Category: Erisa

The DOL has announced in a press release the issuance of long-awaited guidance governing “orphan” or abandoned plans:

Each year approximately 1,650 401(k) plans holding $868 million in assets and covering 33,000 workers are abandoned. Today, the U.S. Department of Labor announced proposed rules to allow financial institutions to take responsibility for these plans and distribute the plans’ assets to workers and their families. . .

The department currently deals with abandoned plans on a case-by-case basis, often with the involvement of the courts. The proposed rules provide standards for determining when a plan is abandoned and establishes a process for winding up the affairs of the plan and distributing benefits to workers. When implemented, the process would eliminate the need for costlier court approvals and allow workers to regain access to their benefits sooner. The proposal also provides guidance on the application of tax qualification rules to plans terminated under this regulation.

Access a Fact Sheet here and the proposed regulations here.

The regulatory initiative consists of three proposed regulations. One proposal, entitled “Rules and Regulations for Abandoned Plans,” establishes procedures and standards for the termination of, and distribution of benefits from, an abandoned pension plan. The second proposal, entitled “Safe Harbor for Rollovers From Terminated Individual Account Plans,” provides relief from ERISA’s fiduciary responsibility rules in connection with a rollover distribution on behalf of a missing or unresponsive plan participant. The last proposal, entitled “Special Terminal Report for Abandoned Plans,” provides annual reporting relief for terminated abandoned plans.

Highlights of the new rules:

(1) A plan generally will be considered abandoned under the proposal if no contributions to or distributions from the plan have been made for a period of at least 12 consecutive months and, following reasonable efforts to locate the plan sponsor, it is determined that the sponsor no longer exists, cannot be located, or is unable to maintain the plan.

(2) Only a qualified termination administrator (QTA) may determine whether a plan is abandoned under the proposal. To be a QTA, an entity must hold the plan’s assets and be eligible as a trustee or issuer of an individual retirement plan under the Internal Revenue Code (e.g., bank, trust company, mutual fund family, or insurance company).

(3) QTAs that follow the regulation will be considered to have satisfied the prudence requirements of ERISA with respect to winding-up activities.

(4) Also, accompanying the proposed regulations is a proposed class exemption that would provide conditional relief from ERISA’s prohibited transaction restrictions. The proposal would cover transactions where the QTA selects and pays itself to provide services in connection with terminating an abandoned plan, and for selecting and paying itself in connection with rollovers from abandoned plans to IRAs maintained by the QTA, including payment of investment fees as a result of the investment of the IRA’s assets in a proprietary investment product.

Finally, the proposed regulations state that the DOL has conferred with representatives of the IRS regarding the qualification requirements under the Code as applied to abandoned plans that would be terminated under the new rules and the IRS has agreed that it will not challenge the qualified status of any such plan or take any adverse action against the QTA, the plan, or any participant or beneficiary of the plan as a result of such termination, including the distribution of the plan’s assets, provided that the QTA satisfies three conditions:

The QTA reasonably determines whether, and to what extent, the survivor annuity requirements of sections 401(a)(11) and 417 of the Code apply to any benefit payable under the plan.

Each participant and beneficiary has a nonforfeitable right to his or her accrued benefits as of the date of deemed termination under paragraph (c)(1) of the proposed regulation, subject to income, expenses, gains, and losses between that date and the date of distribution.

Participants and beneficiaries must receive notification of their rights under section 402(f) of the Code. This notification should be included in, or attached to, the notice described in paragraph (d)(2)(v) of the proposed regulation.

However, the IRS makes it clear that they reserve the right to pursue appropriate remedies under the Code against any party who is responsible for the plan, such as the plan sponsor, plan administrator, or owner of the business, even in its capacity as a participant or beneficiary under the plan.

What is the proposed effective date for the new rules? The DOL states that it is considering making the three proposed regulations, i.e., sections 2578.1, 2550.404a-3, and 2520.103-13, effective 60 days after the date of publication of final rules in the Federal Register. However, the Department invites comments on whether the final regulations should be made effective on an earlier or later date.

In today’s posting at Jottings By an Employer’s Lawyer, Michael Fox discusses a recent 7th Circuit opinion written by Judge Richard Posner on a procedural issue involving an ERISA section 510 case–In In Re: Allstate Insurance Company (7th Cir. 3/28/05) [pdf]. The plaintiffs in the case allege that the employer who had decided to replace its employee insurance agents with independent contractors harassed them so that they would quit so as not to qualify for severance benefits. The class seeks a judgment declaring that the members are entitled to the benefits they would have received under the employer’s ERISA severance plan “had they been fired rather than quitting.” The former employees allege that the employer harassed them by “extending office hours, imposing burdensome reporting requirements, reducing or eliminating reimbursement for office expenses, and setting unrealistic sales quotas.”

