Supreme Court Declines Review of Fiduciary Breach Claims in Tussey v. ABB

The U.S. Supreme Court recently announced that it will not hear the case of Tussey v. ABB, despite encouragement from the Solicitor of Labor to hear the case. The Tussey case involved whether deference should be limited to fiduciaries’ decisions that relate to benefit claims. 

In Tussey, the plan participants alleged that the revenue sharing payments and other aspects of plan administration resulted in breaches of fiduciary duties. They claimed that the plan sponsor overpaid for recordkeeping services, which they said subsidized costs for services related to the plan sponsor’s other benefit plans as well as corporate matters. The terms of the plan document provided the fiduciaries with the discretion to determine eligibility regarding benefits and to take any other actions with respect to the plan, including interpreting of the terms of the plan. 

ERIC members and trial members can read more here.
The 8th Circuit’s decision is available here.
The Supreme Court’s denial of cert is available here.

Associations Recognize Achievements of ERISA

A group of associations, including the ERISA Industry Committee (ERIC) celebrated the 40th anniversary of the Employee Retirement Income Security Act (ERISA) by highlighting providing forty facts about ERISA and the private employer-provided system. The summary includes interesting information about the law, including that at the end of June 2014, average real retirement assets per U.S. household stood at $190,600 (in 2013 dollars)—more than six times higher than in 1975. The summary also explains that “Retirement savings arrangements play an important role in the capital markets. This pool of capital helps to finance productivity-enhancing investments and business expansion.”

To read more, click here.

Supreme Court Agrees to Hear Case on Monitoring Plan Investments

The U.S. Supreme Court has indicated that it will hear the case of Tibble v. Edison International, which involves the selection and monitoring of plan investments and the amount of fees related to those investments.

The Supreme Court’s decision in this case will have a significant impact on how long participants have to sue regarding alleged fiduciary breaches in the selection and monitoring of plan investments. ERIC will closely monitor this case and separately reach out to members to determine if an amicus brief should be filed with the Supreme Court.

ERIC members and trial members can read more here.

The 9th Circuit’s decision in Tibble v. Edison International is available here.
For more information on the case, click here.
For case developments, click here.

Buck Consultants Explores Nixon and the ACA

In "ERISA@40: ERISA, Nixon, and the ACA", Buck Consultants, a Xerox company, explains that:

"Th[e] article looks at the Nixon administration’s proposal to reform the US health care system, presented to Congress in 1974 — the same year ERISA was enacted. Although it wasn’t adopted, the proposal included a number of provisions that are surprisingly similar to those appearing in the Affordable Care Act."

To read more, click here.

Ninth Circuit Considers All Relevant Factors When Reviewing Fiduciary Decisions

The Ninth Circuit Court of Appeals, in Pacific Shores Hospital v. United Behavioral Health, recently examined the standard that applies when courts review a fiduciary’s benefit denial. The Court held that courts should consider “all of the relevant circumstances,” rather than upholding an administrator’s decision as long as it was reasonable.

ERIC members and trial members can read more here.
The Ninth Circuit’s decision is available here.
The Department of Labor’s brief is available here.

Reflections on 40 Years of ERISA

In "Industry Leaders Share Thoughts About ERISA", PlanSponsor.com reports that:

"Forty years ago on September 2, in response to failing companies resulting in workers losing pensions, sweeping legislation designed to protect workers from losing their earned retirement income was signed into law. But, the retirement plan industry looked very different 40 years ago when the Employee Retirement Income Security Act (ERISA) was implemented, and as the industry has changed, the law and its standards have had to change as well...

We wondered how those who have influenced the industry—through their work within the government, as an advocate or as a long-time provider to retirement plans—would answer the same questions. On the pages that follow, several influential industry leaders share their thoughts...."

To read more, click here.

SOL Recommends That Supreme Court Decide Fiduciary Duty Case

The Solicitor of Labor ("SOL") recently recommended that the U.S. Supreme Court consider to what extent fiduciaries are required to monitor investments on an ongoing basis in Tibble v. Edison International. 

