Category: Benefits

Thanks to the Connecticut Employment Law Blog for providing this link here to the ABA’s 2nd Annual Labor and Employment Law Conference materials online which include some great employee benefits materials. My favorite is entitled “The Future of Retiree Health Benefits.”

From Judge Edward E. Carnes of the Eleventh Circuit in the case of Gilley v. Monsanto Co., Inc., 490 F.3d 848, 856 (11th Cir. 2007) mentioned in my previous post here:

Throughout his judicial career Holmes relished challenging cases. While on Massachusetts’ highest court he confessed to a friend that although none of the cases he had handled that year had been of universal interest, “there is always the pleasure of unraveling a difficulty.” A decade and a half later, while on the Supreme Court, he told the same friend that he had few cases of general interest that term, but “[t]here is always the fun of untying a knot and trying to do it in good compact form.” It is a pity that Holmes did not live to see ERISA cases.

For those interested in the impact of MetLife v. Glenn, don’t miss this unpublished Eleventh Circuit opinion issued September 10th in the case of Frankie White vs. the Coca-Cola Bottling Company. In that case, the court dealt with the issue of whether the Benefits Committee which was the plan administrator for the long-term disability plan was operating under a conflict of interest. The Committee had been given the important Firestone discretionary authority to interpret plan provisions and there was a provision in the plan which the court held created a conflict with other provisions of the plan, requiring interpretation or resolution of the conflict. The court held that the Benefits Committee was not operating under a conflict of interest in interpreting the plan provision and resolving the conflict since benefits were being paid from a trust that was funded through periodic contributions so that the company incurred “no immediate expense as a result of paying benefits.” The court cited the case of Gilley v. Monsanto Co., Inc., 490 F.3d 848, 856 (11th Cir. 2007) as authority, in which the court had stated that a company is not under a conflict of interest in such cases even though the company “is responsible for replenishing the funds of the trust.”

While the case is important for a number of reasons (which I could spend all morning discussing, but unfortunately do not have time for), please note this very important language which provides support for the importance of engaging counsel in assisting plan fiduciaries who are given the important task of interpreting plan language:

The committee reasonably interpreted the proviso clause to make it consistent with the summary plan description, . . past practices. . . and the other provisions of the plan. The summary plan description clearly explains the reduction of benefits if a participant receives benefits from other sources and provides an arithmetical example of the offset. The committee determined that it had been the established practice. . .to permit an offset below 60 percent of a participant’s average compensation. . There is no requirement that an administrator. . seek independent counsel in interpreting and administering an ERISA plan,” but seeking counsel establishes the “evenhandedness of [the] decision-making process” because it contributes to “informed and knowledgeable decisions . . . in interpreting the Plan.” Thiokol, 231 F.3d at 835. The committee retained and followed the advice of outside counsel regarding both the offset and recoupment provisions.

(By the way, unpublished opinions can now be cited as authority in federal courts. Read about the Supreme Court’s adoption of amendments to the Federal Rules of Appellate Procedure here, here and here.)

Update: Roy Harmon discusses the case in detail here.

Most Summary Plan Descriptions (“SPDs”) contain disclaimer language stating that in case of conflict between the SPD and the Plan documents, the Plan documents will always govern. In fact, sometimes SPDs are given less attention than we benefits lawyers recommend, usually due to cost or other factors and because people often believe that the disclaimer language will protect them. However, whatever the reason, it appears that the courts are not always willing to enforce provisions of a Plan document that are not disclosed in the SPD, despite the disclaimer language.

One such case occurred less than a year ago–Burgett v. MEBA Medical and Benefits Plan. The case involved a health plan which refused to process the medical expenses of a dependent of a participant unless the participant signed a subrogation agreement. The court looked at two “plan documents” to determine what was the proper result under the Plan–one was called the Plan Rules and Regulations (which the court referred to as the Plan document ) and the other was the SPD. Both contained subrogation language. However, the requirement that the participant sign a subrogation agreement before becoming entitled to reimbursement of medical expenses was contained only in the Plan Rules and Regulations and not in the SPD. The SPD also contained disclaimer language stating that the Plan Rules and Regulations controlled.