While everyone knows that outsourcing is here to stay, and that there are legitimate business reasons and advantages to outsourcing, what I have tried to do here is simply to highlight some of the ERISA litigation that has grown out of this trend in outsourcing. The reason I think it is important is that when employers contemplate outsourcing and hire advisers to help them through the process, many times they are not advised of the issues and risks that can arise in the benefits arena. (See previous posts: Outsourcing Can Lead To Costly ERISA Litigation and Outsourcing: Traps for the Unwary.) Another very recent case–Sheckley v. Lincoln National Corporation Employees’ Retirement Plan, Civil No. 04-109-P-C (D. Maine 2005)–provides some further insight into actions that can expose an employer to liability under ERISA in an outsourcing arrangement as well as actions that can, to some extent, reduce an employer’s exposure to liability under ERISA.

Facts: The employer in the case reorganized its information technology organization, and as a result, forty-nine positions were eliminated. In the course of various restructurings, the employer entered into outsourcing agreements. (The court defines outsourcing as “the practice of transferring job functions to third-party vendors who enter into contracts with the employer to provide the services formerly provided by employees.”) The employer notified twenty-six employees in the information technology department, including plaintiff, that their positions were being outsourced to another employer. Outsourced employees were required to apply for their position with the new employer. Apparently, in the process of outsourcing the employees, they were given a benefits summary which indicated that they would be vested in the prior employer’s retirement plan. However, after accepting the position, plaintiff was informed that his retirement account in the prior employer’s plan would not vest.

Section 510 Claims: When the employer responded to an inquiry from plaintiff about the benefits summary he received, the employer stated that it “contained an error about his pension” and that he was not entitled to vesting because his job was not eliminated, but rather “outsourced.” Plaintiff then made a claim and quasi-appealed the decision under the plan’s claims procedures, but to no avail, and then brought suit under ERISA section 510, claiming that the employer had characterized the action taken as “outsourcing” (versus “job elimination”) in order to deprive plaintiff of vesting under the employer’s pension.

A Magistrate Judge had found that, although the amended complaint alleged the necessary intent, the “mischaracterization of the job eliminations affecting [p]laintiff and the Class … [could not] reasonably be construed, even under the favorable standard applicable to motions to dismiss, to allege discrimination against plaintiff and other members of the putative class.” However, the federal district court in Maine disagreed, holding that the allegations were sufficient to state an ERISA section 510 claim, and denied the employer’s motion to dismiss.

Plan Limitation Period: There was another aspect of the case though which illustrates one technique that employers are seeking to use to reduce their exposure to liability under ERISA, and that was a six-month limitation period contained in the Summary Plan Description (“SPD”). The applicable portion of the SPD read as follows, describing a participant’s rights upon denial of a claim after appeal of the claim:

The decision upon review will be final. It will be communicated in writing and contain the specific reason(s) for the decision, will contain references to the pertinent Plan language upon which the decision was based, and will be written in a manner easily understood by the claimant. Claimants will not be entitled to challenge the LNC Benefits Appeals [and] Operations Committee’s determinations in judicial or administrative proceedings without first filing the written request for review and otherwise complying with the claim procedures. If any such judicial or administrative proceeding is undertaken, the evidence presented will be strictly limited to the evidence timely presented to the LNC Benefits Appeals and Operations Committee. In addition, any such judicial or administrative proceeding must be filed within six months after the Committee’s final decision.

The federal district court joined a number of other courts in holding that the plan’s six-month limitation was reasonable and should be enforced. The technique of including such a limitation in a plan document and SPD is normally utilized to seek to overrule statutes of limitation which would otherwise apply to lawsuits challenging a denial of a claim. A number of courts have recognized such limitation periods as being valid and enforceable under ERISA.

Failure to Adhere to Claims Procedures: Finally, an additional aspect of the fiduciaries’ actions in the case which fiduciaries in general should not emulate was the lackadaisical manner in which the claims procedures under the plan were implemented. The court found that the employer had failed to comply with DOL’s claims procedure regulations (29 C.F.R. § 2560.503-1(g) in two respects:

(1) The adverse benefit determination had failed to include a “statement that the claimant [was] entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits”; and

(2) It had also failed to include “a statement of the claimant’s right to bring an action under section 502(a) of the Act.”