The SOL recently filed an amicus brief, which states that the Supreme Court should hear the first issue on monitoring investments, but not the second issue on deference. On the first issue, the SOL argued ERISA’s statute of limitations does not eliminate the requirement that fiduciaries prudently monitor a plan’s investments. The SOL said that the fiduciaries have a continuing fiduciary duty to review the plan’s investments and eliminate any that are imprudent. Furthermore, the SOL said that it appears as though the fiduciaries did monitor the investments and that the Court should evaluate whether they did so prudently.

ERIC members and trial members can read more here.
The Department of Labor’s brief in Tibble is available here.
The Ninth Circuit’s original decision in Tibble is available here.
The Ninth Circuit’s amended opinion in Tibble is available here.
Additional information about the Tibble case is available here.

Mixed results from Courts of Appeals on ERISA preemption

In recent weeks, U.S. Courts of Appeals have provided mixed results when determining whether state laws were superseded (i.e., preempted) by ERISA. Several Circuit Courts of Appeals recently held that a number of state laws that impacted ERISA plans were not preempted by ERISA, while some courts held that other state laws were not.

A number of U.S. Courts of Appeals have recently examined when ERISA preempts state laws. The Sixth Circuit found in Self-Insurance Institute of America, Inc. v. Snyder that a state law imposing a tax on claims paid by plans, including self-insured plans, was not preempted by ERISA. Similarly, the Third Circuit held in New Jersey Carpenters v. Tishman that a state’s prevailing wage law was not preempted. The Second Circuit found in Wurtz v. The Rawlings Company that a state law that addressed subrogation and reimbursement was preempted for self-funded health plans, but not for fully insured plans. Finally, the First Circuit held in Merit Construction Alliance v. City of Quincy that a state law requiring the maintenance of an ERISA program was preempted.

ERIC members and trial members can read more here.
SIIA v. Snyder is available here.
New Jersey Carpenters v. Tishman is available here.
Wurtz v. The Rawlings Company is available here.
Merit Construction Alliance v. City of Quincy is available here.

DOL Issues Proposed Regulation to Require a Guide for 408(b)(2) Disclosures

The U.S. Department of Labor has issued a proposed regulation that would amend the final fee disclosure regulations requiring service providers to provide a “guide” to plan fiduciaries to assist them in reviewing the detailed fee disclosures. The final fee disclosure regulation or “408(b)(2) regulation” required that service providers to retirement plans provide certain detailed disclosure regarding fees charged to the plan and participants. This proposed regulation would require service providers to also provide a summary document or “guide” with the initial fee disclosures to plan fiduciaries if the fee disclosures are contained in “multiple or lengthy documents.”

ERIC members and trial members can read more here.
The DOL Fact Sheet is available here.
The DOL News Release is available here.
The proposed regulation is available here.

Court of Appeals Finds State Law Requiring Plan Reporting to be Preempted by ERISA

The Second Circuit Court of Appeals recently held in Liberty Mutual v. Donegan that a state law involving reporting by benefit plans was preempted. The court explained:

"Liberty Mutual Insurance Co. operates a self-insured employee health plan. A Vermont statute requires all “health insurers” (including self-insured plans) to file with the State reports containing claims data and other “information relating to health care.” A State regulation specifies how such information must be recorded and transmitted...

Two constants, however, remain: (1) recognition that ERISA’s preemption clause is intended to avoid a multiplicity of burdensome state requirements for ERISA plan administration; and (2) acknowledgment that “reporting” is a core ERISA administrative function. These two considerations lead us to conclude that the Vermont law, as applied to compel the reporting of Liberty Mutual plan data, is preempted."

To read more, click here.

Health Plan Administrator Seeks Declaration That State Prompt-Pay Law Does Not Apply

In Aetna Life Insurance Company v. Methodist Hospitals of Dallas, Aetna (the “TPA”) has asked the U.S. District Court for the Southern District of Texas to find that the Texas Prompt Pay Act does not apply to the self-funded plans it administers.

The TPA alleges that Methodist Hospital demanded more than $10 million from the TPA on the basis that it failed to make payment as required by the Texas Prompt Pay Act. The TPA alleges it made payment pursuant to the terms of its agreement with Methodist Hospital and that the Act should not apply to its self-funded customers. Specifically, the TPA asks the court to declare that “(1) the Texas Prompt Pay Act, by its terms, does not apply to self-funded plans, which do not involve the insurance relationship that is required under the statute, or (2) if the statutes do apply to self-funded plans, they are preempted by ERISA.”

