Category: Erisa

A federal district court for the Northern District of Ohio, Eastern Division, ruled that about 2,500 former employees of the defunct Republic Technologies International are eligible for $96 million in plant shut-down benefits from the PBGC. You can access the case of Pension Benefit Guaranty Corporation v. Republic Technologies International, LLC, et al. here. Articles on the case:

• Associated Press via the New York Times: “Steelworkers Win Plant Closing Benefits”
• the Philadelphia Inquirer: “Court rules in favor of ex-workers.“

The PBGC said yesterday that it would appeal the decision. The agency had argued it was not obligated to pay up to $2,000 in monthly shutdown payments for workers who lost their Republic Technologies jobs but were too young for regular pensions because it had terminated the company’s underfunded pension plans two months earlier. The article quotes Steven A. Kandarian, the agency’s executive director, as stating: “By forcing the [agency] to pay nearly $100 million in unfunded severance benefits, this ruling will further weaken a pension insurance system that is already billions of dollars in the red.”

This just in from the Wall Street Journal: “Ruling Lets Enron Workers Sue Lay, Northern Trust Over Lost Savings.” (Subscription required.) More articles:

• “Banks Cut From Suit by Enron Pensions“: the New York Times
• “Deepest pockets out of case: Some banks freed from Enron suit“: the HoustonChronicle.com
• “Judge: Enron pension suit can go forward“: the Seattle Post-Intelligencer
• “Enron class-action suit may proceed: Judge says lawsuit over squandered pensions to go forward“: MSNBC News
• “Judge: Enron Workers Can Sue Lay: Says ex-CEO can be held liable for pension losses“: Newsday.com

You can read more about the Enron litigation at this link. Also there are links over on the right under “401(k) Litigation Links” which contain additional information regarding the case.

UPDATE: Link to the federal district court for the Southern District of Texas Notable Cases page which contains the link to the Memorandum and Order re: Tittle Defendants’ Motions to Dismiss in the case of Tittle, et al v. Enron Corporation, et al, Civil No. 4:01-CV-3913 is here. It is a 331-page document which the court’s website says may take 11 minutes to download. Link to the actual Memorandum and Order is here.

Much more on this later . . .

The following articles imply that ERISA fiduciaries of retirement plans may find it necessary to replace some of the mutual funds implicated in the current mutual fund scrutiny in order to avoid the possibility of violating fiduciary obligations under ERISA:

• “Fund scandals can impact 401(k)“: from Insurance Newsnet.com
  
• “Mutual Fund Scrutiny Expands“: from USAToday.com

Deloitte & Touche has posted a great article via Benefitslink regarding the Health Insurance Act of 2003 (SB 2) passed by the California legislature: “California Legislature Approves Bill Mandating Employer-Provided Health Coverage.” The bill has not yet been signed by Governor Davis. Interestingly enough, the article makes the point discussed here before, that the bill faces legal challenge under ERISA and that the issue will be decided by the “unpredictable Ninth Circuit.” The article also discusses the fact that the bill may face a legal challenge under the California state constitution that the bill in fact imposes a “fee” or tax on employers. Under the California constitution, a new tax must be approved by a two-thirds majority of the California Assembly and Senate – a level of support SB 2 did not achieve.

The Galen Institute has posted some information regarding the California legislation mandating that employers provide health insurance coverage for their employees (which was passed by the Senate and Assembly, but is awaiting the Governor’s signature) which you can access at this link. Included in the information is a short article expressing the view that the legislation does not have a chance of surviving an ERISA challenge. Quote of Note: “In a nutshell, California is allowed to regulate insurance companies until it is blue in the face, but it is not allowed to pass “any law relating to” how employers provide benefits. It could require insurance companies to sell policies for $10 a year, and it could require residents to buy them. But it cannot require employers to provide or pay for those benefits.”

You can access a copy of the legislation (SB 2) here.

More on the bill in a previous post at ERISAblog here.

Benefitslink.com has posted Alvin D. Lurie’s very lively article on the cash balance plan litigation and controversy: “Murphy’s Law Has IBM Singing the Big Blues.” (You can read more about the cash balance plan litigation in links over on the right as well as in posts at ERISAblog which you can access here.)

Benefitslink.com has posted a Press Release today entitled “Labor Department Announces Proposed Effective Date of COBRA Regulations Will Be Delayed” which states:

In response to questions about complying with the department’s proposed COBRA notice rules, Assistant Secretary of EBSA Ann L. Combs said, “The department intends to give group health plans six months after adoption of final rules to implement administrative changes required by the new rules. Allowing sufficient time for orderly and efficient implementation of the new requirements will help ensure compliance,” added Combs. The final rules are expected to be issued early next year, according to Combs. “In the interim, plan administrators may use the model notices contained in the proposed regulation to satisfy their COBRA notice obligations, although they are not required to do so,” said Combs.