Moreover, the court found that the claims procedures of the plan had contemplated a two-step process which involved the initial claim for benefits and then a right to appeal any denial of such claim. However, the fiduciaries had collapsed the process into a single review, in violation of the plan’s own written claims procedures. Even though the court recognized that, in general, failure of fiduciaries to follow the plan’s claims procedures can lead to “serious consequences”, the court surprisingly in this case held that there was no causal connection between the plan’s failure to follow the claims procedures laid out in the SPD and the plaintiff’s failure to file the action before expiration of the plan’s six-month limitation period had run.

No notification of Contractual Limitation: In addition, the court recognized a 9th Circuit case (Mogck v. Unum Life Ins. Co. of Am., 292 F.3d 1025, 1028-29 (9th Cir. 2002) which had held that a contractual time limitation on commencing legal proceedings under ERISA was not enforceable where the beneficiary was not informed in the claim denial, with the language used in the policy, that the contractual time limitation for legal proceedings would begin to run. Here there was no such notification, but again the court held surprisingly that there was no causal connection between a failure to notify the plaintiff of the contractual limitation and the plaintiff’s failure to file the action within the six-month time frame.

Tips for employers and fiduciaries from the case:

(1) Employers who outsource should seek to provide clear and accurate communications to affected employees.

(2) Employers and fiduciaries should make sure that the plan provides written claims procedures and that claims procedures are followed in the claims and appeals process.

(3) Employers should seek advice regarding whether they could utilize contractual limitation periods in their plan documents and SPDs. If they do so, employers and fiduciaries should bear in mind that a contractual limitation period may not be enforceable in a jurisdiction if claimants are not notified of the plan limitation period in an adverse benefit determination.

I was delighted to receive a copy of Jim Wooten‘s recently published book entitled “The Employee Retirement Income Security Act of 1974: A Political History.” Jim is a professor at the SUNY Buffalo School of Law and states in the “Acknowledgements” that he spent more than ten years working on the book, compiling this rich resource for those wishing to understand the history behind ERISA. While I have not yet had a chance to read the whole book, what I have read so far convinces me that it belongs in every ERISA lawyer’s library.

With mandatory arbitration clauses becoming more and more popular with employers, it is predictable that issues will continue to arise in the courts regarding how these clauses are impacted by ERISA. The recent Sixth Circuit case of Simon v. Pfizer, 2005 U.S. App. LEXIS 2881 (6th Cir. 2005) provides some good background regarding the narrow issue of whether or not ERISA preempts arbitration under the Federal Arbitration Act (“FAA”), even though the court in the end declined to rule on the issue.

The ERISA plan in question was an “Enhanced Severance Plan”, or “ESP” for short. Plaintiff had been terminated from his employment and was seeking benefits under the ESP. The plan provided for a three-step claims review process after which an unsuccessful participant could then proceed to arbitration before the American Arbitration Association and the results would be binding on the participant and the employer.

The plaintiff had brought claims against the employer for retaliatory discharge and discrimination in violation of ERISA § 510, improper denial of benefits, breach of fiduciary duty, and failure to provide timely and proper notice of COBRA benefits. The employer filed a motion to dismiss seeking to dismiss all counts of the complaint based on the ESP’s mandatory arbitration provisions and on a failure on the part of the plaintiff to exhaust his administrative remedies.

The District Court denied the employer’s motion to dismiss with respect to all but Count III (breach of fiduciary duty) and refused to require exhaustion of administrative remedies as to plaintiff’s ERISA Section 510 (Count I) and COBRA (Count IV) claims on the basis that the claims were statutory and thus separate and apart from plaintiff’s claim under the ESP.

On appeal, the Sixth Court overturned the District Court’s decision denying the employer’s motion to dismiss with respect to the ESP claims, holding that a “compulsory arbitration provision divests the District Court of jurisdiction over claims that seek benefits under an ERISA plan, such as the ESP.” However, the Court upheld the District Court’s denial of the employer’s motion to dismiss with respect to the ERISA section 510 claim and the COBRA claim, holding that these claims were not subject to arbitration in the case. The Court held that, even though there was some “factual overlap” between the ERISA section 510 claim and COBRA claim and the wrongful denial of benefits claim, nevertheless the ERISA 510 and COBRA claims had “independent legal bases” and were not simply claims for violations of the ESP that had been recharacterized in order to avoid arbitration. The Court went on to state that, because plaintiff’s ERISA Section 510 and COBRA claims were not covered by the arbitration clauses at issue, it was not necessary to address the question of whether ERISA would pre-empt an arbitration clause that did cover those claims.