For more information, click here.

Fee Dispute Case Settles for $30 Million

BenefitsPro reports in "Int'l Paper to pay $30 million to settle retirement plan suit" that:

"International Paper has agreed to pay $30 million and make some major changes to its retirement plans to settle an excessive fees lawsuit brought by current and former plan participants.

The case, which was filed on Sept. 11, 2006, was one of the first such cases to be filed against a 401(k) plan by participants who claimed they paid $58 million in unreasonable recordkeeping and administration fees."

To read the full article, click here.

ERIC Urges Flexibility on Lifetime Income Disclosures

The ERISA Industry Committee (ERIC), the Washington, D.C.-based trade association representing America’s major employers, submitted comments today to the Department of Labor (DOL) recommending that it provide employers with flexibility regarding lifetime income disclosures.

The DOL issued an advanced notice of proposed rulemaking (Pre-Rule) on May 7 relating to providing lifetime income disclosures on benefit statements for defined contribution plans. The DOL is considering requiring that benefit statements include the participant’s current account balance, a projected account balance, and lifetime income examples.

ERIC commended the DOL for encouraging Americans to focus on the importance of adequately preparing for retirement and working to support the ongoing efforts of plans, but raised a number of concerns about the approach taken by the DOL in the Pre-Rule.

“Lifetime income disclosures should be voluntary, not mandatory and the guidance should be flexible enough to encourage innovation,” Kathryn Ricard, ERIC Senior Vice President for Retirement Policy, stated.

The letter points out that without a mandate, companies and service providers have been actively developing tools to educate workers on the importance of saving and retirement readiness. ERIC notes that imposing a mandate will only stifle creativity.

ERIC’s letter explains that the disclosures required by the Pre-Rule would be confusing and misleading for many participants, and expose companies to unnecessary fiduciary liability. ERIC is concerned that the DOL’s proposal would result in unrealistic expectations and confusion by participants as actual contributions, compensation, and investment earnings will not follow the DOL’s assumed patterns.

ERIC proposes alternatives that it believes would be more effective than the approach described in the Pre-Rule. ERIC recommends that the DOL instead: (1) promote a voluntary system with flexible guidance based on broad principles that will encourage innovation; and (2) encourage the use of online modeling tools, which will allow workers to explore a variety of scenarios based on their individual situations.

“Instead of paper disclosures, the Department should promote the use of online modeling tools. These dynamic tools would allow participants to generate more realistic projections for their scenarios, encourage action, and demonstrate interactively the uncertainty inherent in any projection,” Ricard said.

In the event the DOL insists on issuing regulations that mandate lifetime income disclosures, ERIC also provides detailed recommendations for improving the Pre-Rule.

ERIC’s letter can be accessed by clicking on the link below.

ERIC Comment Letter to DOL

Most Participants Haven’t Focused on Participant Fee Disclosures

The Employee Benefits Research Institute (EBRI) reports that 401(k) fee disclosures don’t seem to be making much of an impact.

EBRI’s 2013 Retirement Confidence Survey found that only 53 % of defined contribution plan participants report having noticed fee disclosure information.

Only 7 % of all plan participants said they made changes to their investments as a result of the fee disclosures.

The few participants who made changes were most likely to move funds out of more expensive investments or to withdraw money from the plan.

The EBRI findings are available here.

DOL Provides Fee Disclosure Relief

The Department of Labor recently issued Field Assistance Bulletin 2013-02 (FAB 2013-02), which provides temporary enforcement relief for participant fee disclosures. ERISA requires fee disclosures to be made for participant-directed individual account plans.

FAB 2013-02 states that the Department of Labor’s EBSA division, as an enforcement matter, will treat plan administrators as providing the disclosures that must be made annually if they furnish the “2013 comparative chart” no later than 18 months after the prior comparative chart was furnished. For those administrators who have taken steps to comply with the 2013 disclosure requirement, FAB 2013-02 states that they may furnish the “2014 comparative chart” no later than 18 months after furnishing the prior comparative chart in compliance with the regulation.

ERIC sent a letter to the EBSA on June 3, 2013 highlighting the timing issues after the first year of compliance in 2012. We asked for guidance similar to what is contained in FAB 2013-02.

A copy of FAB 2013-02 is available here.

ERIC’s comment letter is available here.

