Late last year, the Ninth Circuit held that in order to trigger ERISA’s three-year statute of limitations a defendant must demonstrate that a plaintiff has actual knowledge of the nature of an alleged breach. Accordingly, the court held that merely having access to documents describing an alleged breach of fiduciary duty is not sufficient to cause ERISA’s statute of limitations to begin to run. Instead, the court rejected the standard embraced by other courts and ruled that participants should not be charged with knowledge of documents they were provided by did not actually read. The Ninth Circuit’s decision underscores circuit split over what is sufficient to demonstrate the existence of actual knowledge for purposes of triggering ERISA’s three-year statute of limitations.
In certain cases of a facility sale, restructuring or cessation, recently released information by the Pension Benefit Guaranty Corporation (PBGC) leaves many unanswered questions about plan sponsor liability for single-employer defined benefit plans. Given the lack of clarity, these plan sponsors should continue to consult their lawyer in any type of transaction, restructuring or cessation that approaches a 15 percent demographic change in a plan sponsor’s controlled group over a three-year period.
Sponsors and fiduciaries of health and welfare plans should be aware of a recently filed class-action lawsuit against alleged fiduciaries of a health plan. It challenges health-plan fiduciary oversight and reasonableness of fees similar to actions against fiduciaries of defined-contribution retirement plans. The action highlights the importance of establishing and documenting prudent fiduciary processes for making decisions on behalf of health and welfare plans.
The Employee Retirement Income Security Act of 1974 (ERISA) has long been a source of complex and often-expensive litigation for employers. However, as the number of actions brought by employees under ERISA have surged, employer-defendants have often relied on the so-called top-hat exemption to dismiss certain claims involving executives. Now, several federal courts of appeals have addressed the disputed contention that the presence of employee bargaining power is required for a plan to fall under the top-hat exemption. In this article, Elizabeth Rowe, J. Christian Nemeth and Joseph Urwitz look at recent appeals court decisions and their effects on this exemption.
Originally published in Benefits Law Journal, Autumn 2018
Any employer who has six or more employees in Massachusetts in any calendar month after November 2017 is required to complete a Health Insurance Responsibility Disclosure (HIRD) form by November 30, 2018. The HIRD form is used by MassHealth to collect information about employer-sponsored insurance offerings. The Massachusetts Department of Revenue recently published a set of FAQs stating that the HIRD form:
- Is filed by an employer through the employer’s MassTaxConnect web portal (the employer clicks the “File health insurance responsibility disclosure” link to access the form);
- May be filed by an employer’s third-party payroll provider on the employer’s behalf, though it is the employer’s responsibility to make sure the form is timely filed;
- Will not be used to impose fines or penalties related to the employer’s insurance offerings;
- Must be filed annually by November 30 in future years; and
- Does not require employees to complete a separate form. Employers may recall that a prior version of the HIRD form which was discontinued in 2014 required both the employer and the employee to complete forms.
The FAQs do not specifically establish a penalty for failing to meet the annual November 30 deadline. There is also a possibility that a court could determine that the Employee Retirement Income Security Act of 1974 preempts the HIRD requirement, meaning that employers would no longer be required to file the form if the requirement were challenged in court. However, we recommend employers submit the HIRD form by the fast-approaching deadline on November 30, 2018.
The US Court of Appeals for the First Circuit has solidified a circuit split on who has burden of proving loss causation in ERISA breach of fiduciary duty cases. The First Circuit joined the Fourth, Fifth and Eighth Circuits holding that once a plaintiff demonstrates a fiduciary breach, the defendant has the burden to negate loss causation. Other circuits, including the Sixth, Ninth, Tenth and Eleventh Circuits, have held that a plaintiff bears to burden to establish loss causation. This issue is ripe for Supreme Court review.
Socially responsible investing often sounds like an intriguing idea, but investing plan assets in a socially responsible manner is a notoriously tricky proposition. Earlier this year, the US Department of Labor issued additional guidance clarifying existing DOL guidance applicable to socially responsible investment of plan assets. However, the clarifications included in FAB 2018-01 may further limit the scenarios in which socially responsible investing could be considered prudent under the Employee Retirement Income Security Act of 1974, as amended (ERISA).
ERISA broadly preempts state laws that “relate to” ERISA-governed employee benefit plans to ensure a uniform federal regulatory scheme and to relieve ERISA plans from the burdens of satisfying a patchwork of state laws. Recently, however, several states have enacted legislation designed to regulate the prices that pharmacy benefit managers, as third-party administrators for ERISA-governed plans, agree to reimburse pharmacies for dispensing prescription drugs to ERISA plan members. These regulations run afoul of ERISA, as the US Court of Appeals for the Eighth Circuit has twice held.
A federal judge in Rhode Island recently permitted several claims against Brown University to proceed in a lawsuit alleging that the university and its fiduciaries breached their fiduciary duties under the Employee Retirement Income Security Act of 1974, as amended (ERISA), by mismanaging Brown’s defined contribution plans. This decision follows the recent decision in a similar class action lawsuit against Northwestern University (see blog post here) in which a federal judge granted Northwestern a complete victory in its motion to dismiss.
Unlike in that decision, the court in Short v. Brown University allowed plaintiffs to proceed with claims relating to record-keeping services, including engaging more than one record-keeper, incurring excessive administrative fees and failing to conduct a competitive record-keeping bidding process. Of note, the court indicated that whether particular record-keeping fees are excessive involves questions of fact that cannot be resolved on a motion to dismiss. If other courts were to adopt that line of reasoning, a plaintiff who alleged that any level of fees was excessive could survive a motion to dismiss. The court also permitted plaintiffs to advance claims that Brown chose more expensive funds with poor historical performance, including the CREF Stock Account and the TIAA Real Estate Account.
The court dismissed the plaintiffs’ claims that Brown acted imprudently by offering investment options with multiple layers of fees and using revenue sharing and asset-based fees. Like other courts that have ruled on class action lawsuits against fiduciaries of university defined contribution retirement plans, the Brown court also dismissed the plaintiffs’ claim that Brown acted imprudently by including too many investment choices in its lineup.
The US Department of Labor published a final rule that makes it easier for a group or association of employers to act as a single “employer” sponsor of an Association Health Plan under ERISA. By creating an opportunity for small employers and self-employed individuals to take advantage of the economies of scale that are usually enjoyed by large employers, the final rule is intended to expand access to affordable health care.