On February 28, Todd Solomon and Maureen O’Brien presented a Strafford live webinar, “Private Equity Compliance With ERISA: Navigating Manager Fiduciary Duties for Funds Holding ERISA Plan Assets”. ERISA imposes fiduciary obligations on funds that hold employee benefit plan assets, including private equity managers responsible for investing fund assets. Managing those fiduciary obligations requires knowledge of the ERISA plan asset requirements. In addition, last year’s Sun Capital decision has broad implications for private equity funds and their investors. The ruling subjects funds to joint and several liabilities for the ERISA pension obligations of their portfolio companies. These slides discuss the ERISA fiduciary issues relevant to private equity funds and the implications of the most recent Sun Capital case.
Lisa Schmitz Mazur wrote this bylined article on the challenges employers face in getting employees to use telehealth benefits. Suggesting that employees either are unaware of or are hesitant to use these benefits, Ms. Mazur wrote that “employers and telehealth providers must develop and implement (often in tandem) strategies for addressing these barriers to increase employee utilization.”
The future of the fiduciary rule—originally set to be implemented this upcoming April—remains uncertain after the White House directed the United States Department of Labor (DOL) to reevaluate, defer implementation and consider rescinding the controversial new fiduciary rule on February 3, 2017. In response to the White House, the acting US Secretary of Labor announced that the DOL will now consider its legal options to delay the applicability date to comply with the President’s directive. McDermott’s ERISA practice will closely monitor these developments and provide additional guidance as it becomes available.
The future of the fiduciary rule—originally set to be implemented this upcoming April—remains uncertain after the White House directed the United States Department of Labor (DOL) to reevaluate, defer implementation and consider rescinding the controversial new fiduciary rule on February 3, 2017. In response to the White House, the acting US Secretary of Labor announced that the DOL will now consider its legal options to delay the applicability date to comply with the President’s directive. McDermott’s ERISA practice will closely monitor these developments and provide additional guidance as it becomes available.
In the presentation “Highlights of Record Retention Requirements Applicable to Employee Benefit Plans,” Todd A. Solomon detailed the general rules of The Employee Retirement Income Security Act of 1974 (ERISA). He discussed several specific record-keeping requirements for employee benefit plans and a number of general requirements that imply a duty to retain records, for example general fiduciary duties, plan distribution requirements, COBRA requirements and qualified medical child support requirements.
The US Department of Labor’s Employee Benefit Security Administration recently released final rules on the adjudication of disability claims under welfare and retirement plans (the Final Rule). The purpose of the Final Rule is to add procedural protections and safeguards that are aimed at providing a full and fair claims review process for disability benefit claims, similar to those applicable to group health plans under the Affordable Care Act. The Final Rule also contains helpful guidance for claims and appeals procedures under all types of ERISA plans.
The Supreme Court of the United States has declined to hear the Self-Insurance Institute of America Inc.’s ERISA preemption challenge to a Michigan tax on health insurance plans.
As we previously reported last year, the Sixth Circuit, had decided, on remand from the Supreme Court, that the Michigan Health Insurance Claims Assessment Act (Act) was not preempted by ERISA. The Act imposes a 1 percent tax on all paid claims by insurers or third-party administrators (TPAs) for health services rendered in Michigan to Michigan residents. The case was brought by the Self-Insurance Institute of America (SIIA), a trade association representing the sponsors of self-insured health plans and their TPAs, alleging the Act was preempted by ERISA. The trial court dismissed the case, concluding that the law was not preempted by ERISA. The Sixth Circuit also held that the Act was not preempted. After granting certiorari, the Supreme Court vacated this judgment and remanded the case to the Sixth Circuit for further consideration in light of the Supreme Court’s decision in Gobeille v. Liberty Mut. Life Ins. Co., which invalidated a Vermont statute that required an ERISA plan to report health care information to an all-payer claims database, since the Vermont law interfered with nationally uniform plan administration. On remand, the Sixth Circuit reaffirmed its original decision, finding that nothing in Gobeille warranted overturning its decision. SIIA’s attempt to appeal this decision to the Supreme Court was declined on January 9, 2017.
The US Department of Labor increased the penalties for specified violations of the Employee Income Retirement Security Act of 1974. Most of the penalty increases involve reporting and disclosure failures related to benefit plans and will be effective for penalties assessed after August 1, 2016, if the violation occurred after November 1, 2015.
On December 2, 2016, the Supreme Court of the United States granted the petitions for writs of certiorari to Advocate Health Care, et al. v. Stapleton, Maria, et al., St. Peter’s Healthcare, et al. v. Kaplan, Laurence and Dignity Health, et al. v. Rollins, Starla, all of which previously requested the Court review their arguments on whether the church plan exemption available under the Employee Retirement Income Security Act of 1974, as amended (ERISA), applies so long as a tax-qualified retirement plan is maintained by an otherwise qualifying church-affiliated organization, or whether the exemption applies only if, in addition, a church initially established the tax-qualified retirement plan. The three cases are being consolidated and will receive one hour total for oral argument.
“Top hat plans” have many attractive features, but a new court decision is a reminder that top hat plan participants have limited protections under ERISA – and that assets held in a rabbi trust are not protected from the claims of creditors upon the employer’s bankruptcy or insolvency.
Our client, State Street Bank and Trust Company, served as the trustee of a top hat plan providing special retirement benefits for active and retired senior executives at Chrysler Automotive. When Chrysler was facing bankruptcy in 2008, $200 million in funds from the rabbi trust were used for company operations. Some 400 retired executives (including former chairman Lee Iacocca) were left with nothing in their accounts. After getting no relief in the Chrysler reorganization proceedings, the retirees filed a complaint against State Street and Chrysler’s parent company Daimler A.G. After considerable skirmishing in state and federal court, a federal judge ruled that the plaintiffs could not pursue state law claims of fraud and breach of trust about an ERISA benefits plan (because those claims were preempted by ERISA) – and that any breach of fiduciary duty claims under ERISA would be futile as the top hat plan did not protect retiree accounts in a bankruptcy. Those rulings were affirmed by the Sixth Circuit Court of Appeals.
Back in district court, the plaintiffs filed expanded ERISA claims about the rabbi trust and a new age discrimination claim, all of which were dismissed. In a second appeal, the Sixth Circuit Court of Appeals has ruled (again) that plaintiffs have no viable ERISA claims because the plan and trust operated as described in plan documents and ruled that the age discrimination claims were filed too late. In short, all of the claims have been defeated on pleading and procedural grounds without a trial on what happened during the Chrysler collapse.
This is the latest in a string of court victories for our trustee clients in class actions filed in Detroit and New York about auto industry benefit plans that were wiped out in the 2008 financial crisis, including those at Delphi Automotive, General Motors and now Chrysler litigation partner Bill Boies led the defense and argued for State Street on appeal; associate Jen Aronoff wrote much of the appeal brief. Employee Benefits partner Andrew Liazos provided insights and arguments about the top hat plan and rabbi trust.
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