The First Circuit joined the Eighth Circuit in finding that Fidelity’s practice of earning overnight “float” interest on the cash paid out to 401(k) participants redeeming shares in mutual funds did not violate ERISA’s duty of loyalty or prohibition on self-dealing. In so holding, the Court observed that under the terms of the trust agreements
U.S. District Court Rules that Float Income Earned by Fidelity Is Not a Plan Asset
Four class actions were consolidated in the U.S. District Court for the District of Massachusetts challenging whether float income earned on monies pending a transaction was a “plan asset.” In re Fidelity ERISA Float Income, No. 13-10222, 2015 WL 1061497 (D. Mass. March 11, 2015). Plaintiffs argued that if float was a plan asset, then Fidelity breached its fiduciary duties and committed a prohibited transaction by keeping this float income for its own benefit. Applying ordinary notions of property rights, the District Court held that float income was not a plan asset.
Mental Health Parity Act: A Litigation Update
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.
Hobby Lobby: The Supreme Court’s View and Its Impact
For the second time in two years the United States Supreme Court (the “Court”) has ruled against the Obama Administration with respect to elements of the Affordable Care Act (the “ACA”). In a 5-4 decision announced today in Burwell v. Hobby Lobby Stores, Inc. (“Hobby Lobby”) (f/k/a Sebelius v. Hobby Lobby Stores, Inc.), the Court ruled that the federal government, acting through Health and Human Services (“HHS”), overstepped its bounds by requiring faith-based private, for-profit employers to pay for certain forms of birth control that those employers argued contradicted their religious beliefs, in violation of the Religious Freedom Restoration Act of 1993 (“RFRA”).
In Hobby Lobby, the Court found that for-profit employers are “persons” for purposes of the RFRA. The Court, assuming that the government could show a compelling interest in its desire to provide women with access to birth control, ultimately held that the government could have met this interest in a less burdensome way.
The Debate Continues Over The Fiduciary Status of 401(k) Plan Service Providers
In Golden Star Inc. v. MassMutual Life Ins. Co., 2014 WL 2117511 (D. Mass. May 20, 2014), a district court addressed two issues that have become hotly contested in 401(k) plan fee litigation: (1) whether and when a plan provider’s possession or exercise of discretion over fees confers fiduciary status; and (2) whether, to be a fiduciary with respect to plan investments, a plan provider must not only possess, but actually exercise discretion over the investment options offered by the plan.
MassMutual offered plaintiff Golden Star (the plan sponsor and named fiduciary) recordkeeping and other services for its 401(K) plan. MassMutual defined the menu of investment options offered, and Golden Star selected the options to be offered in its plan from that menu. The mechanism for these investments was separate accounts owned by MassMutual as an insurer; MassMutual would pool the investments of several 401(K) plans investments into these separate accounts and then invest the accounts into mutual funds, or other selected investment options. The group annuity contract between Golden Star and MassMutual allowed MassMutual to assess management fees on the separate accounts of up to 1% of the market value.
Transgender Woman Seeks Coverage Under ACA
A transgender woman recently filed a complaint in the U.S. District Court for the Central District of Illinois against her primary care physician, as well as the not-for-profit health-care clinic with which her physician is affiliated, for alleged violation of the anti-discrimination provision of the Affordable Care Act (ACA). Taylor v. Lystila, No. 14-cv-2072
Supreme Court to Resolve Circuit Split in Health Care Reform Cases
The Supreme Court will review two of the numerous lawsuits challenging the Affordable Care Act’s (ACA) requirement that group health plans and insurers cover, without cost-sharing, contraceptives and/or abortifacients (the “Contraceptive Mandate”). The plaintiffs in these suits are secular, for-profit corporations and their owners, and they assert that being forced to comply with the Contraceptive
Claims Administrator Not Liable Under ERISA For Alleged Failure to Follow ACA’s Enhanced Benefit Claim Procedures
A federal court in New York appears to have issued the first published decision addressing alleged violations of the enhanced benefit claim procedures arising out of the Affordable Care Act (ACA). The new procedures contain various participant-friendly provisions, such as the right to external review, that alter ERISA’s existing benefit claim procedures for non-grandfathered welfare
District Court Permits ERISA Claim for Benefits of IRO Review, Holding Such Review Is Not an Arbitration
In Yox v. Providence Health Plan, No. 12–cv–01348, 2013 WL 865968 (D. Or. Mar. 8, 2013), a federal district court held that the review of benefit denials by an independent review organization (IRO) is not akin to an arbitration proceeding, and thus did not preclude a plan participant from seeking judicial review under ERISA of an adverse benefit determination. The plaintiff sued in federal court under ERISA § 502(a)(1)(B) following denial of health coverage for injuries caused by a seizure and fall. Under the insured health plan terms, the plaintiff exhausted the internal claims procedures and then pursued external review by an IRO (which appeared to be mandated by state insurance law). The IRO upheld the initial denial of benefits. In response to the plaintiff’s suit, the plan argued that IRO determinations are similar to arbitration proceedings and, therefore, judicial review of these determinations should be precluded or greatly limited as would be the case for arbitration procedures governed by the Federal Arbitration Act. The court rejected this argument on the basis of the U.S. Supreme Court’s ruling in Rush Prudential HMO, Inc. v. Moran, 536 U.S. 355 (2002). In Rush, the Supreme Court specifically concluded that independent medical reviews were not arbitration proceedings.