Senate Confirms New Secretary of Labor

The Senate confirmed Tom Perez today as the U.S. Secretary of Labor. There was a party-line vote of 54-46, with no Republicans supporting President Obama's nominee. 

Mr. Perez has been serving as the Assistant U.S. Attorney General for the Civil Rights Division at the U.S. Department of Justice since 2009. He previously served as Maryland Gov. Martin O’Malley’s Labor Secretary from 2007 until 2009.

For more information, click here.

Seventh Circuit Allows Participant to Seek Monetary Damages for Alleged Fiduciary Breach

The U.S. Court of Appeals for the Seventh Circuit in a June 13 ruling adopted the U.S. Supreme Court’s view in Cigna Corp. v. Amara in ruling that a health plan participant is permitted to seek “make-whole relief” in the form of monetary damages in alleged fiduciary breach claims against the participant’s plan.

A three-judge panel of the Seventh Circuit vacated and remanded a 2011 district court ruling, allowing the participant to seek equitable relief under ERISA section 502(a)(3) to receive monetary damages when the defendant is a trustee in the alleged fiduciary breach of misrepresenting plan coverage level.

The case, Kenseth v. Dean Health Plan, Inc., is available here.

ERIC Explores Lifetime Income Proposal

We hope you were able to join us for today's call on lifetime income disclosures on benefits statements.The Department of Labor (“DOL”) has issued an advanced notice of proposed rulemaking (ANPRM) that would require benefit statements for defined contribution plans to include the participant’s account balance and an estimated lifetime stream of payments. An “ANPRM” is a “pre-rule” or a step an Agency can take prior to issuing proposed regulations.

In its ANPRM, the DOL is considering various alternatives to regarding the methodology of disclosing estimated lifetime streams of payments, including requiring plans to:

• Convert the participant’s current account balance to an estimated lifetime income stream of payments, assuming the participant had reached normal retirement age under the plan as of the date of the benefit statement. 
• Show the projected account balance, as well as the lifetime income stream generated by it for participants who have not yet reached normal retirement age. The participant’s current account balance would be: (1) projected to normal retirement age, based on assumed future contribution amounts and investment returns; and (2) then converted to an estimated lifetime income stream of payments, assuming that the person retires at normal retirement age. 
• Include both Options 1 and 2 as estimated monthly payments based on the expected mortality of the participant or beneficiary. If the participant has a spouse, the projections would need to be based on the joint lives of the participant and his/her spouse. 

During today's call, we discussed the proposal and what it might mean for our members. If you missed the call, the materials are available here.

The DOL had already issued a Request for Information (RFI) in 2010. Thus, this is the second round of questions asked by the DOL on this issue and is based on the responses it received to the RFI. ERIC has previously responded to the DOL’s Request for Information (available here) and testified on this issue (available here). In our response to the RFI, we encouraged the DOL to establish a website that allows individuals to make such estimates based on their individual circumstances and opposed a mandated illustration on benefit statements.

During the call, Kathryn Ricard and Debra Davis of ERIC provided an overview of the ANPRM and ERIC’s position on the RFI and Seth Safra of Covington & Burling highlighted particular concerns for large employers.

If you're an ERIC Member, please be sure to let us know what you think of the DOL's proposal by contacting Kathryn Ricard or Debra Davis.

Timing is Everything: Court finds no interference with benefits where claim was already dismissed

A court recently found that a company did not interfere with a participant’s disability benefits in violation of ERISA section 510. In Lampron v. Group Life Insurance and Disability Plan of United Technologies Corporation, an employee was receiving benefits under the company’s short-term disability plan. The participant’s benefits under the plan ended in March 31 2010. Thereafter, the participant was notified that he needed to be cleared to work and return to work no later than June 30, 2010. When he did not return to work, the employee was fired.

U.S. District Court for the District of Maine determined that the company did not interfere with the individual’s disability benefits. The court noted that the company had decided several months before his termination that the individual was not entitled to any benefits under the plan. The court further noted that there was no indication that the company retaliated or discriminated against the employee because he previously collected benefits.

Thus, the timing of the company’s decision to terminate the worker’s employment was a key factor in the court’s findings. Companies may find the court’s decision useful in the event that a participant alleges that they violated ERISA section 510.

A copy of the case is available here.