Posts Tagged ‘ERISA’

Don’t Neglect Making Pension Contributions When Your Employees Are on Military Leave

Active military members who claim they were denied the full pension they’re entitled to are taking to the courts for redress. Two actions that came down this week illustrate the peril to employers that don’t step up to the plate and make the required pension contributions for their employees during their period of military leave.

What these actions have in common is the alleged denial of pension contributions under the Uniform Services Employment and Reemployment Rights Act (USERAA).

In the first case, pilots have sued American Airlines in a federal district court, alleging that the airline violated USERRA by calculating individual pilot pension contributions for periods of military service without reference to the pilot’s average rate of compensation or flight hours prior to commencing military service. The pilots are asking the court to order the airline to pay them the full amount of contributions to which they were entitled under USERRA, the Employee Retirement Income Security Act, and the pension plan.

The second case is a settlement of a pension dispute between members of the New York City Police Department over the department’s contributions to their pensions during the time of military service. The U.S. Attorney for the Southern District of New York, Preet Bharara, announced that the department would make up for its alleged  illegal calculation of pensionable earnings, in violation of the USERRA of NYPD retired officers who were called up to active military service since September 11, 2001, and are collecting a pension from the City.

I wrote about this case in 2012 when the U.S. Attorney called on retired police officers to join the lawsuit.

Don’t make yourself an easy mark for plaintiffs’ attorneys. Use these two cases as object lessons in making sure that your employees on military are receiving the full contributions due them under USERRA, ERISA and the relevant plan.

Unsolicited, Internal Complaint Not Protected Under ERISA, Court Holds

Protection from retaliation is among the most important that a statute can confer, because without it employees might fear to complain about possible violations of employment laws. But for that protection to be triggered, the employee’s complaint must pass a certain threshold.

Section 510 of the Employee Retirement Income Security Act, for example, protects persons who give information in any “inquiry or proceeding” under the statute.

But does that protection extend to intra-company claims, in other words, complaints filed internally but never with a federal or state enforcement agency?

Federal appeals courts have split on the question, but so far the Sixth Circuit has not weighed in on the issue.

This week, a federal district court in Michigan, which is part of the Sixth Circuit, ruled that ERISA Section 510 does not protect internal, unsolicited complaints.

The solicitation in this case was an e-mail by the plaintiff to his employer threatening to report its alleged ERISA violations to federal and state authorities. The court held that the activity was not protected under ERISA because it was not connected to “an inquiry or proceeding.”

Here’s the opinion.

9th Cir.: Remedies Exhaustion Unnecessary in Disability Benefits Case

It’s a maxim of employee benefits law that a claimant must exhaust remedies provided by the company prior to challenging the denial in court. On rare occasions courts will excuse the exhaustion requirement because of extenuating circumstances.

The U.S. Court of Appeals for the Ninth Circuit held that one such set of circumstances existed in the case of an employee who challenged the termination of her long term disability benefits under the Employee Retirement Income Security Act. Unum, the disability insurer, brought a counterclaim against the employee for restitution of oerpaid benefits.

The district court dismissed the employee’s claim for denial of benefits, concluding that she failed to exhaust admnistrative remedies. The appeals court ruled, however,  that exhaustion of remedies should be excused because the plaintiff acted reasonably in light of Unum’s ambiguous communications and failure to engage in a meaningful dialogue.

As a consequence, the appeals court vacated the judgment for Unum and ordered further proceedings in the case.

The case is Bilyeu v. Morgan Stanley Long Term Disability Plan, et al.

ERISA Advisory Council Nominees Sought

If you’d like to be on the Department of Labor’s ERISA Advisory Council and have input into the nation’s premier employee benefits law, now is the time to get your name in.

The department’s Employee Benefits Security Administration is seeking nominees to fill five positions on the council, which advises on policies and regulations affecting employee benefit plans under the Employee Retirement Income Security Act.

The council meets at least four times a year and makes recommendations  to the secretary regarding functions carried out under ERISA.

And as we all know, ERISA is the big enchalada when it comes to employee benefits. It sets the standard nationwide for how employee benefits are administered.

Find out if you can make the cut.

The deadline for submitting nominations is Aug. 3.

