Category: Benefits

Kenni Merritt has written an article for the Oklahoma Bar Journal which is a primer on ERISA Section 510 claims: “Interference with ERISA-Protected Rights: Making a Federal Case Out of a Wrongful Discharge Action.” Excerpt:

ERISA does not provide a statute of limitations for suits under Section 510. Therefore, courts select the most analogous state law limitations period. The courts that have considered ERISA Section 510 claims have almost unanimously concluded that the most analogous state law cause of action under Section 510 is wrongful termination or retaliatory discharge, state law causes of action encompassing an employee’s claim that he was discharged in violation of public policy. . . To reduce exposure to liability, some plan sponsors include a limitations period in their benefit plan documents and summary plan descriptions. A number of courts have recognized such plan-imposed limitation periods as being valid and enforceable under ERISA.

The whole March 11th issue of the Oklahoma Bar Journal is devoted to employment discrimination.

I have added a link in the 409A section on the right to a transcript of a 90-minute webcast posted by Kilpatrick Stockton and sponsored last year by the Corporate and Securities Law Committee Of the Association of Corporate Counsel. While the webcast was presented prior to the issuance of the proposed regulations, it still contains some good information and features Dan Hogans, Attorney Advisor in the Office of Tax Policy, Department of the Treasury.

DOL has announced:

• A new mailing address for the DFVC Program. Read the News Release here. The new address takes effect April 11, 2006.
• A technical amendment extending the interim final rules under the Mental Health Parity Act (“MHPA”) to December 31, 2006. Late last year, the Employee Retirement Preservation Act (P.L. 109-151) extended MHPA’s sunset date under ERISA, the Code, and the Public Health Service Act to December 31, 2006. This interim amendment conforms the regulatory sunset date to the new statutory sunset date. Read the News Release here.

(The MHPA requires that annual or lifetime dollar limits for mental heath benefits be no lower than the dollar limits for medical/surgical benefits offered by a group health plan. The act applies to group health plans or health insurance coverage offered by issuers in connection with a group health plan that offers both mental health and medical/surgical benefits. However, it does not require plans to offer mental health benefits.The MHPA provisions in ERISA generally apply to all group health plans other than governmental plans, church plans, and certain other plans.)

The Ninth Circuit Court of Appeals has issued an opinion overturning a lower court decision and siding with the U.S. attorney in a case involving a writ of garnishment issued against a pension plan. The case is U.S. v. Novak and specifically holds that the Mandatory Victims Restitution Act of 1996 (“MVRA”), 18 U.S.C. § 3663A, in conjunction with 18 U.S.C. § 3613, constitutes a statutory exception to ERISA’s anti-alienation provision. The participant in the case had pleaded guilty to certain conspiracy charges and was ordered to pay restitution in the amount of $3,360,051.67. Of course, focus turned to a pension plan where the participant had accrued a sizable pension which was, however, a drop in the bucket compared to the total restitution ordered. At the government’s request, the Clerk of the district court issued a post-judgment writ of garnishment to the plan sponsor of the plan for amounts owed to the participant under the pension plan. The writ was issued pursuant to the garnishment provisions of the Federal Debt Collection Procedures Act (“FDCPA”), 28 U.S.C. § 3205. On March 5, 2004, the district court had issued an order quashing the writ of garnishment, which order was overturned by the Ninth Circuit. Excerpt from the opinion:

We determine that with the passage of the MVRA, Congress did what the Supreme Court in Guidry indicated it could do: enact a statutory exception to ERISA’s anti-alienation provision. We find that Congress enacted a statutory exception because (a) the MVRA is a specific collection statute designed to provide victims with restitution, and (b) Congress provided for restitution orders to be enforced like tax liens, which are enforceable against ERISA pension benefits.

Circuit Judge Fletcher issued a dissent in the case, arguing that, for there to be a statutory exception to ERISA’s anti-alienation provisions, Congress must “issue a clear statement of its intent to abrogate ERISA.” Fletcher noted that neither the MVRA nor 18 U.S.C. § 3613 contain such a directive:

This statutory scheme does not evidence a clear statement to abrogate ERISA’s anti-alienation provision. Although the statutory text does mandate restitution, it lacks any express statement (as it does for Social Security, see 18 U.S.C. § 3613(a)) that restitution owed to victims can be collected from ERISA pensions. And, as noted previously, there is nothing within ERISA calling for an exception for orders of restitution. Without an express directive in the restitution statute to seize ERISA pensions or a specific carve-out within ERISA’s anti-alienation provision, we should not create one through judicial fiat.

The majority’s decision is consistent with IRS’s view of the subject which you can read about in two previous posts: U.S. Attorneys Seeking To Levy Against Qualified Plan Assets Under the FDCPA and When the U.S. Attorney Comes Knocking . . . The majority also cites district court cases in Oklahoma, Virginia, Michigan, Louisiana, and North Carolina which are in accord with its decision. The U.S. Attorney, as well as plan sponsors, plan administrators and fiduciaries who would like to comply with such directives, but were concerned about the ERISA anti-alienation provisions, are now armed with this Ninth Circuit opinion as well.

