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Benefits And Legal Update By: Lawrence P. Postol, Esquire (202) 828-5385 Seyfarth Shaw LLP 975 F Street, N.W., Washington, DC 20004-1454.

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Presentation on theme: "Benefits And Legal Update By: Lawrence P. Postol, Esquire (202) 828-5385 Seyfarth Shaw LLP 975 F Street, N.W., Washington, DC 20004-1454."— Presentation transcript:

1 Benefits And Legal Update By: Lawrence P. Postol, Esquire (202) 828-5385 Seyfarth Shaw LLP 975 F Street, N.W., Washington, DC 20004-1454

2 Presenter ©2013 Seyfarth Shaw LLP | 16172186_2 2 | Lawrence P. Postol is a partner in the Washington, DC office of Seyfarth Shaw, which has offices in Atlanta, Boston, Chicago, Houston, Los Angeles, New York, Sacramento, San Francisco, Washington, DC, London, Shanghai, and Australia. Mr. Postol graduated cum laude from Cornell Law School in 1976, and was an Editor of the Cornel Law Review. Mr. Postol represents management in employment and labor law. Mr. Postol has successfully argued two cases before the United States Supreme Court and twenty-five cases before the United States Court of Appeals. Mr. Postol has written two books and over 75 articles in the employment law area. (202) 828-5385

3 Overview Supreme Court Rulings Same-Sex Marriage Considerations ERISA & Employee Benefits Litigation Update Health Care Reform - Next Steps Hot Topics ©2013 Seyfarth Shaw LLP | 16172186_2 3|

4 Supreme Court Update

5 1. Supreme Court Update Vance v. Ball State University  U.S. Supreme Court defines Title VII “supervisor” as employee empowered with the ability to "take tangible employment actions against the victim" such as hiring and firing. This is a narrower standard than some courts had applied, and can affect employer liability in sexual harassment cases, and other laws. University of Texas Southwestern Medical Center v. Nassar  U.S. Supreme Court holds that retaliation provision of Title VII requires that a plaintiff prove “but for” causation. This makes it harder for plaintiffs to win; it is not enough that a retaliatory animus was part of the motive. This would apply to ERISA retaliation. 5 | ©2013 Seyfarth Shaw LLP | 16172186_2

6 1. Supreme Court Update Fisher v. University of Texas  U.S. Supreme Court holds that Equal Protection Clause of 14th Amendment permits consideration of race in admissions decisions, but strict judicial scrutiny must be applied. Affirmative action lives on. United States v. Windsor  U.S. Supreme Court holds that Section 3 of DOMA violates the Equal Protection Clause as applied to persons of the same sex who are legally married under the laws of their state See next section. 6 | ©2013 Seyfarth Shaw LLP | 16172186_2

7 2. The Changing Face of Class Actions Class Certification Made More Difficult  U.S. Supreme Court ruled in Comcast v. Behrend that plaintiffs must show a method by which class-wide damages can be commonly calculated The damages model the customers presented failed to show that individual damages calculations would not overwhelm questions common to the class “Rigorous analysis” for certification will often overlap with the merits of the underlying claim Supreme Court Upholds Class Arbitration Waivers  U.S. Supreme Court ruled in American Express Co. v. Italian Colors Restaurant that a class action waiver required merchants to arbitrate their antitrust claims on an individual, bilateral basis, even though the cost of pursuing those claims would exceed their potential recovery.  Also consider jury waivers, particularly in D.C. 7 | ©2013 Seyfarth Shaw LLP | 16172186_2

8 Same-Sex Marriage Considerations

9 United States v. Windsor, 133 S.Ct. 2675 (2013) Section 3 of the Defense of Marriage Act (“DOMA”) is unconstitutional. Section 3 defined “marriage” and “spouse,” for federal law purposes, as meaning only marriages between opposite-sex couples. Windsor became effective July 21, 2013. Many federal statutes refer to “marriage” or “spouse,” and each must now be interpreted to include a lawful same-sex spouse. ©2013 Seyfarth Shaw LLP | 16172186_2 9|

10 United States v. Windsor If federal law requires employer provide a benefit/right to a “spouse”, you must provide it to same-sex spouse where marriage was in state or country where it is legal. ERISA generally does not require benefits or rights to spouses, so generally employers need not provide ERISA rights to same-sex spouse. But see possible Constitutional equal rights issue. However, there are some ERISA exceptions, e.g., pension death benefits and QDRO orders. ©2013 Seyfarth Shaw LLP | 16172186_2 10|

11 United States v. Windsor The ruling does not require all states to allow or recognize same-sex marriages. The ruling does not invalidate any existing state laws or provisions in state constitutions that prohibit same- sex marriage. The ruling does not require all employer-sponsored benefit plans to provide benefits for same-sex spouses. But if a benefit or right must be provided to “spouse”, e.g. pension death benefit absent a waiver, then that right/benefit must be provided to same-sex spouse who were legally married in state or country which recognizes same-sex marriage. Same for QDRO divorce order. ©2013 Seyfarth Shaw LLP | 16172186_2 11|

