U.S. Supreme Court to Decide Standing Question on ERISA Pension Lawsuits

The U.S. Supreme Court is mulling over whether retirement plan participants must demonstrate individual or imminent risk of financial loss before seeking a breach of fiduciary duty action under the Employee Retirement Income Security Act of 1974 (“ERISA”).  On January 13, 2020, the U.S. Supreme Court heard oral arguments in the matter of Thole v. U.S. Bank, N.A. (No. 17-1712), and the Court’s coming decision could have wide-reaching implications for participant standing in ERISA causes of action.

The plaintiffs in Thole, who are participants in a U.S. Bank defined benefit pension plan (the “Plan”), allege that the defendants breached their fiduciary duties by mismanaging and failing to diversify the Plan’s assets.  Read More ›

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What is the Fate of ACA? No Answers Yet from the Fifth Circuit.

Background

As noted in our previous December 2018 blog post, “Texas Judge Declares the Affordable Care Act Unconstitutional – What’s Next?,” and our October 2019 newsletter, “2019 End of Year Plan Sponsor “To Do” List (Part 1) Health & Welfare,” on December 14, 2018, Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas ruled the whole of ACA to be unconstitutional in Texas v. United States of America, No. 4:18-cv-00167. The plaintiffs (certain Republican-led states and two individuals) alleged, and Judge O’Connor agreed, that the repeal of the individual mandate “renders legally impossible” the Supreme Court’s prior savings construction of ACA and that the individual mandate is not severable from the rest of ACA. Read More ›

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The Ninth Circuit Reverses Itself and Enforces ERISA Mandatory Arbitration Clause

A three-judge panel of the Ninth Circuit recently decided that Charles Schwab Corp. can require a proposed class action to arbitrate its claim that Schwab breached its fiduciary duties by including Schwab-affiliated investment funds in the Plan, despite the funds’ poor performance, to generate fees for Schwab and its affiliates.  In doing so, the Ninth Circuit overturned its former decision in which it held that ERISA claims cannot be arbitrated.

Specifically, the Ninth Circuit panel determined that the Ninth Circuit’s 1984 opinion in Amaro v. Continental Can Co. should no longer be followed because of more recent precedent permitting ERISA claims to be arbitrated, including the U.S. Read More ›

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A Wellness Win for Employers, But Will it Last?

As explained in our April 21, 2015 and May 9, 2015 blog posts, wellness programs that are part of a group health plan are subject to the HIPAA nondiscrimination rules, and other state and federal laws including, but not limited to the ADA, Title VII of the Civil Rights Act, and GINA.   Navigating the regulatory maze has been a challenge for employers, and the most recent struggles involve compliance with the ADA’s “voluntary” requirement. On December 30, 2015, the Federal District Court for the Western District of Wisconsin in Equal Employment Opportunity Comm’n v. Flambeau, Inc., bypassed the ADA’s voluntary rule and held that Flambeau’s wellness program complied with the ADA under an alternative exception –  the ADA’s safe harbor. Read More ›

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Obergefell v. Hodges – Same-Sex Marriage Now Legal in All 50 States

In 2013, the Supreme Court, in United States v. Windsor, struck down Section 3 of the Defense of Marriage Act (“DOMA”) which defined marriage, for Federal purposes, as between one man and one woman. The Windsor ruling resulted in numerous Federal benefits for same-sex couples who were legally married in a jurisdiction that performed same-sex marriages. However, at that time, the Supreme Court declined to address whether states could define marriage as between one man and one woman. This allowed states to continue to ban same-sex marriage, which caused confusion among employers with respect to the interplay between complying with Federal law and complying with the laws of the states in which they operated. Read More ›

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King v. Burwell – Supreme Court Confirms Tax Subsidies are Available in All States

In an earlier blog post this year, I discussed the King v. Burwell case and the possible ramifications if the United States Supreme Court did not uphold the Internal Revenue Service position that residents in states with either a state or federal Health Care Exchange are entitled to receive subsidies from the federal government to help pay for Health Care Exchange coverage.  On June 25, 2015, in a 6-3 decision, the Supreme Court ruled that the federal subsidies are available in states with federal Health Care Exchanges as well as states with state Health Care Exchanges.

The Court did not rubberstamp the IRS’ position, but rather found that it was “the Court’s task to determine the correct reading of” the statute.  Read More ›

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Supreme Court Confirms that Plan Fiduciaries have a “Continuing Duty of Some Kind” to Monitor Investments

In Tibble v. Edison International, Justice Breyer held, for a unanimous Supreme Court, that “a fiduciary normally has a continuing duty of some kind to monitor investments and remove imprudent ones.” In so ruling, the Court reversed a decision from the Ninth Circuit, which held, in essence, that plan fiduciaries could not be held responsible for imprudent investment decisions made more than six years prior to the filing of the complaint.

In Tibble, the fiduciaries of the Edison 401(k) Savings Plan added three mutual funds to the plan’s investment lineup in 1999. The fiduciaries added an additional three investment funds to the fund lineup in 2002. Read More ›

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Supreme Court Decision Changes Standards for Employer Stock in Retirement Plans

The Supreme Court recently decided a case that eliminates the “presumption of prudence” for plan fiduciaries relating to their investment in employer stock in retirement plans.  In Fifth Third Bancorp v. Dudenhoeffer, the Supreme Court determined that fiduciaries of an employee stock ownership plan (“ESOP”) are not entitled to a presumption of prudence.  Rather, the ESOP fiduciaries must comply with same standard of prudence that applies to all ERISA fiduciaries, except that an ESOP fiduciary is under no duty to diversify the ESOP’s investments.

In its decision, the Supreme Court provided a roadmap for the lower courts in applying the pleading standard.  Read More ›

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Employers May Be Able to Exempt Severance Payments from FICA Tax under Quality Stores

The Supreme Court recently ruled in U.S. v. Quality Stores that severance paid to employees is considered wages for FICA purposes.  Before the Court’s decision, there was little doubt that employer-provided severance was wages for income tax purposes, but lower court cases were a mixed bag about whether severance was wages for FICA tax purposes.  Indeed, the Sixth Circuit in Quality Stores, held that the severance payments made by Quality Stores were not wages for FICA tax purposes because the payments fell within the statutory exclusion for Supplemental Unemployment Benefit (“SUB”) payments for FICA tax purposes.  The Supreme Court upheld the IRS’ position and disagreed with the Sixth Circuit’s analysis.  Read More ›

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