Nevertheless, despite the fact that the Court did not find it necessary to decide the issue in the Sixth Circuit, the Court did provide a helpful list of cases which had already reached a decision on the issue:

This narrow issue has not yet been addressed by the Sixth Circuit, see Eckel v. Equitable Life Assur. Soc. of the U.S., 1 F.Supp.2d 687 at 688 (noting that the Sixth Circuit had not yet addressed the issue); however, the majority of courts considering this issue have held that disputes arising under ERISA, including COBRA claims, are subject to arbitration under the FAA. See Kramer v. Smith Barney, 80 F.3d 1080, 1084 (5th Cir.1996); Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1115-16 (3d Cir.1993); Bird v. Shearson Lehman/American Express, Inc. 926 F.2d 116, 122 (2d Cir.1991), cert. denied 501 U.S. 1251 (1991); Arnulfo P. Sulit, Inc. v. Dean Witter Reynolds, Inc., 847 F.2d 475, 479 (8th Cir.1988); Peruvian Connection, Ltd. v. Christian, 977 F.Supp. 1107, 1111 (D.Kan.1997); Fabian Fin. erv. v. Kurt H. Volk, Inc. Profit Sharing Plan, 768 F.Supp. 728, 733-34 (C.D.Cal.1991); Southside Internists Group PC Money Purchase Pension Plan v. Janus Capital Corp., 741 F.Supp. 1536, 1541-42 (N.D.Ala.1990); Glover v. Wolf, Webb, Burk & Campbell, Inc., 731 F.Supp. 292, 293 (N.D.Ill.1990).

Please note that employers who include such clauses in their plans may subject themselves to additional fiduciary obligations with respect to notifying participants of such provisions, as indicated in this Ninth Circuit decision here: Chapel v. Laboratory Corporation of America.

Many employers are continuing the trend of outsourcing certain services or functions by subcontracting with a third party. However, the process of outsourcing often ends in terminations of employment which can give rise to lawsuits and claims under ERISA and other areas of the law.* A recent 8th Circuit case–Dallas D. Register, et. al. v. Honeywell Federal Manufacturing & Technologies, LLC, 2005 WL 367319 (8th Cir. 2005)–illustrates the exposure to lawsuits that outsourcing can bring under section 510 of ERISA. That provision prohibits an employer from discharging an employee for the purpose of interfering with the attainment of any right to which the employee may become entitled under an ERISA plan.

Oftentimes, employers will transfer the affected employees to a third party contractor so that employees continue their jobs, but end up working for a different employer. Many times, employees end up with “lesser” benefits in the process, i.e. higher health care premiums or less favorable health care benefits, lower pension and retirement benefits, and/or less attractive fringe benefits. If it can be shown that an employer’s desire to reduce benefits cost was a “determinative factor” in the decision to outsource, the employer could be exposed to liability under ERISA.

The Register case illustrates the type of situation which can give rise to a long drawn-out lawsuit under ERISA, but also demonstrates how one employer was able to defeat such claims in the end. The case is also instructive because it shows that, no matter how many extraordinary measures an employer may take to try to be fair to employees and to avoid such claims, an employer can still end up battling the claims in court.

The facts of the case, as set forth in the opinion, are as follows:

Honeywell, the original employer (a government contractor referred to as “GC”), managed and operated a plant for the Department of Energy (“DOE”). GC’s contract with DOE provided that the government paid all management and operation costs at the plant, including employee compensation and benefit costs, and GC received an incentive fee based on performance and other awards. Apparently, GC became dissatisfied with the performance of its facilities and utilities engineering groups which were responsible for onsite construction projects and facilities, and hired a consultant who identified the group as a potentially weak area which GC might want to consider outsourcing to improve quality.

In 2001, the facilities and utilities engineering functions were outsourced to Facilities and Engineering Services (“FES”), a subsidiary of the new employer (“Employer “) which had been created for this purpose. Several employees asked to be transferred to other positions within GC to avoid being outsourced, but GC placed restrictions on such transfers in order to ensure continuity of operations after the work was outsourced. GC then terminated the nine employees (who brought the suit) along with 46 others and all were offered employment at FES. The nine employees accepted the employment with FES and remained at their same desks at the GC facility and performed the same functions as they had when they worked for GC.

