome determinative.  This article sheds some light on the reasoning behind each view and suggests steps that plan drafters can take to better ensure that claim denials are subject to deferential review by the courts. Continue Reading

IRS to Amend Cafeteria Plan Regulations to Facilitate Enrollment in Marketplace Coverage

Posted in ACA, Affordable Care Act, Cafeteria Plans, IRS

On Thursday, September 18, 2014, the Internal Revenue Service (“IRS”) released Notice 2014-55, which expands the cafeteria plan “change in status” rules to allow plans to offer employees an option to revoke their elections for employer-sponsored health coverage to purchase a qualified health plan through a Health Insurance Marketplace (“Marketplace”).   The notice is effective immediately and will appear in IRB 2014-41, to be published Oct. 6, 2014.

The notice addresses two specific situations in which a plan could allow an employee to revoke a cafeteria plan election (other than a health FSA election):  due to enrollment in the Marketplace; and due to a reduction in hours of service.  This should be a welcome relief to employers that may have been struggling with how to allow employees to change coverage from under the employer’s plan to a Marketplace or other group health plan. Continue Reading

Mental Health Parity Act: A Litigation Update

Posted in ACA, Affordable Care Act

The Federal Mental Health Parity and Addiction Equity Act (the “Federal Parity Act”), like many similar state parity laws, mandates that financial requirements (e.g., copayments, coinsurance, or deductibles) and treatment limitations (e.g., limitations on the frequency of treatment, number of out-patient visits, or amount of days covered for in-patient stays) applicable to mental health benefits generally can be no more restrictive than the requirements and limitations applied to medical benefits. These parity laws, which are enforceable under ERISA, have been at issue in an increasing number of cases. Three district courts, all of which are located within the Ninth Circuit, have released rulings over the past few weeks. Continue Reading

California Repeals 60-Day Limit on Waiting Periods

Posted in Affordable Care Act

On August 15, 2014, California passed Senate Bill 1034, which repealed an insurance law (Assembly Bill 1083) that prohibited insurance companies from including waiting periods in excess of 60 days in their group health insurance contracts.  The new law, effective January 1, 2015, prohibits California insurance companies from applying any “waiting or affiliation period” under a group or individual health benefit plan.

So where does that leave California employers, who are permitted under federal law (the ACA) to have a one-month orientation period and up to a 90-day waiting period? Continue Reading

Sixth Circuit says ERISA does not preempt state law claim for fraudulent inducement.

Posted in Preemption

The Sixth Circuit recently held that ERISA did not preempt  a plan participant’s claim for state law fraudulent inducement.   McCarthy v. Ameritech Pub., Inc., No. 12-4510, 2014 WL 3930572 (6th Cir. 2014).  Defendant-API’s decided to terminate Plaintiff’s employment and gave her two options: (1) she could leave and receive a lump-sum “termination payment”;  or (2) she could enter  API’s Employment Opportunity Pool, where she would receive priority consideration for another position while receiving reduced pay taken from her “termination payment.”   Because Plaintiff’s husband was critically ill, Plaintiff’s decision depended on whether she had accrued enough employment service to retain her healthcare benefits upon leaving.  Plaintiff’s supervisors falsely advised her that, notwithstanding the representations by API’s health and welfare plan administrators to the contrary, she was not entitled to retain her healthcare benefits unless she continued working for an additional nine months.  As a result of Plaintiff’s decision to enter the employment pool, “API . . . received nine months of free labor from [Plaintiff].” Inter alia, the Sixth Circuit held that ERISA did not preempt  Plaintiff’s state law fraudulent inducement claim because Plaintiff was not seeking any benefits due under the health and welfare plan, but rather fair compensation for the work performed for the nine months she was allegedly induced to remain at API.

New Guidance on Locating Missing Participants for Terminated Defined Contribution Plans

Posted in Uncategorized

On August 14, 2014, the U.S. Department of Labor (DOL) provided new guidance to plan fiduciaries of terminated defined contribution plans for locating missing and unresponsive participants in order to distribute their benefits.  The guidance comes in the form of Field Assistance Bulletin (FAB) No. 2014-01, which replaces FAB No. 2004-02.  As discussed below, the guidance may also prove useful in finding missing and unresponsive participants in other circumstances as well. Continue Reading

Divided Fourth Circuit Panel Rules On Burden of Proving Loss Causation in ERISA Fiduciary Breach Case

Posted in Loss Causation, Stock Drop

“As for those who might contemplate future service as plan fiduciaries, all I can say is: Good luck.” 

That was the sentiment expressed in a blistering dissent by Fourth Circuit Judge J. Harvie Wilkinson in the latest ruling in a lawsuit challenging the decision by the fiduicaries of the RJR 401(k) plan to liquidate two stock funds that previously had been available to plan participants wishing to invest in Nabisco stock. Tatum v. RJR Pension Inv. Committee et al., No. 13-1360, 2014 WL 3805677 (4th Cir. Aug. 4, 2014). In a split decision, the panel ruled that, because plaintiff-participant Richard Tatum had proved that the plan fiduciaries acted imprudently by liquidating the stock fund without the benefit of a proper investigation, the burden of proof shifted to defendants to show that a prudent fiduciary would have made the same decision.  In so ruling, the Court reversed the lower court decision, which had found in favor of defendants after a bench trial upon finding that they had demonstrated that a prudent fiduciary could have made the same decision.

The Fourth Circuit’s decision makes a number of significant statements and rulings on the burdens of proof related to loss causation, the meaning of “objective prudence,” and the standards for reviewing decisions pertaining to stock funds in the wake of the Supreme Court’s ruling in Fifth Third v. Dudenhoeffer.  Some of the Court’s pronouncements are difficult to reconcile with existing case law.  If not set aside on en banc or Supreme Court review and if adopted elsewhere, the decision could substantially impact the future conduct of fiduciary breach litigation, as well as plan practices in administering stock funds. Continue Reading

District Court Allows ERISA Section 510 Retaliation Claim to Proceed

Posted in ERISA Section 510

A federal district court in Pennsylvania concluded that Irene Najmola, a former employee of Chester County Hospital, sufficiently pled a retaliation claim under ERISA section 510 by alleging that her employment was terminated shortly after returning from short-term disability leave.  In so ruling, the court determined that Najmola sufficiently pled that defendant had the specific intent to interfere with her attainment of ERISA benefits by alleging that she: (1) was an employee; (2) utilized her ERISA protected short-term disability plan; and (3) was terminated.  In addition, the Court held that the temporal proximity between the exercise of her short-term disability leave and her termination were sufficient at the motion to dismiss stage to infer that defendants had the intent to interfere with or retaliate against plaintiff for utilizing ERISA protected benefits. The case is Najmola v. Women’s Healthcare Group of Pa., 2014 U.S. Dist. LEXIS 101583 (E.D. Pa. July 24, 2014).