Transcript Benefits AndLegal Update - HRA-NCA

Benefits And
Legal Update
By: Lawrence P. Postol, Esquire
[email protected]
(202) 828-5385
Seyfarth Shaw LLP
975 F Street, N.W.,
Washington, DC 20004-1454
Presenter
Lawrence P. Postol is a partner in the Washington, DC
office of Seyfarth Shaw, which has offices in Atlanta,
Boston, Chicago, Houston, Los Angeles, New York,
Sacramento, San Francisco, Washington, DC, London,
Shanghai, and Australia.
Mr. Postol graduated cum laude from Cornell Law School
in 1976, and was an Editor of the Cornel Law Review.
Mr. Postol represents management in employment and
labor law. Mr. Postol has successfully argued two cases
before the United States Supreme Court and twenty-five
cases before the United States Court of Appeals.
Mr. Postol has written two books and over 75 articles in
the employment law area.
[email protected]
(202) 828-5385
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Overview
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Supreme Court Rulings
Same-Sex Marriage Considerations
ERISA & Employee Benefits Litigation Update
Health Care Reform - Next Steps
Hot Topics
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Supreme Court Update
1. Supreme Court Update
• Vance v. Ball State University
 U.S. Supreme Court defines Title VII “supervisor” as employee
empowered with the ability to "take tangible employment actions
against the victim" such as hiring and firing. This is a narrower
standard than some courts had applied, and can affect
employer liability in sexual harassment cases, and other laws.
• University of Texas Southwestern Medical Center
v. Nassar
 U.S. Supreme Court holds that retaliation provision of Title VII
requires that a plaintiff prove “but for” causation. This makes it
harder for plaintiffs to win; it is not enough that a retaliatory
animus was part of the motive. This would apply to ERISA
retaliation.
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1. Supreme Court Update
• Fisher v. University of Texas
 U.S. Supreme Court holds that Equal Protection Clause of 14th
Amendment permits consideration of race in admissions
decisions, but strict judicial scrutiny must be applied. Affirmative
action lives on.
• United States v. Windsor
 U.S. Supreme Court holds that Section 3 of DOMA violates the
Equal Protection Clause as applied to persons of the same sex
who are legally married under the laws of their state
See next section.
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2. The Changing Face of Class Actions
• Class Certification Made More Difficult
 U.S. Supreme Court ruled in Comcast v. Behrend that plaintiffs
must show a method by which class-wide damages can be
commonly calculated
• The damages model the customers presented failed to show that individual
damages calculations would not overwhelm questions common to the class
• “Rigorous analysis” for certification will often overlap with the merits of the
underlying claim
• Supreme Court Upholds Class Arbitration Waivers
 U.S. Supreme Court ruled in American Express Co. v. Italian
Colors Restaurant that a class action waiver required merchants
to arbitrate their antitrust claims on an individual, bilateral basis,
even though the cost of pursuing those claims would exceed
their potential recovery.
 Also consider jury waivers, particularly in D.C.
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Same-Sex
Marriage Considerations
United States v. Windsor, 133 S.Ct. 2675
(2013)
• Section 3 of the Defense of Marriage Act (“DOMA”)
is unconstitutional. Section 3 defined “marriage” and
“spouse,” for federal law purposes, as meaning only
marriages between opposite-sex couples.
• Windsor became effective July 21, 2013.
• Many federal statutes refer to “marriage” or
“spouse,” and each must now be interpreted to
include a lawful same-sex spouse.
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United States v. Windsor
• If federal law requires employer provide a benefit/right
to a “spouse”, you must provide it to same-sex spouse
where marriage was in state or country where it is legal.
• ERISA generally does not require benefits or rights to
spouses, so generally employers need not provide
ERISA rights to same-sex spouse. But see possible
Constitutional equal rights issue.
• However, there are some ERISA exceptions, e.g.,
pension death benefits and QDRO orders.
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United States v. Windsor
• The ruling does not require all states to allow or
recognize same-sex marriages.
• The ruling does not invalidate any existing state laws
or provisions in state constitutions that prohibit samesex marriage.
• The ruling does not require all employer-sponsored
benefit plans to provide benefits for same-sex
spouses. But if a benefit or right must be provided to
“spouse”, e.g. pension death benefit absent a waiver,
then that right/benefit must be provided to same-sex
spouse who were legally married in state or country
which recognizes same-sex marriage. Same for
QDRO divorce order.
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Key Unresolved Issues
• Windsor clearly applies to same-sex couples who were
married in state/country which allows same-sex
marriage, and who live in states that recognize samesex marriages.