The proposed COBRA regulations which were issued May 28, 2003, were supposed to take effect January 1, 2004, and the DOL had also announced in the regulations that any old COBRA notices which were modeled after the one issued in ERISA Technical Release 86-2 (June 26, 1986) would no longer satisfy good-faith compliance requirements beginning May 28, 2003. Presumably using the model notice provided by the DOL in the proposed regulations was to constitute good-faith compliance. However, this statement by Combs indicates that EBSA has decided that there should be a later effective date and has backed off from requiring employers to immediately begin using the new model notice as provided in the proposed regulations. As many of you may recall, many of the comments received by the DOL regarding the proposed COBRA regulations requested a more reasonable effective date (as discussed in this post).

A couple of the significant changes to be brought about by the proposed regulations would be the additional notice requirements for plan administrators:

• The proposed regulations would require a notice be given to employees and qualified beneficiaries, who notify the plan administrator of a “qualifying event” but who are not otherwise entitled to COBRA coverage, of the reason such coverage is unavailable. The plan administrator would have to provide this information within 14 days of receiving notice of the “qualifying event.”
• The proposed regulations would also require that a qualified beneficiary be sent notice of termination of COBRA coverage when that termination occurs before the end of the maximum period of COBRA coverage.

At 9:16 AM today, the Commonwealth Court of Pennsylvania issued a decision, in a workers compensation case, purporting to prospectively abolish common law marriage but upholding the finding of marriage in the case before it. The case is PNC Banc Corporation v. Workers Compensation Appeal Board. Undoubtedly, the decision will have an impact in the benefits arena in Pennsylvania for those plans which depend on state law to determine whether or not an employee is “married.”

The DOL issued a very helpful opinion last week, DOL Advisory Opinion 2003-11A, which answers this question: whether a plan’s delivery of a mutual fund Profile to participants and beneficiaries immediately before or immediately after their investment in a mutual fund would satisfy regulations issued by the DOL pursuant to section 404(c) of ERISA. Generally, in the case of an investment alternative subject to the registration requirements of the Securities Act of 1933 such as a mutual fund, the 404(c) regulations provide that a participant or beneficiary shall be provided a copy of the “most recent prospectus” that was provided to the plan. DOL Advisory Opinion 2003-11A basically provides that the “prospectus” requirement can be met with a “profile”:

The Department has not defined the term “prospectus” in the 404(c) regulations, or elsewhere. In the preamble to the 404(c) regulations, the Department states that the prospectus delivery requirement is intended to ensure that, immediately before or immediately after a participant’s or beneficiary’s initial investment in an investment alternative, such as a mutual fund, that is required to deliver a prospectus to investors under the federal securities laws, participants and beneficiaries must be afforded the opportunity to review the prospectus in connection with an initial investment in such investment alternative. . . it is the view of the Department that, under the 404(c) regulations, the term “prospectus” includes a Profile. The Department believes that the delivery of a Profile by an identified plan fiduciary or designee to plan participants or beneficiaries satisfies the requirements of the 404(c) regulations because it provides a clear summary of key information about a mutual fund that is useful to such participants and/or beneficiaries.

The opinion goes on to say:

Where the most recent prospectus in the plan’s possession is a Profile, then delivering the Profile to plan participants and beneficiaries, immediately before or immediately after such individuals’ initial investment in a mutual fund, would satisfy a participant-directed individual account plan’s prospectus delivery obligation under 29 CFR section 2550.404c-1(b)(2)(i)(B)(1)(viii). Where the most recent prospectus is a 10(a) prospectus, 29 CFR section 2550.404c-1(b)(2)(i)(B)(1)(viii) would require the delivery of a 10(a) prospectus.

Please note, however, that if a participant or beneficiary specifically requests “a 10(a) prospectus” then “the most recent 10(a) prospectus must be provided.”

You can access the DOL’s News Release about the advisory opinion here.

(Any comments on this from my securities law brethren-blawgers?)

The Wall Street Journal today tells you how to start a blog.

Also this article from Sunspot.net: “Weblogs finding a home in nation’s workplace.” The article notes the legal concerns of workplace blogs:

Christopher Wolf, a partner at the Washington law firm, Proskauer Rose, thinks the potential perils of workplace blogging are so great that he advises clients not to start them. “People are just more casual in the stuff they put on the Internet,” Wolf said. “Recording one’s thoughts can lead to problems for both the employer and the employee because it becomes readily available for all to see.”

My thoughts: workplace blogs are probably here to stay due to the many benefits they offer and legal experts should come up with good guidelines and helpful procedures for handling this very important tool.