12 Key Unresolved Issues Windsor clearly applies to same-sex couples who were married in state/country which allows same-sex marriage, and who live in states that recognize same- sex marriages. President Obama has directed all federal agencies to implement the court’s ruling by implementing a “ceremonial” rule. See IRS Revenue Ruling 2013-17 (9/3/13). If the marriage ceremony was held in a state or country that allows same sex marriages, then the federal government will recognize the same-sex married couples, even if they live in a state that does not recognize such marriages. They will be considered “married” for federal law purposes. ©2013 Seyfarth Shaw LLP | 16172186_2 12|

13 Key Unresolved Issues It is unclear, to what extent, the court’s ruling may have retroactive impact on employee benefit plans. For example, if an employee with a same-sex spouse has already commenced his or her pension benefit in the form of a single life annuity, will the plan be required to solicit the spouse’s consent (or, failing to do so, automatically adjust the payment amount for the spouse’s QJSA survivor benefit)? For situations where the employee has been receiving imputed income due to coverage of a same-sex spouse, can the employee request a refund from the employer of federal tax withholding amounts attributable to the imputed income? ©2013 Seyfarth Shaw LLP | 16172186_2 13|

14 Hollingsworth v. Perry, 133 S.Ct. 2652 (2013) In a separate decision issued on the same day as Windsor, the Supreme Court ruled that a California judge’s prior order allowing same-sex couples to marry should be reinstated. Same-sex marriage had been legal in California, but only for a very short time -- between June 17, 2008 and November 4, 2008. California is now allowing same-sex marriages again. Opponents have filed motions for injunctions, but they have been denied. ©2013 Seyfarth Shaw LLP | 16172186_2 14|

15 Health Care Reform - Next Steps

16 Overview Marketplace notices – decisions & strategies Wellness program incentives/penalties Overview of other 2014 legal requirements ©2013 Seyfarth Shaw LLP | 16172186_2 16|

17 Marketplace Notices What: Notice regarding health insurance exchanges When: October 1, 2013 (existing employees) Within 14 days of hire (new employees) How: Electronically (for employees with work-related computer access); first-class mail (all others) Who: All domestic employees Content: Existence of new marketplace, contact information, description of services Possibility of tax credit to help pay for premiums Statement regarding implications of obtaining marketplace coverage (lose employer contribution, lose tax-favored status) ©2013 Seyfarth Shaw LLP | 16172186_2 17|

18 Marketplace Notices ©2013 Seyfarth Shaw LLP | 16172186_2 18|

19 Employer Coverage Tool ©2013 Seyfarth Shaw LLP | 16172186_2 19| What: Pre-enrollment template for individuals seeking exchange coverage When: N/A - optional How: N/A - optional Who: N/A – optional

20 Wellness Programs Permissible penalty/reward for HIPAA wellness programs increased to 30% of employee’s health program cost 50% differential permitted for smoking cessation programs Final regulations undercut promise of expanded penalties? Should still be cautious about other applicable laws under: GINA ADA (but see benefit plan safe harbor) 20 | ©2013 Seyfarth Shaw LLP | 16172186_2

21 Other Market Reforms in 2014 90-day waiting period limitation No pre-existing condition exclusions Coverage for routine patient costs relating to clinical trials Nondiscrimination on choice of providers New SBC content requirements Limitation on out-of-pocket expenses 21 | ©2013 Seyfarth Shaw LLP | 16172186_2

22 ERISA & Employee Benefits Litigation Update

23 Stark v. Mars, Inc., 2012 U.S. Dist. LEXIS 98791 (S.D. Ohio July 17, 2012) – No Estoppel Participant told by call-center that her monthly pension benefit would exceed what the plan provided. The plan stated that its terms would control if any non-plan representation was inconsistent with those terms. The court rejected the participant’s estoppel claim because (i) the evidence showed, at worst, “an honest mistake,” (ii) the call center employees were not fiduciaries, and (iii) plan disclaimers undercut reliance. Accord Jensen v. Solvay Chemicals, Inc., 2013 WL 3306356 (10 th Cir. July 2, 2013) (no relief for non-egregious 204(h) notice error; no promissory estoppel relief because no reliance); but see Kenseth v. Dean Health Plan, Inc., 2013 WL 2991466 (7 th Cir. June 13, 2013) (monetary damages may be awarded where fiduciary represents health plan coverage when the plan did not, even without a showing of detrimental reliance) ©2013 Seyfarth Shaw LLP | 16172186_2 23|

24 Guyan International, Inc. v. Professional Benefits Administrators, Inc., 689 F.3d 793 (6 th Cir. 2012) – Using Participant Funds To Pay Expenses Is Improper Service provider breached its fiduciary duties by paying its own expenses with funds earmarked to pay participant claims. Language in the service provider contract disclaiming fiduciary status was not controlling because the provider exercised some control over the disposition of plan assets. ©2013 Seyfarth Shaw LLP | 16172186_2 24|