• President Obama has directed all federal agencies to
implement the court’s ruling by implementing a
“ceremonial” rule. See IRS Revenue Ruling 2013-17
(9/3/13). If the marriage ceremony was held in a state
or country that allows same sex marriages, then the
federal government will recognize the same-sex married
couples, even if they live in a state that does not
recognize such marriages. They will be considered
“married” for federal law purposes.
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Key Unresolved Issues
• It is unclear, to what extent, the court’s ruling may have
retroactive impact on employee benefit plans.
• For example, if an employee with a same-sex spouse has
already commenced his or her pension benefit in the form
of a single life annuity, will the plan be required to solicit
the spouse’s consent (or, failing to do so, automatically
adjust the payment amount for the spouse’s QJSA survivor
benefit)?
• For situations where the employee has been receiving
imputed income due to coverage of a same-sex spouse,
can the employee request a refund from the employer of
federal tax withholding amounts attributable to the imputed
income?
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Hollingsworth v. Perry, 133 S.Ct. 2652
(2013)
• In a separate decision issued on the same day as
Windsor, the Supreme Court ruled that a California
judge’s prior order allowing same-sex couples to marry
should be reinstated.
• Same-sex marriage had been legal in California, but
only for a very short time -- between June 17, 2008 and
November 4, 2008.
• California is now allowing same-sex marriages again.
• Opponents have filed motions for injunctions, but they
have been denied.
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Health Care Reform Next Steps
Overview
• Marketplace notices – decisions & strategies
• Wellness program incentives/penalties
• Overview of other 2014 legal requirements
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Marketplace Notices
• What: Notice regarding health insurance exchanges
• When: October 1, 2013 (existing employees)
Within 14 days of hire (new employees)
• How: Electronically (for employees with work-related
computer access); first-class mail (all others)
• Who: All domestic employees
• Content:
• Existence of new marketplace, contact information, description of
services
• Possibility of tax credit to help pay for premiums
• Statement regarding implications of obtaining marketplace
coverage (lose employer contribution, lose tax-favored status)
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Marketplace Notices
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Employer Coverage Tool
• What: Pre-enrollment
template for individuals
seeking exchange
coverage
• When: N/A - optional
• How: N/A - optional
• Who: N/A – optional
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Wellness Programs
• Permissible penalty/reward for HIPAA wellness
programs increased to 30% of employee’s health
program cost
• 50% differential permitted for smoking cessation programs
• Final regulations undercut promise of expanded penalties?
• Should still be cautious about other applicable laws under:
• GINA
• ADA (but see benefit plan safe harbor)
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Other Market Reforms in 2014
• 90-day waiting period limitation
• No pre-existing condition exclusions
• Coverage for routine patient costs relating to clinical
trials
• Nondiscrimination on choice of providers
• New SBC content requirements
• Limitation on out-of-pocket expenses
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ERISA & Employee
Benefits Litigation
Update
Stark v. Mars, Inc., 2012 U.S. Dist. LEXIS
98791 (S.D. Ohio July 17, 2012) – No Estoppel
• Participant told by call-center that her monthly pension benefit would
exceed what the plan provided.
• The plan stated that its terms would control if any non-plan
representation was inconsistent with those terms.
• The court rejected the participant’s estoppel claim because (i) the
evidence showed, at worst, “an honest mistake,” (ii) the call center
employees were not fiduciaries, and (iii) plan disclaimers undercut
reliance.
• Accord Jensen v. Solvay Chemicals, Inc., 2013 WL 3306356 (10th Cir.
July 2, 2013) (no relief for non-egregious 204(h) notice error; no
promissory estoppel relief because no reliance); but see Kenseth v.
Dean Health Plan, Inc., 2013 WL 2991466 (7th Cir. June 13, 2013)
(monetary damages may be awarded where fiduciary represents
health plan coverage when the plan did not, even without a showing of
detrimental reliance)
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Guyan International, Inc. v. Professional Benefits
Administrators, Inc., 689 F.3d 793 (6th Cir. 2012) – Using
Participant Funds To Pay Expenses Is Improper
• Service provider breached its fiduciary duties by paying
its own expenses with funds earmarked to pay
participant claims.
• Language in the service provider contract disclaiming
fiduciary status was not controlling because the provider
exercised some control over the disposition of plan
assets.
