Department of Labor Proposes to Delay Implementation of Disability Claim Regulations

On October 6, 2017, the Department of Labor signed a proposed Rule “to delay for ninety (90) days – through April 1, 2018 – the applicability of the Final Rule amending the claims procedure requirements applicable to ERISA-covered employee benefit plans that provide disability benefits.”

Specifically, the DOL proposes:

Section 2560.503-1 is amended by removing “on or after January 1, 2018” and adding in its place “after April 1, 2018” in paragraph (p)(3) and by removing the date “December 31, 2017” and adding in its place “April 1, 2018” in paragraph (p)(4).

The proposed rule is scheduled to be officially published on October 12, 2017. There will be a 15-day period for comments on the proposal to extend the applicability date. There will also be a 60-day period to submit “comments providing data and otherwise germane to the examination of the merits of rescinding, modifying, or retaining the rule[.]” Continue Reading

ERISA § 502(c)(1) Claim for Statutory Penalties is Barred by One-Year Statute of Limitations, Second Circuit Holds

Deciding an issue of first impression, the U.S. Court of Appeals for the Second Circuit recently held that a plaintiff’s claim under ERISA § 502(c)(1) was barred by Connecticut’s one-year statute of limitations for an action seeking to collect a statutorily-imposed civil penalty. Brown v. Rawlings Fin. Servs. LLC, (2d. Cir., 8/22/17) (Jacobs, Leval, Raggi, Js.).

Plaintiff, a plan participant, had filed suit against Rawlings, Aetna, and the William W. Backus Hospital claiming that they had failed to timely respond to her request for documents concerning her healthcare benefit plan. The defendants moved to dismiss her complaint on the ground that the suit was not timely filed, and the District Court granted the motion. Plaintiff thereafter appealed to the Second Circuit, arguing that the District Court had applied the incorrect limitations period. Continue Reading

DOL Seeks to Extend Transition Period under the Fiduciary Rule

The U.S. Department of Labor (DOL) has filed a proposal with the Office of Management and Budget (OMB) to delay implementation of the following exemptions under the fiduciary rule from January 1, 2018 to July 1, 2019:

  • Best Interest Contract Exemption (PTE 2016-01)
  • Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs (PTE 2016-02)
  • Prohibited Transaction Exemption 84-24 for Certain Transactions Involving Insurance Agents and Brokers, Pension Consultants, Insurance Companies, and Investment Company Principal Underwriters (PTE 84-24)

This development was publicized by the DOL in a notice of administrative action submitted by its attorneys to the U.S. District Court for the District of Minnesota in one of several antifiduciary rule cases currently pending. Notification of the submission to the OMB becomes publicly available the morning following the submission, which will bring additional details to this delay.

Department of Labor Secretary Acosta Announces Partial Implementation of the Fiduciary Rule

On May 22, 2017, Department of Labor (DOL) Secretary Alexander Acosta announced in an op-ed in the Wall Street Journal that the DOL will not issue another delay of the “fiduciary rule,” set to become generally effective on June 9, 2017. Secretary Acosta stated on Monday evening that “[w]e have carefully considered the record in this case…and have found no principled legal basis to change the June 9 date while we seek public input.”

The long-awaited rule, which revised the definition of “fiduciary” for retirement investment advice purposes, had an original applicability date of April 10, 2017. President Donald Trump, by way of presidential memorandum dated February 3, 2017, ordered the DOL to review the fiduciary rule and prepare an updated economic and legal analysis to determine whether the fiduciary rule was likely to harm investors, disrupt the retirement services industry, or cause an increase in litigation. After receiving more than one thousand comments from those who would potentially be affected by the rule, the DOL issued a rule to delay its effective date to June 9, 2017, so it could further evaluate the rule.

In tandem with Secretary Acosta’s announcement, the DOL issued Field Assistance Bulletin (FAB) No. 2017-02, which issued a temporary enforcement policy on the fiduciary rule, as well as an 11-page set of FAQs relating to the upcoming June 9 effective date and the transition period from June 9, 2017, to January 1, 2018, when the rest of the rule is set to take effect.

It May Be Time to Start Thinking About Equitable Claims Again

A recent decision by the Eighth  Circuit Court of Appeals, Jones v. Aetna Life Ins. Co., No. 16-1714, 2017 U.S. App. LEXIS 8112 (8th Cir. May 8, 2017), provides another signal that those of us defending against benefit claims increasingly may have to contend with simultaneous equitable claims for breach of fiduciary duty. Though the law is developing in this area (when is ERISA law not “developing”?), and likely will vary from circuit to circuit, you can expect more plaintiffs to add an equitable claim to a benefits complaint, and you can expect at least some courts to allow those claims to go forward. What strategies will prove most effective in responding to this latest tactic? While there are no definitive answers at this point, there are some ideas to consider. Continue Reading

Lawyer’s Role in Challenged ESOP Transaction May Have Caused Him to be an ERISA Fiduciary

A court in the Western District of Virginia held that a lawyer working as a Senior Trust Officer for a fiduciary to an Employee Stock Ownership Plan could be personally liable to workers who claim they overpaid for their employer’s stock purchased by the employer’s ESOP. Hugler v. Vinoskey, 2017 BL 145574, W.D. Va., No. 6:16-cv-00062, 5/2/17.  Continue Reading