(Query: Can payment be compelled prior to a participant’s right to receive payment under the Plan? The IRS had said in a PLR (as discussed in a previous post) that the U.S. Government cannot garnishee or otherwise collect against a plan participant’s or beneficiary’s benefit until the participant or beneficiary has a right to a distribution under the terms of the plan. The Ninth Circuit doesn’t appear to address the issue in the Novak case.)

Speaking of “mind-numbing” (in this previous post here), the IRS has issued final regulations concerning disclosure of relative values of optional forms of benefit. The Pension & Benefits Weblog has posted a helpful summary here. The IRS provided some good commentary regarding the regulations here.

A quote from this enjoyable WSJ article–After (Billable) Hours–about lawyers who blog:

Are all lawyers secret bloggers, frustrated writers or both? More important, should they keep their day jobs?

. . . According to a survey conducted by blogads.com, lawyers ranked fourth among both readers and posters to blogs. Many of the best-known blogs, such as InstaPundit.com, are run by lawyers. It’s easy to understand why blogging attracts the J.D. set: Few professions combine as much creative talent with so much mind-numbing work . . .

In the dark hours, writing seems like a natural escape. It’s what most lawyers do (when they’re not reviewing documents), and though blogging is very different from drafting a prospectus, it’s close enough to fool many lawyers into trading one form of verbiage for another. Writing a blog can also be done in secret, on your own time (or during office hours if you’re careful), and it is potentially lucrative (if you can get some ads or make a name for yourself). For many lawyers, writing is also their true love, a dream they had before financial concerns and parental pressure drove them into drudgery. . .

(Hat Tip: Tax Prof Blog)

I have heard of people staying in their jobs because of benefits, and people going to other jobs because of benefits, but how about people choosing a mate because of benefits? The Wall Street Journal reports here on that development.

I have added Notice 2006-33 to my collection of 409A links over in the right-hand column. The Notice provides transition relief for certain nonqualified deferred compensation plans that are in violation of the requirements of Internal Revenue Code section 409A(b).

Section 409A(b) generally applies to the use of offshore trusts in connection with amounts payable under a nonqualified deferred compensation plan (“NDCP”) and also the use of restrictions on assets to protect the payment of benefits under a NDCP in connection with a change in the service recipient’s financial health. The use of such offshore trusts or restrictions on assets generally triggers the income inclusion and additional tax provisions of section 409A. The notice addresses the application of certain technical corrections made to these provisions in GOZA, (which was enacted on December 21, 2005), including the requirement that sponsors of certain plans be given a limited period during which the arrangements may be made compliant with section 409A(b).

The transition relief provided by the Notice says that, with respect to assets set aside, transferred or restricted on or before March 21, 2006 so as to be subject to inclusion under sections 409A(b)(1) or 409A(b)(2), taxpayers shall be treated as not having triggered the inclusion or additional tax provisions of section 409A(b) if the NDCP comes into conformity on or before December 31, 2007, with the requirements of section 409A(b) and any guidance issued before such date.

For those of us who procrastinate, the TaxGuru has provided the absolute deadline for filing 2005 tax returns here. Surprisingly, for Maine, Massachusetts, New Hampshire, New York and Vermont, he explains why the deadline is really April 18th. The rest of us only have until April 17th. Get your Form 4868 here if you need one.

Anyone who has had to deal with all of the paperwork involved in a hospital visit can relate to the message of this article from today’s Wall Street Journal: “Escape from Claims Hell.” Excerpt:

When Jennifer McAulay walked into Lisa Norris’s office in Torrance, Calif., three years ago, she brought with her a half-dozen cardboard boxes stuffed with doctors’ bills, insurance statements, hospital records and collection notices.

The documents, from two insurance companies and a slew of medical providers, reflected one teenage son’s two heart surgeries; the other’s chest surgery (including a bill for at least $25,000); and her own emergency hysterectomy. Most had accumulated over four years, metastasizing into the linen closet and a closet in the bedroom. Many of the envelopes were still unopened. Some of the bills even stemmed from her Caesarean more than a decade before.

“If I don’t get some help with this, I’m going to go absolutely insane,” Ms. McAulay, a 52-year-old IT worker in El Segundo, Calif., remembers thinking before she shoved the bills into boxes to find Ms. Norris.

In doing so, Ms. McAulay turned to one of a small number of “claims assistance professionals,” who, for a fee, will help cut through the avalanche of paperwork that can surround even the simplest medical conditions. It isn’t clear just how many individuals and companies offer such services nationwide. . .

The article goes on to note that medical claims assistance is now being marketed as a new type of employee benefit that companies can offer to employees. My guess is that it won’t be long before it becomes fairly common to offer such a benefit although it probably won’t be cheap.