Labor Department Delays New Fiduciary Rule

A new definition of “fiduciary” for investment advisers will have to wait awhile. The U.S. Department of Labor said yesterday that it withdrew and is reconsidering a proposed rule to redefine the definition of fiduciary for investment professionals who advise investors on 401(k) plans, individual retirement accounts and other retirement plans.

“It was a very broad rule that lacked a great deal of definition and clarity that we believe had a number of unintended consequences,” said Ken Bentsen, executive vice president of public policy and advocacy at SIFMA, the Securities Industry and Financial Markets Association.

My blogging colleague Christine Roberts has written more about this development at her E for ERISA site.

IRS Sends Questionnaires to Colleges and Universities Re Their 403(b) Plans

Courtesy of the E is for ERISA blog comes news that the Internal Revenue Service has launched a pilot project to give colleges and universities the opportunity to identify and correct problems in their 403(b) retirement plans.

IRS’ Employee Plans Compliance Unit is in the process of sending over 300 written questionnaires to a random sample of small, medium, and large institutes of higher education, including private and public colleges, universities, and trade and vocational schools.

The questionnaire – on IRS Form 886-A – contains 18 separate questions but mainly focuses on one issue: whether the organization’s Section 403(b) plan satisfies the “universal availability” (UA) requirement. Under that rule, if one employee has the opportunity to defer a portion of salary under the plan, then generally all employees must be offered the same opportunity.

According to an excerpt from the IRS webpage describing the project:

“The information gathered from this project will ultimately result in a report issued by the IRS describing responses and identifying  areas where additional 403(b) education, guidance, and outreach is needed and how we can focus enforcement efforts to address and/or avoid non-compliance in UA and new plan document requirements for organizations involved in higher education.”

Read more here.

Actual Harm Needed to Recover Additional Benefits Under ERISA, U.S. Supreme Court Holds

A plan participant must show actual harm in order to receive relief when a summary plan description is inconsistent with the  actual retirement plan, the U.S. Supreme Court ruled today.

The high court ordered a federal district court to hold a new hearing on whether participants in CIGNA’s retirement plan can meet the requirement for obtaining relief.

The suit was brought by CIGNA employees who claimed they lost benefits when the company converted its retirement plan from a defined benefit to a cash balance plan. Employees who participated in the cash balance p[lan did  not know that the calculation formula used for its opening balance led to  periods when the cash balance accrued benefit was less than the employee’s “minimum  benefit.”

The SPD did not  mention or explain “wear away,” but it did state that employees would never  receive less than the minimum benefit.

The district court held that CIGNA did not meet ERISA standards because it  failed in its duty to inform Amara about the possibilities of a “wear away”  effect regarding the cash balance plan. The court found  that CIGNA in fact issued misleading statements that made employees reasonably  believe that they would immediately begin accruing benefits under the cash balance plan. 

The district court also held that Amara  is entitled to receive benefits because a plaintiff who brings a claim under  ERISA is entitled to relief if she meets the burden that the deficient SPD  caused “likely harm.” The court explained that an employer can  rebut through evidence that the SPD was in effect a harmless error. The  district court rejected the rule that a plan participant must show that she  detrimentally relied on the SPD. The United States Court of Appeals for the  Second Circuit affirmed the district court’s ruling.

The Supreme Court granted certiorari to  decide whether a plan participant must show “likely harm” or “detrimental  reliance” in order to receive relief when the SPD is inconsistent with the  actual retirement plan.

In today’s 8-0 ruling, the Supreme Court held to obtain relief by surcharge for violations of §§102(a) and 104(b), a plan participant or beneficiary must show that the violation injured him or her. But to do so, he or she need only show harm and causation. Although it is not always necessary to meet the more rigorous standard implicit in the words “detrimental
reliance,” actual harm must be shown.

The court said:

“We are not asked to reassess the evidence. And we are not asked about the
other prerequisites for relief. We are asked about the standard of prejudice.
And we conclude that the standard of prejudice must be borrowed from equitable
principles, as modified by the obligations and injuries identified by ERISA
itself. Information-related circumstances, violations, and injuries are
potentially too various in nature to insist that harm must always meet that more
vigorous “detrimental harm” standard when equity imposed no such strict