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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

New IRS Guidance on 40% Excise Tax Previews Future Regulatory Complexity

Posted in ACA, Affordable Care Act

Although public opposition to the 40% excise tax on high-cost health care is rapidly growing, the IRS continued to develop a regulatory framework for administration of the excise tax through its issuance of Notice 2015-52 on July 30, 2015. Similar to the first notice on this topic, Notice 2015-52 merely identifies various administrative challenges without providing concrete guidance. If nothing else, the new guidance provides another preview into what will undoubtedly be a complex regulatory environment. Continue Reading

Eleventh Circuit Again Affirms Dismissal of Stock Drop Claim Against Delta Air Lines

Posted in Employer Stock Fund

The Eleventh Circuit affirmed dismissal of ERISA breach of fiduciary claims against Delta Air Lines and other alleged plan fiduciaries in connection with a defined contribution plan’s investments in Delta Air Lines stock.   In so ruling, the Court joined a growing number of decisions following Dudenhoeffer that have dismissed claims based on public information. Continue Reading

No Damages Awarded for ERISA Plan Fund Mapping Claims

Posted in Damages

Mapping in a 401(k) plan occurs when an investment option is removed and the participant’s investment in that option is transferred to a different investment option (absent direction from the participant).  On remand from the Eighth Circuit, the district court in Tussey v. ABB Inc., No. 2:06-cv-04305 (W.D. Mo. July 9, 2015), held that plan fiduciaries abused their discretion when they mapped participants’ investments from a balanced fund to the plan trustee’s managed allocation fund.  In so ruling, the court found that the trustee and plan sponsor had entered into an improper cross-subsidization agreement whereby the trustee was paid above-market rates for providing services to the plan in exchange for providing various administrative services to the plan sponsor at a loss.  As a result of this conflict, Continue Reading

ACA Reporting Update: New Forms, Higher Penalties & Other Guidance

Posted in ACA, Affordable Care Act

With the impending deadline early next year, most applicable large employers are (or should be) in the process of gearing up for what is perhaps the biggest Affordable Care Act (“ACA”) compliance challenge this year — the information reporting requirements found in Sections 6055 and 6056 of the Internal Revenue Code (the “Code”) (details of which can be found here).  Many employers are finding that properly programming their systems to track the data necessary to complete the forms is a lengthy, time consuming and complicated process.  As they work with their vendors and internal resources to prepare to meet their obligations, employers should be aware that over the last few months, the stakes have been raised by new legislation and there has been some additional guidance as to completion of the forms. Continue Reading

Third Circuit Rules That Actual Harm Needed for Monetary Equitable Remedy

Posted in Remedies

The Third Circuit recently held that a plaintiff was not entitled to a monetary, equitable remedy under ERISA § 502(a)(3) where he failed to prove actual harm.  Perelman v. Perelman, Nos. 14–1663, 14–2742, 2015 WL 4174537 (3d Cir. 2015).  Continue Reading

Trade Act Reinstates Expired Health Coverage Tax Credit (HCTC)

Posted in Health Coverage Tax Credit (HCTC)

On July 6, 2015, President Obama signed the Trade Preferences Extension Act of 2015.  Among other things, the Trade Act retroactively reinstated the Health Coverage Tax Credit (HCTC), which had previously expired on January 1, 2014, and extended its availability through December 31, 2019.  As discussed below, the reinstated HCTC may require employers to update COBRA notices and summary plan descriptions.  In addition, it may present a strategic planning opportunity in certain bankruptcy situations. Continue Reading

Agencies Issue Final Regulations on the Summary of Benefits and Coverage (SBC) Requirements

Posted in ACA, Affordable Care Act

As promised in the FAQ issued on March 30, 2015, the U.S. Departments of the Treasury, Labor and Health and Human Services  (the Departments) have issued final regulations regarding the summary of benefits and coverage (SBC) and uniform glossary for group health plans and health insurance coverage in group and individual markets under the Patient Protection and Affordable Care Act (ACA).  These regulations finalize, with very few changes, the proposed regulations issued on December 30, 2014.  The final regulations state that the Departments anticipate a new SBC template and associated documents will be issued by January 2016 and will apply to coverage that begins or is renewed after January 1, 2017.

