Benefit Controversies Archives - Page 19 of 31

Federal Government Refuses to Defend DOMA; Implications for Employee Benefit Plans

by Jackie Sinn | Apr 11, 2011 | Benefit Controversies

On February 23, 2011, U. S. Attorney General Eric Holder issued a press release indicating that the federal government will no longer defend the constitutionality of Section 3 of the federal Defense of Marriage Act (DOMA). Section 3 of DOMA provides that for all purposes under federal law, the word “marriage” means only a legal union between one man and one woman as husband and wife, and the word “spouse” refers only to a person of the opposite sex who is a husband or wife.

Despite the symbolic value of the attorney general’s press release, the release by itself does not change existing federal law. Therefore, until DOMA is officially held to be unconstitutional by the U.S. Supreme Court or repealed by Congress, same-sex couples are not entitled to any of the benefits that opposite-sex married couples are entitled to under federal law, and states are still authorized to refuse to recognize same-sex marriages validly performed in other states where such unions have been legalized.

It is important to note that the press release does not speak to the constitutionality of Section 2 of DOMA, which provides that states may refuse to recognize same-sex marriages performed in other states where such unions have been legalized. If Section 3 of DOMA is ultimately found to be unconstitutional, Section 2 of DOMA may still remain intact. Under this scenario, same-sex couples married and living in the relatively few states that recognize same-sex marriage would be entitled to federal law benefits currently provided to opposite-sex couples, while at the same time same-sex couples living in the majority of states that do not recognize same-sex marriage would continue to be denied these same federal rights and privileges.

Employers should continue to closely monitor the federal cases involving the constitutionality of DOMA. The federal government’s decision not to defend Section 3 of DOMA will undoubtedly have a significant impact on the results. For more information, see Federal Government Refuses to Defend Defense of Marriage Act – Now What? and Court Rulings that Federal Ban on Same-Sex Marriage is Unconstitutional Raises Significant Implications for Employee Benefit Plans.

Recent Updates on Challenges to the Health Care Reform

by McDermott Will & Emery | Feb 4, 2011 | Benefit Controversies, Health and Welfare Plans

by Amy M. Gordon and Michael T. Graham

On January 31, 2011, another Federal district court judge opined on the constitutionality of the controversial Health Care Reform legislation. In Florida v. U.S. Department of Health and Human Services, Judge Vinson of the U.S. District Court for the Northern District of Florida, in a case brought by governors and attorneys general from 26 states, held that the individual insurance mandate provisions in the legislation that require all persons to purchase health care insurance were unconstitutional.

In his opinion, Judge Vinson found that the individual insurance mandate exceeded the regulatory powers granted to Congress under the U.S. Constitution’s Commerce Clause. Judge Vinson held that the penalties associated with not purchasing health care insurance went beyond Congress’ broad authority to make laws that are “necessary and proper” to carrying out its designated responsibilities. He found that if Congress could regulate an individual’s inactivity through the Commerce Clause, then Congress could regulate virtually any kind of activity or inactivity with almost unlimited power. He concluded that if Congress could penalize an individual for deciding not to engage in certain commerce, the enumeration of individual rights in the Constitution would have been made in vain. In ruling on a second claim, Judge Vinson dismissed a claim that the legislation violated state sovereignty rights by requiring states to pay for a fractional share of the planned expansion of Medicaid.

Judge Vinson’s decision updates the federal judicial scoreboard on whether Health Care Reform is or is not unconstitutional at 2 and 2. However, unlike the Virginia federal court that also ruled against the individual mandate provision but upheld the rest of the legislation, Judge Vinson went further, concluding that the individual mandate was so inextricably connected to the other provisions in the legislation that its unconstitutionality required that the entire legislation be invalidated. Ultimately, while this ruling comes in what may be the most prominent challenge to Health Care Reform given that the case was filed by many states’ governors and attorneys general, it will merely become one of many opinions on the individual mandate’s constitutionality given that there are over 20 pending cases challenging the legislation.

On the Legislative front, on February 2, 2011, Senate Republicans were defeated by a vote of 51-47 in their effort to repeal Health Care Reform.

As of now, these two events will have little impact on employers and their group health plans. We recommend a wait and see approach. Senate Republican leaders expressed that they were not surprised that this effort was defeated and that votes were cast generally along party lines. As for the Florida court decision, Judge Vinson declined to require enforcement of his ruling pending an expected appeal by the Obama administration.

Because the individual mandate provision does not take effect until 2014, it is likely that the Federal courts will continue to provide differing opinions until the issues is settled by the Supreme Court. In fact after the Senate defeat, Democratic Senator Bill Nelson of [...]

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Proposed PBGC Rule Has Potential to Expand Liability of Pension Plan Sponsors

by McDermott Will & Emery | Nov 10, 2010 | Benefit Controversies, Retirement Plans

by Joseph S. Adams, Michael T. Graham, Diane M. Morganthaler, Maureen O’Brien, David E. Rogers and Patrick D. Ryan

The Pension Benefit Guaranty Corporation (PBGC) has issued proposed guidance interpreting Section 4062(e) of the Employee Retirement Income Security Act of 1974, as amended (ERISA), which requires defined benefit pension plan sponsors to notify the PBGC when more than 20 percent of plan participants are separated from employment when a facility or operation is shut down or ceased by an employer. The PBGC’s latest proposed rule greatly expands the universe of potential Section 4062(e) event triggers, reiterating the PBGC’s recent aggressive pursuit to monitor underfunded defined benefit pension plans.

The proposed rule reverses prior PBGC guidance suggesting that asset sales were immune from Section 4062(e)’s reach. The proposed rule also stretches the terminology in Section 4062(e) to provide the PBGC with discretion to impose Section 4062(e) liability on a wide variety of employer business decisions that were once thought exempt from that section. For example, the proposed rule’s definitions and interpretations of key terminology in Section 4062(e) including terms and phrases like “operation,” “facility,” “cessation,” “separation,” “result,” and “Active Participant Base,” grants the PBGC broad powers to assert that Section 4062(e) events have occurred.

The PBGC determines Section 4062(e) liabilities by multiplying (a) the liability that would have occurred if the defined benefit plan had been terminated by the PBGC immediately after the cessation date multiplied by (b) the ratio of the number of affected participants to the Active Participant Base (as newly defined under the proposed regulations). Depending on the funded status of the defined benefit plan, this liability can be significant.

Employers that sponsor defined benefit plans and that are considering layoffs, sales, product line discontinuances, plant closings or similar workforce restructurings should contact employee benefits counsel to determine if such actions could result in a Section 4062(e) event.

Click here for a MWE White Paper containing a detailed analysis of the new proposed regulations.