Employee Retirement Income Security Act (ERISA) Archives

Decisive Victory: ERISA Class Action Dismissed with Prejudice

by Ted Becker and Julian André | Jan 31, 2024 | Employee Benefits, Employee Stock Ownership Plans (ESOPs)

In 2016, Inland Fresh Seafood Corporation of America established an employee stock ownership plan (ESOP), a type of defined contribution employee benefit plan. The ESOP then purchased 100% of Inland Fresh stock from Inland Fresh’s former shareholders.

Since the ESOP was founded, it has provided substantial benefits to Inland Fresh’s employee participants.

In November 2022, four former Inland Fresh employees filed an Employment Retirement Income Security Act of 1974 (ERISA) class action complaint against Inland Fresh, a number of its executives, its outside counsel, the ESOP Committee and the ESOP’s independent trustee.

The complaint alleged that the defendants breached their ERISA fiduciary duties, engaged in transactions prohibited by ERISA and ultimately caused the ESOP to pay more than fair market value for Inland Fresh stock during the initial transaction.

From Clinic to Courtroom: Legislation and Litigation Limiting Prescription Practices

by Alden Bianchi | May 10, 2023 | Employee Benefits, Health and Welfare Plans

On April 20, 2023, McDermott’s Alden Bianchi was a speaker at the ERISA Industry Committee’s 2023 Annual Spring Policy Conference, which was held at the National Press Club in Washington, D.C. The panel in which he participated was entitled “From Clinic to Courtroom – Legislation and Litigation Limiting Prescription Practices,” and it covered three main topics: state regulation of telehealth; the regulation of specialty pharmacy supply chains and delivery measures (“brown bagging,” “white bagging” and “clear bagging”); and state-level efforts to regulate pharmacy benefit managers (PBMs) following the US Supreme Court’s 2020 Rutledge decision, which held that an Arkansas law regulating the costs of prescription drugs was not preempted by the Employee Retirement Income Security Act of 1974 (ERISA).

Here are some of the program’s key takeaways and predictions:

While telehealth is here to stay, the high cost of Medicare reimbursements presents an immediate barrier to widespread adoption, and the particulars of how telehealth will be regulated will be left largely to the states.
The battle over the delivery of specialty prescription drugs is heating up as PBMs seek to capture some of the margins previously available only to providers. State laws regulating pharmacies and pharmacists will be at the center of the battle, and future legislative efforts will likely be subject to challenge.
State legislatures have read the Rutledge decision broadly in ways that virtually guarantee a good deal of future litigation. It might take as long as a decade, and it may well take more than one trip to the Supreme Court before plans, issuers, providers, state legislators and regulators, and other stakeholders have a reliable understanding of the contours of ERISA preemption in the pharmacy context.

Accompanying this post are copies of Mr. Bianchi’s panel materials, including:

ERISA Preemption Developments in Managed Care

by Jeremy Earl and Kate McDonald | Apr 13, 2023 | Employee Benefits, Health and Welfare Plans

For plans governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1461 (ERISA), the doctrine of federal ERISA preemption over state statutes, regulations or administrative schemes has been a central subject of litigation since the inception of the statute. In December 2020, the US Supreme Court issued a decision on the subject in Rutledge v. Pharm. Care Mgmt. Ass’n, 208 L. Ed. 2d 327 (2020).

In the short, unanimous opinion, the Supreme Court in Rutledge held that ERISA did not preempt an Arkansas statute that regulates pharmacy benefit managers’ (PBM) drug reimbursement rates. Arkansas passed Act 900 in 2015 to regulate PBM reimbursement rates for pharmacies, which, in effect, established a reimbursement floor that requires PBMs to reimburse pharmacies at a rate that reflects the pharmacy’s acquisition cost for the drug in question.

Access this McDermott Health 2023 Annual Report (pg. 9).

ERISA 401(k) Fee Case Victory for Schneider

by Sarah Walters, Jennifer Routh and Margaret Warner | Feb 2, 2023 | Employee Benefits, Fiduciary and Investment Issues, Retirement Plans

A Massachusetts federal judge recently gave a major win to Schneider Electric in an employee benefits lawsuit brought by former workers. According to this Law360 article, seven former Schneider Electric employees accused the company and its investment manager of running afoul of the Employee Retirement Income Security Act of 1974 when they replaced well-performing funds with those of the investment manager. McDermott Partners Sarah E. Walters, Jennifer B. Routh and Margaret H. Warner represented Schneider Electric.

Access the article.

DOL Proposes Significant Changes to VFCP Program

by Jennifer Hill, Jacob Mattinson and Patrick Ryan | Dec 22, 2022 | Employee Benefits, Retirement Plans

On November 21, 2022, the US Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) released a proposed amendment and restatement of the Voluntary Fiduciary Correction Program (VFCP), along with a proposed amendment to the Prohibited Transaction Exemption (PTE) 2002-51.

The VFCP allows plan sponsors to voluntarily correct certain fiduciary breaches to avoid civil enforcement actions and civil penalties imposed under the Employee Retirement Income Security Act of 1974 (ERISA) and its accompanying regulations. The most relevant components of the proposed changes for plan sponsors relate to delinquent contributions of participant deferrals and loan repayments as these tend to occur more frequently than other issues corrected through the VFCP. Importantly, the proposed amended and restated VFCP would add a new self-correction feature, clarify existing transactions currently eligible for correction and simplify certain administrative or procedural requirements for participation in and correction of transactions under the VFCP. This would be the first time the DOL has allowed self-correction under VFCP. The proposed changes are intended to encourage greater VFCP participation by providing for more efficient and less costly corrections.

