Does Presidential Memorandum Impact Disability Claim Regulations?

The DOL’s recent amendments to the disability claim regulations, 29 C.F.R. §  2560.503-1, became effective January 18, 2017, but the new provisions in that new regulation do not take effect until January 1, 2018 (for claims filed after that date).

The January 18, 2017 effective date was apparently intentional, as it was just before inauguration day.

On January 20, 2016, Reince Priebus issued a Presidential Memorandum advising the heads of all executive departments and agencies to, among other things, delay implementation of any regulation that had not taken effect prior to January 20, 2017. The purpose of the postponement is to  review “questions of fact, law, and policy” raised by the regulation.

Is the new regulation “saved” from the effect of this memorandum because it became effective on January 18, 2017? Or does the fact that the actual changes do not take effect until January 1, 2018 allow the new administration to conclude that it remains subject to review? Time will tell.

“Bare violation” of ERISA without concrete injury does not confer standing

Lee v. Verizon Commc’ns, Inc., — F.3d –, 2016 WL 4926159 (5th Cir. Sept. 15, 2016), held that a defined benefit pension plan participant does not have Article III standing to challenge the plan’s alleged violation of ERISA, in the absence of “concrete injury” to himself.

The case is a putative class action growing out of an amendment to Verizon’s pension plan that terminated it for retirees and replaced it with an annuity. One of the claims asserted fiduciary misconduct in violation of 29 U.S.C. § 1109(a), which requires a fiduciary to “make good … any losses to the plan” from a breach of duty. In an unreported 2015 decision, 623 Fed.Appx. 132 (5th Cir. 2015) (Lee 2015), the court had affirmed the dismissal of that claim for lack of standing. Lee 2015 had held that, though the plaintiff had statutory standing to assert a violation of ERISA by a plan fiduciary, he did not have Article III standing because “standing for defined-benefit plan participants requires imminent risk of default by the plan, such that the participant’s benefits are adversely affected,” and he had not alleged any likelihood of such injury.

The plaintiff petitioned for certiorari, and the Supreme Court granted the petition and vacated Lee 2015 and remanded it for reconsideration in light of Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016). Spokeo had addressed the question whether and when a statutory violation satisfied the concrete harm required for Article III standing.   Continue Reading

Extra-ERISA contractual obligation regarding pension plan is enforceable

Hunter v. Berkshire Hathaway, Inc., 829 F.3d 357, 358 (5th Cir. 2016), involved the interpretation of parties’ rights and obligations regarding a pension plan following a corporate acquisition. Its discussion of the extent to which an employer can obligate itself not to change a plan, even when benefits are not vested, is noteworthy. Continue Reading

Mutual fund redemptions payable to participants are not plan assets, and broker can retain interest earned while holding the cash

In re Fid. ERISA Float Litig., 829 F.3d 55 (1st Cir. 2016), held that Fidelity did not breach fiduciary duties to the plans at issue by allegedly earning interest on cash on its way to participants after a redemption had been made. The case involved a number of 401(k) plans that had hired Fidelity as trustee to act as intermediary between the plans, the participants and the mutual funds in which the participants’ funds were invested. In a nutshell, when a participant desired to make a withdrawal, the mutual fund would sell the shares and transfer the cash to Fidelity; Fidelity held the cash at least overnight in an account that allegedly earned interest for Fidelity; and it then distributed the cash to the participant. The plaintiffs, various participants and one plan administrator, sued on behalf of the plans. Continue Reading

Fifth Circuit provides guidance on when ERISA governs severance plans

In Gomez v. Ericsson, Inc., 828 F.3d 367, 369 (5th Cir. 2016), the central question was whether ERISA governed Ericsson’s Standard Severance Plan and Top Contributor Enhanced Severance Plan of 2010. The issue arose because, after plaintiff was laid off and signed a standard release, he wiped the hard drive on his company laptop before returning it. Ericsson asserted that the laptop had materials that did not exist elsewhere, and it denied plaintiff the benefits under the Plans. Plaintiff sued, and that brought up the question whether ERISA governed. Continue Reading

Internal quality assurance discussion about $100,000 error in plan interpretation not evidence of conflict

Running an employee benefit claims operation is a complex undertaking, which requires continual training and oversight. A robust quality assurance organization can play an important part in the overall management mix. Curran v. Aetna Life Ins. Co., 13-cv-289, 2016 WL 3843085 (S.D.N.Y. July 11, 2016), gives a concrete example of a quality assurance review catching a significant error that would have resulted in an incorrect six-figure payment, and documenting the correction of the problem in a responsible, non-biased way. I always think that an organization’s strength is best revealed by how it responds to a problem, so Aetna deserves a gold star for this case. Continue Reading

Second Circuit rejects “substantial compliance” rule

In Halo v. Yale Health Plan, 819 F.3d 42 (2d Cir. 2016), the Second Circuit made a significant change to the impact of ERISA claim regulations on subsequent litigation, rejecting the rule that it is sufficient for claim administrators to substantially comply with the regulations. Instead, the court held that, unless there is strict compliance with the regulations, courts will ordinarily conduct a de novo review of claim determinations, though it established a path for administrators to retain the arbitrary and capricious standard of review. Continue Reading

Language in SPD can be used to find discretion where SPD is incorporated into plan

In Burrell v. Prudential Ins. Co. of America, — F.3d –, 2016 WL 1426092 (5th Cir. Apr. 11, 2016), plaintiff argued that the plan did not give discretionary authority to Prudential, because the plan merely defined “Claim Fiduciary” as the person or entity “designated in the Plan (including the Summary Plan Description, Insurance Contracts or appendices, which are part of the plan) … to have discretionary authority[.]” The SPD designated Prudential as the Claim Fiduciary, and plaintiff argued that a grant of discretion in the SPD is insufficient. The Fifth Circuit rejected that argument, holding that the terms of an SPD can control if the SPD is incorporated into the plan, and it clearly was here.

Court shifts burden of proof to plan

Estate of Barton v. ADT Security Svcs. Pension Plan, — F.3d. –, 2016 WL 1612755 (9th Cir. Apr. 21, 2016), involved a plaintiff who worked for about 20 years (with a couple of interruptions) for ADT and affiliated entities. His employers went through several mergers and acquisitions during the period, and some (but perhaps not all) of them participated in the pension plan at issue. Continue Reading

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