These final regulations make changes to the initial SBC regulations, issued on February 14, 2012, and codify certain guidance previously set forth in the FAQs about Affordable Care Act ImplementationContinue Reading

Reminder: Non-Grandfathered Plans Must Implement Embedded Out-of-Pocket Maximums

Posted in ACA, Affordable Care Act

As employers and plans prepare for 2016 open enrollment, they must be sure to address in their benefit design and with their third party vendors the new embedded out-of-pocket maximum limitations on individuals that were announced at the end of May by the U.S. Departments of Labor (“DOL”), Health and Human Services (“HHS”) and the Treasury (collectively, the “Departments”).

The Affordable Care Act (“ACA”) requires that non-grandfathered group health plans place limits on the maximum annual cost sharing imposed on plan enrollees for out-of-pocket costs associated with essential health benefits.  For plan and policy years beginning in 2016, the maximum out-of-pocket cost for self-only coverage is $6,850, while the maximum out-of-pocket cost for coverage that is not self-only coverage is $13,700. Continue Reading

District Court Rules Privately-Held Stock Plan Fiduciary May Have Affirmative Duty To Disclose

Posted in Disclosure

A federal district court in Georgia held that plan fiduciaries of a closely-held company’s single stock ERISA fund may have a duty to disclose material, non-public information concerning the value of the company’s shares when the information could have a potentially extreme negative effect on a plan participant.  The plaintiffs were participants in defendant Stiefel Laboratories, Inc.’s  (SLI’s) defined contribution stock plan.  The plan terms permitted plaintiffs, under certain circumstances, to require SLI to purchase their shares at the price set forth in the most recent stock appraisal.  Plaintiffs alleged that SLI encouraged them to sell their shares in SLI’s single stock ERISA fund for one-fifth of the amount they would have received as part of GlaxoSmithKline’s subsequent purchase of SLI.  Plaintiffs argued that SLI and the plan fiduciaries had a fiduciary duty to disclose the impending acquisition, and that had they been so informed, they would not have exercised their rights to put the shares to SLI.

The court denied defendants’ motion for summary judgment on plaintiffs’ nondisclosure claim.  In so ruling, the court relied on earlier decisions recognizing an affirmative duty to disclose under “special circumstances with a potentially extreme impact on a plan as a whole, or where participants generally could be materially and negatively affected.”  The court distinguished recent Eleventh Circuit authority that plan fiduciaries do not have a duty to disclose material, nonpublic information to plan participants as being limited to publicly traded stock where the value is set in the open market and where a contrary rule would conflict with prohibitions on insider trading.  According to the court, it was up to the factfinder to decide whether SLI’s “plans of going public” constituted “special circumstances” requiring disclosure.  Central to the court’s decision was the fact that the plan participant was “in a vulnerable position” because he did not receive any warning that “investment in a non-diversified single stock fund was risky” and because he did not “have the benefit of the open market determining the value of his SLI stock.” Under these circumstances, the plan participant “did not receive the slightest hint that his shares would not be purchased at a fair market value.”  To the contrary, the court pointed to evidence that the defendants communicated false information to him regarding the actual value of SLI stock and management’s plans about the future of the company, either of which the court held could have been actionable as affirmative misrepresentations.  The case is Wagner v. Stiefel Laboratories, Inc., No. 12 Civ. 3234, 2015 U.S. Dist. LEXIS 81464 (N.D. Ga. June 18, 2014).

Ninth Circuit Affirms Dismissal of ERISA Section 510 Claim

Posted in Section 510

The Ninth Circuit affirmed the dismissal on summary judgment of Plaintiff Rosemarie Cole’s claim that her employer, Permanente Medical Group, interfered with her receipt of pension benefits in violation of ERISA § 510.  In so ruling, the Court  explained that even if Cole established a prima facie case of discrimination under § 510 – by showing that Permanente terminated her employment eighteen months before she would have been entitled to additional pension benefits — her claim still failed because Permanente stated that it terminated Cole’s employment because she knowingly violated Permanente’s confidentiality policy, and Cole offered no evidence that Permanente actually had a discriminatory motive or that the person who made the decision to fire her was aware that the termination would negatively affect her benefits.  The case is Cole v. Permanente Medical Group, Inc., No. 13 Civ. 15952, 2015 WL 3982534 (9th Cir. July 1, 2015).