25 Dudenhoefer v. Fifth Third Bancorp, 692 F.3d 410 (6 th Cir. 2012) – No Presumption Of Prudence No presumption of prudence applies to a fiduciary decision that continues to offer employer stock as an investment option, notwithstanding the hard-wired nature of the plan, where doing so is alleged to have been improvident and a causal connection is alleged between the alleged fiduciary breach and the harm suffered by the plan. The plaintiffs also turned SEC filings into a fiduciary act, where the filings were incorporated into an SPD. But see Glaxosmithkline ERISA Litigation, 2012 WL 3798260 (2d Cir. Sept. 4, 2012) (dismissing a complaint failing to allege a “dire situation” where the plan is hard-wired or strongly favors an employer stock investment option); White v. Marshall & Ilsley Corp., 714 F.3d 980 (7 th Cir. 2013) (same). ©2013 Seyfarth Shaw LLP | 16172186_2 25|

26 Harris v. Amgen, 2013 WL 2397404 (9 th Cir. June 4, 2013) – No Presumption Of Prudence The Moench presumption, originally applied by the Third Circuit in Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995), provides that, when a plan document requires or encourages investment in employer stock, a plan fiduciary’s decision to continue offering employer stock as an investment option is presumed to be prudent, unless the plaintiff can show that the fiduciary knew or should have known of the company’s imminent collapse or other dire circumstance. The Ninth Circuit determined that the Moench presumption did not apply in Harris because the plans did not contain language requiring or encouraging a company stock fund be offered; the plan merely allowed it. The court held that the fiduciaries’ actions should be reviewed under ERISA’s general prudence standard. ©2013 Seyfarth Shaw LLP | 16172186_2 26|

27 Stephan v. UNUM Life Ins. Co., 697 F.3d 917 (9 th Cir. 2012) – Watch What You Say To Counsel The fiduciary exception to the attorney-client privilege applies to insurance companies that serve as ERISA fiduciaries or plan sponsors. Legal advice given prior to the final fiduciary determination is not in anticipation of litigation or otherwise privileged. ©2013 Seyfarth Shaw LLP | 16172186_2 27|

28 Tibble v. Edison Int’l, 2013 WL 3947717 (9 th Cir. Aug. 1, 2013) – Excessive Fees Are A Problem Fiduciaries were imprudent in not considering lower fee institutional-class mutual funds in place of retail mutual funds, as 401(k) investment options. ERISA’s 6-year statue of limitations applies to investment option decisions. Revenue sharing provisions in plan documents were not violated – the abuse of discretion standard applies. ©2013 Seyfarth Shaw LLP | 16172186_2 28|

29 US Airways v. McCutchen, 133 S.Ct. 1537 (2013) and Heimeshoff v. Hartford Life & Accident Ins. Co., 133 S.Ct. 1802 (cert. granted from 2012 WL 4017133 (2d Cir. Sept. 13, 2012)) - Equity Only If Plan Ambiguous Plan terms control over equitable principles (in construing a welfare plan reimbursement provision). Equitable principles can be used to interpret ambiguous plan terms. Can a benefits denial limitations period accrue and run out before the fiduciaries reach a final decision on the claim? ©2013 Seyfarth Shaw LLP | 16172186_2 29|

30 Hakim v. Accenture United States Pension Plan, 718 F.3d 675 (7 th Cir. 2013) – General Release A general release as part of a reduction in force in favor of the plan sponsor bars an ERISA 204(h) claim against the sponsor’s pension plan because a preceding benefit statement advised the participant of his claim for more benefits than what the statement described. Not at issue and not subject to the general release are claims for benefits under the terms of the plan itself. Those claims are subject to ERISA’s anti-alienation provision. ©2013 Seyfarth Shaw LLP | 16172186_2 30|

31 Central States, Southeast and Southwest Areas Pension Fund v. Nagy, 2013 LEXIS 7912 (7 th Cir. April 22, 2013) – Personal Liability Of Owner The Seventh Circuit held an individual personally liable for withdrawal liability for a multiple party pension ($3.6 million). The Court of Appeals noted that withdrawal liability extends to all trades or businesses under common control with a withdrawing employer. In this case, the individual, who owned 80% of the withdrawing employer, also (i) owned and leased property to the withdrawing employer; and (ii) provided management services as an independent contractor. The Court of Appeals held that these activities constitute a “trade or business” under common control with the withdrawing employer, and therefore, makes the individual personally liable for withdrawal liability. ©2013 Seyfarth Shaw LLP | 16172186_2 31|

32 Hot Topics

33 Social Media – Employer policies limiting use of blogs, company email and confidential company information can be a problem per the NLRB protection of concerted employee activities as to terms and conditions of employment. Criminal and Credit Background Checks–Need individual job risk assessment per EEOC ADA – Reasonable Accommodations, Patience, Patience and IME’s – Unpaid Leave Beyond FMLA and Work at Home Requests Virginia Noncompetes–Expect More Litigation. ©2013 Seyfarth Shaw LLP | 16172186_2 33|

34 ©2013 Seyfarth Shaw LLP | 16172186_2 34|

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