Among benefits-related cases in 2013, courts addressed offerings to same-sex couples, statute of limitations, remedies under ERISA and 401(k) plan fees. Heres a look at five cases that could have implications for your benefit plans in the year ahead.
Heimeshoff v. Hartford Life & Accident Co.
In what can be viewed as a victory for plan sponsors, the Supreme Court ruled that statute of limitation periods written into plan documents are valid, as long as those periods are reasonable.
The Supreme Court eliminated any uncertainty as to whether or not plan sponsors and/or employers can insert a contractual limitations period within the plan document itself, says Nicole Eichberger, a New Orleans-based lawyer in Proskauers employee benefits, executive compensation and ERISA litigation practice. And it did so by saying that contractual limitation periods written into plan documents are valid as long as they are reasonable, without opining as to what constitutes a reasonable period.
U.S. Airways v. McCutchen
In another case that reached the Supreme Court, the justices ruled that James McCutchen, a U.S. Airways., Inc. employee, did not have to pay his health plan back all of the money he recovered following a car accident.
The case raised the issue of whether a benefit plan administrator is entitled to full reimbursement for payments made to a plan participant injured in an accident where the participant sues and recovers damages from a third party.
According to the decision, the health plan has a right to be reimbursed, but McCutchen should be able to charge his health plan for part of his lawyers fees.
The Court basically said two things: the plan is a contract between the employer/plan sponsor and the employees and, pursuant to that contract, if the plan says were going to recover, dollar for dollar, what we paid you as soon as you recover, regardless of the circumstances, that should be enforced, says Myron Rumeld, a lawyer with Proskauer. Thats the broad proposition the employer community is taking from the case.
Fifth Third Bancorp v. Dudenhoeffer
On Dec. 13, 2013, the Supreme Court agreed to review decision by the 6th Circuit, which reversed a dismissal of a complaint in this ERISA stock drop case.
Courts generally apply a presumption of prudence standard to plan fiduciaries in cases involving employer stock. Plaintiffs must establish that the decision to allow such investments was an abuse of discretion.
Generally, there seems to be more courts giving plan sponsors leeway in having employer stock funds in their plans, says Patty Cain, a lawyer with Neal, Gerber & Eisenberg in Chicago, citing other stock drop cases, such as Kopp v. Klein (5th Circuit) and White v. Marshall & Isley Corp. (7th Circuit). If they have the stock funds in their plans, there is a trend towards the courts applying a presumption of prudence in evaluating whether or not it was in violation of ERISA to maintain the stock fund in the plan. Its still a very active issue, though.
Tussey v. ABB
In 2012, a federal judge ruled that Fidelity Investments and the American unit of ABB violated ERISA by making 401(k) plan participants pay excessive fees, and ordered the defendants to pay nearly $37 million in damages.
The ruling found that the ABB defendants had breached their fiduciary duties to the plan and its participants when they failed to monitor recordkeeping costs. In 2013, ABB and Fidelity filed appeal briefs with the 8th U.S. Circuit Court of Appeals. In June 2013, the Department of Labor filed an amicus brief with the 8th Circuit Court of Appeals, in support of the plaintiffs.
United States v. Windsor
Hailed as a huge victory for same-sex couples, the Supreme Courts decision in June 2013 striking down the federal Defense of Marriage Act means all same-sex couples are treated the same as opposite-sex spouses for any federally administered benefits.
Guidance from the U.S. Department of the Treasury, the Internal Revenue Service and the Department of Labor has clarified that same-sex couples legally married in a jurisdiction with laws authorizing same-sex marriage will be treated as married for federal tax purposes, regardless of whether the couple resides in a state where same-sex marriage is recognized.
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