Second Circuit Upholds Dismissal of ERISA Claims Against Plan Defendants for Alleged “Cross-Subsidization” Scheme

In Hannan v. Hartford Financial Services, Inc., (2d Cir., April 25, 2017), the Second Circuit Court of Appeals affirmed dismissal of a potential ERISA class action against Family Dollar Stores, its employee benefits plan, and the plan’s group life insurance provider (Hartford), rejecting allegations by plan participants that the plan defendants had engaged in a so-called “cross-subsidization” scheme in violation of federal law. The Second Circuit confirmed that neither the negotiation of premium rates nor any alleged subsidization component between different types of life insurance provided under the plan constituted a breach of fiduciary duty or prohibited transaction under ERISA.

The background facts, as alleged in the complaint and summarized in the court decisions, are as follows. Family Dollar contracted with Hartford to provide group life insurance coverage to employees under the Family Dollar Stores, Inc. Group Insurance Plan (the “Plan”).  All employees were automatically enrolled in basic life insurance under the Plan at no cost to them. They also were offered the option (but were not obligated) to purchase supplemental life insurance coverage for which they would pay the premiums.  Continue Reading

Fifth Circuit Maintains Default Deferential Standard Of Review In Denial Of Benefit Claims, But Suggests It May Soon Be Overruled

For more than twenty-five years, the law of the Fifth Circuit has been that health and disability benefit denials based on factual determinations (e.g., whether a beneficiary is disabled or whether a treatment is medically necessary within the meaning of a plan) are reviewed by courts under an abuse of discretion standard, regardless of whether a subject plan includes discretionary “Firestone” language. Pierre v. Connecticut General Life Ins. Co., 932 F.2d 1552, 1553 (5th Cir.) cert. denied, 112 S. Ct. 453 (1991).

The Fifth Circuit’s so-called “Pierre deference” was recently challenged in the case of Ariana M. v. Humana Health Plan of Texas Inc., No. 16-20174 (5th Cir. Apr. 21, 2017). In Ariana M., the plaintiff argued that a Texas statute prohibiting the use of discretionary clauses in insurance policies overrode the Fifth Circuit’s default Pierre deference, under which district courts are directed to “reject[ ] an administrator’s factual determinations in the course of a benefits review only upon the showing of an abuse of discretion.” Dutka ex rel. Estate of T.M. v. AIG Life Ins. Co., 573 F.3d 210, 212 (5th Cir. 2009).  The plaintiff argued that Texas’s specific ban on the use of discretionary language in insurance policies precluded the district court from conducting a deferential review of Humana’s factual findings, and thus compelled application of the more favorable de novo standard.

The Fifth Circuit rejected the plaintiff’s argument, unanimously finding that “Texas’s anti-discretionary clause law concerns what language can and cannot be put into an insurance contract in Texas.  It does not mandate a specific standard of review for insurance claims.B” Consequently, “Texas’s anti-discretionary clause law does not change [the Fifth Circuit’s] normal Pierre deference”, and courts in the Circuit will continue to apply Pierre deference to all factual determinations even in cases arising out of insurance policies issued in Texas. In this regard, Ariana M. preserves the status quo. Continue Reading

Ninth Circuit Denies Health Care Providers’ ERISA Claims

The Ninth Circuit affirmed two district court judgments dismissing ERISA actions brought by health care providers in DB Healthcare v. Blue Cross Blue Shield of Arizona, No. 14-16518, and Advanced Women’s Health Center v. Anthem Blue Cross Life & Health Insurance Co., No. 14-16612. The health care providers’ argument was two-fold:  (1) health care providers were “beneficiaries” under Section 502(a) of ERISA, and thus could bring suit directly under ERISA; and (2) the plaintiffs in these cases could bring derivative claims under ERISA because the subscribers had assigned their claims under the plans to the plaintiffs. The Court denied both these claims.

Consistent with the Second, Third, Sixth, Seventh, and Eleventh Circuits, the Ninth Circuit held that medical providers were not “beneficiaries” under Section 502(a) of ERISA and therefore could not bring suit directly under ERISA. A “beneficiary” is defined as “a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.” The Court noted that the term “benefit” referred to “the specific advantages provided to covered employees, as a consequence of their employment, for particular purposes connected to alleviating various life contingencies.” The right to payment for medical services was not a “benefit” under the plan. Therefore, health care providers are not ERISA “beneficiaries” and may not sue under ERISA to recover payments due for services rendered or to otherwise enforce the statute. Continue Reading

Insurer Did Not Breach Fiduciary Duty by Disclosing Substance Abuse Claim to Employer

In Williams v. FedEx Corporate Servs., 849 F.3d 889 (10th Cir. 2017), plaintiff sued FedEx for violating the Americans with Disabilities Act (ADA) by requiring him to enroll in the company’s substance abuse and drug testing program. He also sued Aetna, FedEx’s STD insurer, for breach of fiduciary duty for reporting to FedEx that plaintiff had filed a disability claim for substance abuse. The district court granted summary judgment for defendants on both claims.

The Court reversed the ADA decision, and remanded to the district court for further evaluation of one of FedEx’s defenses. Continue Reading

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