Regarding benefits, GC had a pension plan while the Employer did not. However, GC amended its pension plan to allow affected employees who were reaching a retirement milestone to receive an unpaid “bridge” leave of absence so they could reach the milestone. In addition, GC worked with the Employer to design a compensation and benefits package for the outsourced employees. The FES salary for each of the nine was equal to or greater than the salary received at GC, and FES employees were eligible for bonuses that were not available from GC. In addition, the Employer created two additional defined contribution plans for the FES employees. GC also commissioned a study of its benefits package compared to the one at FES. The first study indicated that the value of the FES package would be approximately 90% of GC’s. The Employer then enhanced the FES benefit package in response, with the result that the FES package was valued at 95% of GC’s or 105% if possible bonuses were considered.

So why did the employees sue? They claimed that they lost their right to future benefit accruals and their retiree medical benefits as a result of the outsourcing, and alleged that both DOE and GC benefited financially from the change. They pointed to DOE’s Annual Report on Contractor Work Force Restructuring which stated that employees had been outsourced from the GC plant and that the workforce restructuring produced savings for the government in salary and benefits from the outsourced positions in the amount of $5.7 million. The employees claimed that GC shared in any savings the government experienced by reducing costs, including employee benefits.

In an ERISA section 510 case, to overcome a showing of a section 510 violation, the employer must articulate a legitimate, nondiscriminatory reason for the outsourcing. If the employer does so, the burden shifts back to the employees to prove that the employer’s proffered reason was pretextual. In this case, the district court had opined that the employees showed that one of the two business reasons offered by GC for the outsourcing were pretextual, but the other was held not to be pretextual, so that the employer prevailed.

On appeal, the Court upheld the lower court’s finding that GC’s reasons for the outsourcing were legitimate and nondiscriminatory. GC had stated that its main reason for the outsourcing was “to maintain its contract with DOE.” The employees argued that GC’s restrictions on the internal transfers were evidence of pretext, but GC “produced evidence that the restrictions were put in place to ensure continuity of operations” and that it had “amended its pension plan to allow twenty-six of the fifty-five outsourced employees to reach a retirement milestone.” The Court cited the fact that GC had worked with the Employer to create a benefits package for the outsourced employees at FES that included higher salaries, the opportunity to earn bonuses, and two defined contribution plans funded by DOE. The Court also cited the study which was performed showing that the package was only 90% of GC’s and that it was enhanced to make it comparable or even better than GC’s if bonuses were included in the calculation.

Comment: It is obvious in this case that the plaintiffs thought they had a “smoking gun” in the DOE’s Annual Report discussed above, i.e. that the outsourcing had saved millions of dollar in costs, including benefits cost. However, here the employer was able to show legitimate business reasons for the outsourcing which were held not to be pretextual due to the many efforts on the part of the employer to provide comparable benefits.

More on outsourcing here and in this previous post–Outsourcing: Traps for the Unwary.

*The recent case of Millsap et al. v. McDonnell Douglas Corporation, 2003 WL 21277124 (N.D.Okla. 2003), resulted in a $36 million settlement for employees involved in a plant closing where employees alleged that the plant closing occurred as a result of the employer’s motivation to reduce benefits cost. Read about the case here and here.

Matthew Vansuch, a 3L at the University of Akron School of Law, has written a very interesting note for the Akron Law Review, discussing the impact of the U.S. Supreme Court case of Kentucky Association of Health Plans, Inc. v. Miller. The note is entitled “Not Just Old Wine in New Bottles: Kentucky Association of Health Plans, Inc. v. Miller Bottles a New Test for State Regulation of Insurance.” As you may recall, the Miller case changed the test for determining whether a state law is deemed to be a law “which regulates insurance” under the ERISA “savings clause” to the following two-prong test: (1) the state law must be directed specifically directed toward entities engaged in insurance, and (2) the state law must substantially affect the risk pooling arrangement between the insurer and the insured. The article contains an interesting observation about how federal district courts since Miller have been “sluggish” in coming to an understanding of the perceived “differences between the common sense-McCarran-Ferguson test and the Miller test.” Vansuch argues that “Miller is a new blend of wine fermented from a different batch of grapes than those used in the bottling of the casks of old, unlabeled wine barrels that confused everyone, including the Supreme Court.” He further argues that Miller’s two-part test is a “clean break,” and “not merely the old McCarran-Ferguson grapes recycled into Miller’s vintage.”

