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

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 It May Be Time to Start Thinking About Equitable Claims Again

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

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

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

In Erwood v. Life Ins. Co. of N. Am., Civil Action No. 14-1284, 2017 U.S. Dist. LEXIS 56348 (W.D. Pa. 2017), a Federal Judge ruled after a bench trial that WellStar Health System Inc., the plan administrator of a Group Life Insurance Program (“Plan”), breached its fiduciary duty “by misrepresenting and failing to adequately inform [plaintiff] of the need or the means to convert two group life insurance policies purchased by her now-deceased husband[.]”

Plaintiff initially asserted claims for benefits (under 29 U.S.C. § 1132(a)(1)(B)) against the Plan and Life Insurance Company of North America (“LINA”), and for breach of fiduciary duty (under 29 U.S.C. § 1132(a)(3)) against WellStar and LINA. The court granted summary judgment dismissing the benefits claim, but denied summary judgment on the fiduciary duty claim. Plaintiff and LINA subsequently settled, leaving WellStar the sole defendant for trial, with the sole claim of breach of fiduciary duty.

The Plaintiff is the widow of a neurosurgeon who was employed by WellStar. The Plaintiff’s husband purchased life insurance policies as part of the Plan. The Plaintiff’s husband was diagnosed with a malignant brain tumor, forcing him to take FMLA leave, which subsequently became an approved claim under WellStar’s long term disability (“LTD”) plan. While her husband was on disability, plaintiff told WellStar that she had questions about her husband’s benefits, and WellStar set up a meeting with a benefits representative familiar with the Plan. The Court found that WellStar repeatedly assured plaintiff and her husband that “all [of their] coverage [is] going to remain the same[.]” A subsequent mailing by WellStar disclosed that conversion of life insurance coverage would be necessary after 36 weeks of leave, but did not include forms or more information about conversion, or the date by which conversion was required. After plaintiff’s husband’s death, LINA denied her claim under the Plan on the ground that the coverage had lapsed.
Continue Reading ERISA Plan Administrator’s Failure to Notify Beneficiary of Life Insurance Conversion Rights Breaches Fiduciary Duty

As ordered by President Trump in a presidential memorandum (the “Memorandum”) on February 3, 2017, the U.S. Department of Labor (DOL) proposed a 60-day delay to the “fiduciary rule,” which revised the definition of “fiduciary” for retirement investment advice purposes. The rule was originally set to become effective on April 10, 2017; however, after receiving

As ordered by President Trump in last month’s presidential memorandum (the “Memorandum”), the U.S. Department of Labor (DOL) proposed a 60-day delay to its conflict of interest rule (commonly referred to as the “fiduciary rule”). The effective date of the fiduciary rule, which revised the definition of a “fiduciary” for retirement investment advice purposes, is currently April 10, 2017. In addition to a general 15-day comment period, the DOL is also accepting comments until April 16, 2017 on the Memorandum itself and on issues applicable to whether or not the fiduciary rule should be revised, revoked, or further delayed.
Continue Reading DOL Calls For Delay of the Fiduciary Rule

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 Extra-ERISA contractual obligation regarding pension plan is enforceable

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