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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

U.S. Supreme Court Says “Regular Review” of ERISA Investments Required

Posted in Statute of Limitations, Supreme Court

ERISA plan fiduciaries charged with responsibility for selecting, monitoring or removing plan investment options should pay close attention to the U.S. Supreme Court’s recent ruling in Tibble v. Edison Intl., 135 S. Ct. 1823 (2015).  In that decision, the Court ruled that ERISA’s duty of prudence involves “a continuing duty to monitor investments and remove imprudent ones.”  Although the Court did not elaborate on what it viewed to be the scope of an ERISA plan fiduciary’s duty to monitor, the plaintiffs’ bar is already seizing on the ruling as a potential basis for asserting new claims based on a failure to monitor prudently plan investments and other plan functions.  Thus, plan fiduciaries are advised to establish a thoughtful and appropriate procedure for monitoring plan investment options, to diligently follow that procedure when monitoring plan investment options, and to make and preserve a written record reflecting that they followed their procedure in every regard.  Taking these steps will put fiduciaries in a favorable position should emboldened plan participants file lawsuits challenging whether fiduciaries fulfilled their duty to monitor plan investment options based on the perceived plaintiff-friendly Tibble ruling. Continue Reading

SEC Announces Open Meeting on Proposed Clawback Requirements under Dodd-Frank Act

Posted in Compensation Committees, Executive Compensation

The Dodd-Frank Wall Street Reform and Consumer Protection Act became law on July 21, 2010, introducing a variety of executive compensation-related regulations, including with respect to shareholder say-on-pay voting and independence requirements for members of the compensation committees and their advisers.  Almost five years following the enactment of the Dodd Frank Act, the rules enacting the incentive compensation clawback provisions under Dodd Frank Act Section 954 have not even been proposedContinue Reading

The U.S. Supreme Court Finds a Constitutional Right to Same-Sex Marriage: Implications for Employee Benefit Plan Sponsors

Posted in Same-Sex Marriage, Supreme Court

On June 26, 2015, the U.S. Supreme Court issued a historic decision in Obergefell v. Hodges, holding that the Fourteenth Amendment’s Due Process and Equal Protection Clauses require states to allow same-sex marriage and to recognize same-sex marriages performed in other states.  The decision comes exactly two years to the day from the Court’s decision in Windsor defining “spouse” to include same-sex spouses for purposes of federal law.

As a result of the Court’s decision, the existing 14 state bans on same-sex marriage are invalid, and same-sex spouses are entitled to all of the rights extended to opposite-sex spouses under both federal and state law.  Continue Reading

King v. Burwell – Supreme Court Upholds Premium Subsidies under Federally-Run Marketplaces; ACA Remains (Mostly) Unfazed

Posted in ACA, Affordable Care Act, Supreme Court

On June 25, 2015, the United States Supreme Court released its much anticipated King v. Burwell decision regarding the validity of premium assistance issued by Federally-run Marketplaces.  Chief Justice Roberts, writing for the 6-3 majority, agreed with the Internal Revenue Service’s (IRS) interpretation that premium assistance under the Patient Protection and Affordable Care Act of 2010 (the “ACA”) is available to individuals who purchase coverage on both State-run and Federally-run Marketplaces.  With the Supreme Court’s King ruling, the provisions of the ACA have prevailed in two of four key challenges (the Court upheld the individual mandate, but rejected a requirement that states expand Medicaid, in National Federation of Independent Business v. Sebelius and rejected the contraceptive mandate in Burwell v. Hobby Lobby Stores, Inc.). Continue Reading

SCOTUS Invites Solicitor General to Submit Its View on ERISA Venue Selection Provisions

Posted in Venue

We previously reported that a split Sixth Circuit panel enforced a venue selection clause in an ERISA plan.  In so ruling, the Court rejected the U.S. Department of Labor’s attempt to regulate by amicus brief and reasoned that the Department’s brief was “an expression of mood.”  The Department, according to the Sixth Circuit:  (i) had no more experience than the Court with respect to determining whether federal statutes prohibit venue selection, and (ii) had not previously pursued an enforcement action, promulgated a regulation, or issued interpretive guidance relating to an ERISA plan’s venue selection clause.  Observing that Congress could have proscribed such clauses if it chose to do so, the Court found that “[i]t is illogical to say that, under ERISA, a plan may preclude venue in federal court entirely [via an arbitration clause], but a plan may not channel venue to one particular federal court.”