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Dudenhoefer v. Fifth Third Bancorp, 692 F.3d
410 (6th Cir. 2012) – No Presumption Of
Prudence
• No presumption of prudence applies to a fiduciary decision
that continues to offer employer stock as an investment
option, notwithstanding the hard-wired nature of the plan,
where doing so is alleged to have been improvident and a
causal connection is alleged between the alleged fiduciary
breach and the harm suffered by the plan. The plaintiffs also
turned SEC filings into a fiduciary act, where the filings were
incorporated into an SPD.
• But see Glaxosmithkline ERISA Litigation, 2012 WL 3798260
(2d Cir. Sept. 4, 2012) (dismissing a complaint failing to
allege a “dire situation” where the plan is hard-wired or
strongly favors an employer stock investment option); White
v. Marshall & Ilsley Corp., 714 F.3d 980 (7th Cir. 2013)
(same).
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Harris v. Amgen, 2013 WL 2397404
(9th Cir. June 4, 2013) – No Presumption Of
Prudence
• The Moench presumption, originally applied by the Third
Circuit in Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995),
provides that, when a plan document requires or encourages
investment in employer stock, a plan fiduciary’s decision to
continue offering employer stock as an investment option is
presumed to be prudent, unless the plaintiff can show that
the fiduciary knew or should have known of the company’s
imminent collapse or other dire circumstance.
• The Ninth Circuit determined that the Moench presumption
did not apply in Harris because the plans did not contain
language requiring or encouraging a company stock fund be
offered; the plan merely allowed it. The court held that the
fiduciaries’ actions should be reviewed under ERISA’s
general prudence standard.
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Stephan v. UNUM Life Ins. Co., 697 F.3d 917 (9th
Cir. 2012) – Watch What You Say To Counsel
• The fiduciary exception to the attorney-client privilege
applies to insurance companies that serve as ERISA
fiduciaries or plan sponsors.
• Legal advice given prior to the final fiduciary
determination is not in anticipation of litigation or
otherwise privileged.
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Tibble v. Edison Int’l, 2013 WL 3947717 (9th Cir.
Aug. 1, 2013) – Excessive Fees Are A Problem
• Fiduciaries were imprudent in not considering lower fee
institutional-class mutual funds in place of retail mutual
funds, as 401(k) investment options.
• ERISA’s 6-year statue of limitations applies to
investment option decisions.
• Revenue sharing provisions in plan documents were not
violated – the abuse of discretion standard applies.
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US Airways v. McCutchen, 133 S.Ct. 1537 (2013) and
Heimeshoff v. Hartford Life & Accident Ins. Co., 133 S.Ct.
1802 (cert. granted from 2012 WL 4017133 (2d Cir. Sept. 13,
2012)) - Equity Only If Plan Ambiguous
• Plan terms control over equitable principles (in
construing a welfare plan reimbursement provision).
• Equitable principles can be used to interpret ambiguous
plan terms.
• Can a benefits denial limitations period accrue and run
out before the fiduciaries reach a final decision on the
claim?
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Hakim v. Accenture United States Pension
Plan, 718 F.3d 675 (7th Cir. 2013) – General
Release
• A general release as part of a reduction in force in favor
of the plan sponsor bars an ERISA 204(h) claim against
the sponsor’s pension plan because a preceding benefit
statement advised the participant of his claim for more
benefits than what the statement described.
• Not at issue and not subject to the general release are
claims for benefits under the terms of the plan itself.
Those claims are subject to ERISA’s anti-alienation
provision.
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Central States, Southeast and Southwest Areas Pension
Fund v. Nagy, 2013 LEXIS 7912 (7th Cir. April 22, 2013) –
Personal Liability Of Owner
• The Seventh Circuit held an individual personally liable
for withdrawal liability for a multiple party pension ($3.6
million). The Court of Appeals noted that withdrawal
liability extends to all trades or businesses under
common control with a withdrawing employer. In this
case, the individual, who owned 80% of the withdrawing
employer, also (i) owned and leased property to the
withdrawing employer; and (ii) provided management
services as an independent contractor. The Court of
Appeals held that these activities constitute a “trade or
business” under common control with the withdrawing
employer, and therefore, makes the individual
personally liable for withdrawal liability.
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Hot Topics
Hot Topics
Social Media
Criminal and Credit
Background Checks
ADA
Virginia Noncompetes
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– Employer policies limiting use of blogs,
company email and confidential company
information can be a problem per the
NLRB protection of concerted employee
activities as to terms and conditions of
employment.
– Need individual job risk assessment per
EEOC
– Reasonable Accommodations, Patience,
Patience and IME’s
– Unpaid Leave Beyond FMLA and Work at
Home Requests
– Expect More Litigation.
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