Despite the presence of subrogation language in both documents and despite the disclaimer language in the SPD, the court held:

The governing statute and regulations require the SPD to inform the participants and beneficiaries of the circumstances that might result in the denial of or the loss of benefits. The requirement to execute a subrogation agreement was not a condition listed in the SPD, although it was arguably included in the Plan Rules and Regulations. When the formal plan documents conflict with an SPD, the SPD controls. . . Because the SPD is the controlling plan document and contains no requirement that the participants or beneficiaries execute a subrogation agreement as a condition to receiving benefits, the administrator was legally incorrect when it imposed that requirement.

Another more recent case of Solien v. Raytheon Long Term Disability Plan is even more worrisome. In that case, the court refused to uphold a one-year limitations period for challenging benefit claims in court where the limitations period was stated in the SPD, but was not stated in a place in the SPD that the court felt would put the participant on notice about the limitations period. (In other words, not only do you have to make sure the appropriate language is in the SPD, but it is also important as to where the information is placed in the SPD–according to the Arizona district court in the Solien case.)

Adam Russo shares some interesting perspectives on the Supreme Court’s MetLife v. Glenn decision as it relates to administration of health plan claims here in his blog Passion for Subro.

(Check out some of his great links in the blog’s side-bar as well.)

Not a surprising position for the IRS to take:

Man indicted for allegedly seeking heavenly tax refund

(From the Roth & Company, P.C. Tax Update Blog.)

(Supported by scripture as well.)

Here is a link to a Court of Federal Claims opinion, issued August 6, 2008, on the income taxation of demutualization proceeds: Fisher v. U.S. Not only will the opinion be very helpful to the many taxpayers who receive such proceeds, but the story behind the opinion which you can read about here is heart-warming. No indication yet whether the case will be appealed.

(From the TaxGuru)

UPDATE: Read more about the case here and here.

Most people do better with short-term goals than long-term goals. That is the conclusion reached by a recent study from Rice University on saving entitled “The Effects of Time Frames on Personal Savings Estimates, Savings Behavior and Financial Decision Making.” Excerpt from a press release: “Americans need to save paycheck to paycheck“:

For example, in one study, those saving for next month estimated they would save $287 but actually saved $440. On the other hand, participants who were asked to estimate how much they would save in a specific month in the future indicated a much higher value — $946 — but ended up saving far less — only $123.

Another argument, I guess, for the automatic enrollment proponents since saving from paycheck to paycheck doesn’t always lend itself very well to the qualified plan world.

Informative article on how those who have taken early retirement are coping with the difficulties of dealing with the economy: “Some early retirees have second thoughts.” Obtaining health care benefits appears to be the biggest concern. Praise goes to those companies who are able to provide health-care benefits for part-time workers, which according to the article is only about one-quarter of the companies that provide health care benefits.

From the U.S. Census Bureau Report issued yesterday:

Both the percentage and number of people without health insurance decreased in 2007. The percentage without health insurance was 15.3 percent in 2007, down from 15.8 percent in 2006, and the number of uninsured was 45.7 million, down from 47.0 million.

The number of people with health insurance increased to 253.4 million in 2007 (up from 249.8 million in 2006). The number of people covered by private health insurance (202.0 million) in 2007 was not statistically different from 2006, while the number of people covered by government health insurance increased to 83.0 million, up from 80.3 million in 2006.

The percentage of people covered by private health insurance was 67.5 percent, down from 67.9 percent in 2006. The percentage of people covered by employment-based health insurance decreased to 59.3 in 2007 from 59.7 percent in 2006. The number of people covered by employment-based health insurance, 177.4 million, was not statistically different from 2006.

Press Release is here.

From Plan Sponsor’s article on the report here:

Rates for 2005-2007 using a three-year average show that Texas (24.4%) had the highest percentage of uninsured, the report said. At 8.3%, Massachusetts and Hawaii had the lowest point estimates for uninsured rates, but they were not statistically different from Minnesota (8.5%), Wisconsin (8.8%) and Iowa (9.4%). In addition, Hawaii was not statistically different from Maine (9.5%).