With a petition for certiorari pending, the U.S. Supreme Court has asked the Solicitor General to file a brief expressing the government’s views on whether “ERISA’s special venue provision, § 1132(e)(2), and a plaintiff’s choice of venue under that provision, may be abrogated by a more restrictive venue-selection clause in an ERISA plan.”  The case is Smith v. Aegon Cos Pension Plan, 769 F.3d 922 (6th Cir. 2014), petition for cert. filed, (U.S. Mar. 13, 2015) (No. 14-1168).

GM Not Obligated to Make $450 Million Contribution to Fund Union Retiree Health Benefits

Posted in Release Agreements / Settlements, Retiree Benefits

The Sixth Circuit held that GM was not obligated to contribute $450 million to fund retiree health benefits for UAW members because the most recent contract between the UAW and GM extinguished GM’s former obligation to contribute.  In response to earlier litigation between the UAW against GM to recover retiree health benefits and a bankruptcy reorganization, GM established a trust to fund UAW retiree health benefits and agreed to make a one-time $450 million payment to the trust.  Thereafter, GM filed for Chapter 11 bankruptcy and sold all of its assets and liabilities to the “New GM.”  Days after the sale was approved, New GM and the UAW entered into a new settlement which: (1) did not mention the $450 million payment, and (2) established a new benefits agreement.   When the UAW sought the $450 million payment,  New GM refused to pay, arguing in part that the agreement did not require such a contribution.

The district court granted summary judgment in favor of New GM, finding that the $450 million contribution obligation did not survive GM’s reorganization.  On appeal, the Sixth Circuit disagreed, finding that the obligation did survive because the purchase agreement associated therewith passed on all liabilities arising under the UAW Collective Bargaining Agreement, which included the obligation to make the $450 million contribution.  However, the Court nonetheless determined that New GM was not obligated to pay because a subsequent settlement  agreement between GM and the UAW was properly construed as having extinguished GM’s former obligation.  The Court pointed out that the settlement agreement did not mention the obligation and made clear that it superseded, extinguished, and/or released GM from all former obligations concerning retiree health benefits arising from the former UAW/GM litigation and settlement agreements and all GM bankruptcy proceedings.  Accordingly, the Court affirmed the district court’s granting of summary judgment and New GM was not bound to make the contribution.  The case is Int’l Union, United Auto., Aerospace & Agr. Implement Workers of Am. v. Gen. Motors, LLC, 2015 WL 223950 (6th Cir. May 14, 2015).

ERISA Participant’s Supplemental Submission Doesn’t Restart Exhaustion Clock

Posted in Benefit Claims, Exhaustion of Administrative Remedies

A federal district court in New Jersey held that supplemental documentation submitted by a participant in connection with the claims review process did not restart the clock for a claims administrator to decide the participant’s appeal.  Plaintiff Tracee Lewis-Burroughs timely appealed Prudential Insurance Company of America’s decision to stop paying her long-term disability benefits. Continue Reading

U.S. Supreme Court Sends ERISA Investment Fee Case Back For Further Review

Posted in 401(k) Plans

Today, the U.S. Supreme Court ruled that an ERISA plan participant may allege that a plan fiduciary breached the duty of prudence by not properly monitoring the plan’s investment options as long as the alleged breach of the continuing duty occurred within six years of the suit. Continue Reading

Third Circuit: Catalyst Theory of Recovery Applies to ERISA Fee Award

Posted in Attorneys' Fees

The Third Circuit held that the catalyst theory of recovery applies to ERISA cases when determining whether to award attorneys’ fees.  In this case, Plaintiffs (two individuals and two pharmacies) filed suit against Defendant insurance companies for denial of benefits under ERISA.  After their motion to dismiss was denied, Defendants paid the claims in full.  Both parties then sought attorneys’ fees and costs, which the district court denied.  The Third Circuit affirmed the district court’s decision to deny fees, but remanded on the issue of whether Plaintiffs were entitled to interest on the delayed payment of benefits.  Ultimately, the Defendants agreed to pay $68,000 in interest to Plaintiffs and the case settled.  Continue Reading

IRS Chief Counsel Memorandum Clarifies that Correction of Section 409A Failures in Year of Vesting Will Not Shield Income Inclusion Under 409A

Posted in IRS

Earlier this month, the Office of Chief Counsel of the Internal Revenue Service released a Memorandum clarifying the impact of a correction of a Code Section 409A operational failure before the date of vesting of nonqualified deferred compensation but during the year of vesting.  In the Chief Counsel Memorandum, the IRS clarified that such a correction, under such circumstances, would not avoid income inclusion under Code Section 409A.  Continue Reading