Access the full article.

Employer Group Urges Justices To Hear Seattle Benefits Row

by Michael B. Kimberly, Sarah P. Hogarth and Andrew Liazos | Nov 16, 2022 | Benefit Controversies, Retirement Plans

An employer group says the federal government erred in arguing that a Seattle benefits mandate for hotel workers doesn’t conflict with federal law. According to this Law360 article, the ERISA Industry Committee (ERIC) asked the US Supreme Court to review a US Court of Appeals for the Ninth Circuit decision that backed the Seattle ordinance despite arguments from the US Department of Labor that the law doesn’t contradict the Employee Retirement Income Security Act. McDermott’s Michael B. Kimberly, Sarah P. Hogarth and Andrew C. Liazos represent ERIC.

Access the article.

Save It for a Rainy Day Part 2: IRS Announces Additional Plan Amendment Extensions

by Teal Trujillo, Patrick Ryan and Diane Morgenthaler | Oct 12, 2022 | Employee Benefits, Employment, Executive Compensation, Retirement Plans

On September 26, 2022, the Internal Revenue Service (IRS) extended the amendment deadline for non-governmental qualified retirement plans, plans covered under Section 403(b) of the Internal Revenue Code (Code) and individual retirement accounts (IRAs). The extensions included many of the amendment deadlines under the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), the Bipartisan American Miners Act of 2019 (Miners Act), and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). See our prior On the Subject about this earlier extension. Missing from this earlier IRS extension was a postponement of deadlines relating to certain CARES Act provisions, in particular those related to COVID-related distributions and loan relief, as well as deadlines relating to disaster-related loans or distributions under the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Disaster Act).

NEW IRS EXTENSION

IRS Notice 2022-45 provides a new extension to December 31, 2025, of the special amendment deadlines included in Section 302 of the Disaster Act and in Section 2022 of the CARES Act.

Section 2022 of the CARES Act provided for COVID-related distributions, increased loan amounts and delayed loan repayments.
Section 302 of the Disaster Act provided favorable tax treatment for certain disaster-related loans or distributions.

Previously, amendments for these CARES Act and Disaster Act provisions would have been required by the end of the 2022 plan year. The Notice also clarifies that CARES Act and Disaster Act amendments adopted before the new December 31, 2025, deadline will not cause the plan to fail to satisfy the anti-cutback requirements of Code Section 411(d)(6) or of Section 204(g) of the Employee Retirement Income Security Act of 1974 (ERISA).

The extension applies to individual retirement accounts (IRAs), to qualified plans that are not governmental plans and to Code Section 403(b) plans that are not maintained by a public school. The amendment deadlines for Code Section 403(b) plans maintained by a public school, and for governmental plans (including plans covered by Code Section 457(b)), remain slightly different.

ACTION ITEM

Most tax-qualified retirement plans and Code Section 403(b) plans that elected to offer COVID-related distributions and loan relief can now wait to adopt changes required under the CARES Act, SECURE Act, MINERS Act or Disaster Act in a single amendment no later than December 31, 2025.

How the Overturning of Roe v. Wade May Affect US Employer Benefits Plans

by Sarah Raaii | Sep 22, 2022 | Benefit Controversies, Employee Benefits, Health and Welfare Plans

The US Supreme Court’s decision to overturn Roe v. Wade has led to a flurry of confusion and questions from employers. In this Benefits Canada article, McDermott’s Sarah Raaii explains how some states are imposing criminal penalties for anyone who assists with abortion within their borders.

“If a court determines state abortion restrictions are generally applicable criminal laws, then potentially, ERISA (Employee Retirement Income Security Act) plans can be subject to criminal penalties if they provide abortion services, including travel benefits,” Raaii said.

Access the article.

Want to Provide Abortion Travel Benefits at Your Company? Here’s How to Protect Employees

by Sarah Raaii | Sep 1, 2022 | Benefit Controversies, Employee Benefits, Health and Welfare Plans

How can companies provide abortion travel benefits to their workers without disclosing sensitive medical information? In this Corporate Counsel article, McDermott’s Sarah Raaii provides insight into how the Health Insurance Portability and Accountability Act (HIPAA) and the Employee Retirement Income Security Act (ERISA) offer protections for workers seeking reproductive healthcare services.

“The most common way that we’ve seen employers offering these abortion benefits is to include them in their existing ERISA health plans, in which case they [the plans] would be subject to HIPAA,” Raaii said.

Access the article.

ESOP Litigation: Latest Trends and Questions

by J. Christian Nemeth | Jul 6, 2022 | Employee Benefits, Employee Stock Ownership Plans (ESOPs), Fiduciary and Investment Issues, Retirement Plans

On May 6, 2022, McDermott Partner Chris Nemeth delivered a presentation during the 2022 TEA National Conference titled “ESOP Litigation: Latest Trends and Open Questions.” His presentation focused on recent significant employee stock ownership plan (ESOP) court decisions and emerging litigation trends in the ESOP industry. Chris and his co-presenter touched on the enforceability of arbitration clauses in the Employee Retirement Income Security Act of 1974 (ERISA) litigation, post-transaction debt forgiveness, and pleading and standing requirements.

For questions about employee benefits matters, please contact Chris or McDermott’s employee benefits practice team.

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