Read more about ERISA preemption in previous posts which you can access here.

Did you know that the Social Security Administration keeps a database of individuals who have been identified by the Internal Revenue Service as having qualified for pension benefits under private retirement plans? The database is maintained by SSA pursuant to the requirements of ERISA. You can access information about the database here.

A recent Sixth Circuit case–Ramsey v. Formica Corp.–illustrates how painful it can be to unravel errors made by plan administrators in making payments to retirees. The saga in this case apparently began with an audit of the pension plan in question which revealed that certain retirees had, for a period of between eight and seventeen years, been receiving monthly amounts which exceeded what they were entitled to under the plan. The audit found that 440 of the 624 retirees in its defined pension plan dating from 1985 were receiving incorrect benefits. In January of 2004, the company, which was emerging from Chapter 11 bankruptcy reorganization, found that 295 retirees received overpayments totaling about $1 million and another 145 retirees had been underpaid a total of about $500,000. The Company entered into a Voluntary Compliance Program with the Internal Revenue Service and began correcting the benefit payment mistakes.

While the plan made up the underpaid amounts, it also reduced the payments of those who were overpaid, and indicated that it might have to recover certain additional overpayment amounts from retirees. Here’s what happened next:

To maintain their monthly payments notwithstanding the audit findings, plaintiffs filed an action in state court alleging claims of negligent misrepresentation and promissory estoppel. Contemporaneously, plaintiffs filed a motion for a temporary restraining order to enjoin Formica from reducing its monthly benefit payments. The same day, Formica filed a notice of removal, arguing that plaintiffs’ complaint stated claims under the Employee Retirement Income Security Act for breach of fiduciary duty. The district court accepted jurisdiction pursuant to 29 U.S.C. §1132(a)(3), and held a conference that afternoon to establish a briefing schedule and a hearing date for oral argument with regard to plaintiffs’ motion for a temporary restraining order. The next day, Formica amended its notice of removal to argue that plaintiffs seek “to recover pension benefits” and, therefore, that plaintiffs’ state law claims are entirely preempted by the Act. Plaintiffs then amended their complaint to add claims for breach of fiduciary duty and equitable relief under the Act and to name as additional defendants the fiduciaries of Formica’s Employee Retirement Plan.

The district court denied the motion for a temporary restraining order and the Sixth Circuit affirmed, holding that the form of relief was not authorized under ERISA. The Court, relying on Mertens and Great-West held that here, where the plaintiffs were asking for the Court to direct the plan to pay monies which were not owed for an uncertain duration, that the relief sought did not fall under the “categories of relief that were typically available in equity” and, therefore, were not authorized by ERISA.

One of the alternatives suggested by the plaintiffs was that the company (rather than the plan) should continue paying the unreduced amounts to the retirees, but the Court affirmed the district court’s ruling that such state law claims were tied to the incorrect processing of the pension payments and thus were entirely preempted by ERISA.

Also, an interesting aspect of the case was a statement by the Court that at various times the company had allegedly “solicited substantial groups of employees to take early retirement” and had “presented each employee with proposed early retirement kits” which had included “pre-prepared documents describing the incentive for early retirement as well as individualized estimates detailing what the specific retiree could expect in benefits each month.” According to the Court, the plaintiffs had chosen to retire early and had received the amounts that were represented to them by the “early retirement solicitation.”

The highly publicized insurance industry investigations have spawned concern over how employers can meet their ERISA obligations when it comes to maintaining life and disability programs for their employees. (Read about the the ERISA implications of the investigations in this previous post–“Action Required by ERISA Fiduciaries in Recent Insurance Probe.”) This article from BenefitNews.com–“Scandals may prompt more online insurance bidding“– indicates that “some consultants are recommending that employers use online bidding for their plan purchases to avoid any hint of impropriety” and that “the software lowers benefit costs” and “adds transparency to the bidding process.”

The article rightly points out that an “employer’s ERISA fiduciary duty demands companies choose benefits on more than price alone.” Before jumping on this bandwagon, an employer should consult with its legal adviser to determine what other “prudent practices and procedures” should be involved in assessing the carriers, in order to make sure that the employer and/or fiduciaries of the plans are meeting their fiduciary obligations under ERISA.