topic 11: articles

erisa 40th anniversary report card

-ERISA ushered in vast improvements in the protection of participants, but fell short in some areas because its rules create ambiguities and leave the responsible parties - sponsoring ER's, plan service providers, and plan fiduciaries - w/o clear and concise direction, which has led to inaction and fear of liability -To further its goal of increasing transparency, ERISA imposed more demanding requirements and created additional reporting obligations with IRS, DOL and the newly minted PBGC - information reported included an audited financial statement, an actuary's report on the funded status of the plan, and identifying information about plan fiduciaries and service providers -Congress frequently revisited disclosure obligations and imposed additional requirements over the years -Give the disclosure and reporting requirements a B - there is much that can be better timed and simplified; a more expansive view of what it means to "furnish" the required information would allow for a better grade -The readability of model notices issue by the regulatory agencies could be improved -ERISA clarified a number of rules for plan fiduciaries and eliminated the drastic remedies for violations of prior law prohibited transaction rules -Give ERISA a B for these fiduciary rules - ambiguities in the law have left much of the heavy lifting up to the regulators and courts to fill in gaps with their interpretations -One set of national standards and regulation for benefit plans is a key benefit of ERISA for employers & generally limiting ERISA actions to federal courts went a long way towards harmonizing results - therefore received an A letter grade -Before ERISA imposed vesting standards, pension plans had free reign to set their own requirements and many had very restrictive standards ERISA required full vesting at normal retirement and vesting for those who leave employment before their normal retirement date using one of three schedules: 10-year "cliff," 15 year graded -The pension vesting rules earn a B - the backloading rules are narrowly drawn based on traditional formulas instead of principle-based rules that would more readily accommodate hybrid designs -Under the new funding minimums, actuarial valuations had to be performed at least once every three years. In addition to paying the plan's "normal cost," the employer had to pay down liabilities and losses on prescribed schedules -Minimum funding standards earns an A because w/o these standards some private plans may have ended up in the same boat as many state and local government plans -Overall, ERISA has done a satisfactory job meeting its goal - legislative proposals today in Congress do not contemplate repealing ERISA → focus on incremental changes

when employee benefits are subject to erisa and what that means

-ERs generally know that formal arrangements, such as retirement plans and group medical insurance programs, are subject to federal laws including ERISA - common misconception that these laws do not apply to benefits of small ERs or they only apply to benefits that ERs have formalized through a written plan or other formal steps -A benefit program is subject to ERISA if 1) there is a plan, fund, or program 2) that is established or maintained by an ER 3) for the purpose of providing benefits specifically covered by ERISA 4) to participants or their beneficiaries -Do you have a "plan, fund or program" → yes if a reasonable person could determine the intended benefits, a class of beneficiaries, the source of financing, and the procedures for receiving benefits; benefits that are not provided on an ongoing basis to similarly situated employees are not generally plans - but should still be scrutinized closely -Is it established or maintained by an ER? - if the ER contributes funds to provide a benefit to EEs, this test will generally be met; certain voluntary, fully insured, EE pay all programs are not subject to ERISA under a safe harbor Does it provide a benefit specifically covered by ERISA? - only if it provides benefits specifically identified by ERISA as covered benefits -Are benefits provided to participants or beneficiaries? - a participant is an EE or former EE of an ER who is or may become eligible to receive a benefit from the plan & a beneficiary is a person designated by the participant, or the terms of a benefit plan, who is or may become entitled to benefits under the plan (spouse, child) -Since self-employed individuals and partners are not EEs, a plan covering only those individuals would not be covered by ERISA -If your benefit meets the 4 elements of the ERISA coverage test, then the next consideration is whether a statutory or regulatory exclusion applies -These exclusions include, but are not limited to, governmental plans; church plans; plans maintained solely to comply with worker's compensation, unemployment compensation, or disability insurance laws; plans maintained outside the U.S. for non-resident aliens; and certain payroll practices -If you have a benefit program subject to ERISA, you need to consider whether you are complying with ERISAs requirements which include: maintaining a written plan document, filing annual returns, responding to participant requests for documents in a timely manner and maintain and distributing summary plan descriptions -Benefits to the ER: ERISA preempts state law w/ respect to benefits provided under an ERISA-covered plan - state laws generally provide more expansive remedies than the remedies available under ERISA; use ERISA to protect yourself from exposure to the liabilities associated with state court remedies, further your potential liability by setting time limits in the plan on when participants may file a lawsuit for benefits and if a dispute does arise, benefit denials under an ERISA plan are generally entitled to deferential treatment in federal court

supreme court reaffirms erisas preemptive effect

-In Gobeille v. Liberty Mutual Insurance, the Supreme Court overturned a Vermont law requiring ERISA plans to disclose health payments to the state's "All Payer Database." The Court determined that reporting requirements are a key aspect of plan administration and can only be altered by Congress or the relevant federal agency and held that state laws subjecting employee benefit plans to additional disclosure regulations are preempted by ERIS -In Gobeille v. Liberty Mutual Insurance Co.,1 the Court was asked to decide whether the Employee Retirement Income Security Act of 1974 (ERISA) preempted a Vermont law that required health insurers to report claims information to a statewide database. The Court ruled that because reporting was a central component of the uniform system of plan administration contemplated by Congress, it is impermissible for a state to add additional reporting requirements, regardless of economic costs to the plan or underlying policy justifications by the state. In addition, the Court confirmed that the passage of the Patient Protection and Affordable Care Act of 2010 (ACA) had no effect on the jurisprudence of ERISA preemption -The Court ruled that, even under the more-limited preemption framework introduced over the last three decades, a state could not require a plan to alter from ERISA-compliant administration procedures. - The Court has since provided three types of laws that that must be preempted, even if they are in furtherance of policy goals traditionally pursued by the states: Any law that directly and exclusively regulates ERISA plans or relies on the existence of ERISA plans to operate; Any law that governs a "central matter of plan administration," including one that upsets the nationally uniform system of plan administration contemplated by Congress; and A law that indirectly restricts a plan's terms or choice in service providers by imposing an acute economic incentive. This case focuses on the second classification. The Court explained that by enacting ERISA Congress intended to reduce plan compliance costs by replacing the fifty-one relevant regulatory regimes then in effect with a strict, but exclusive, uniform framework. As a result, any state law that requires plans operating within its borders to alter a "central matter of plan administration" must be preempted under the Supremacy Clause. In previous cases, courts have ruled that "central matters of plan administration" subject to the nationally uniform framework include: (a) determining whether to pay benefits, (b) disclosing plan information to participants, and (c) maintaining plan and participant records. -Although the larger effect of Gobeille is not yet known, there are a few immediately clear new rules of law. First, although ERISA does not preempt federal law, any state mandate that creates novel, redundant or inconsistent administration requirements are preempted unless they qualify for an exemption, even if the state is acting in pursuance of a policy goal within the scope of the ACA. Second, information relating to ERISA claims is exempt from the "all-payer databases" established by at least 18 states. In fact, additional disclosures beyond those required by the Department of Labor may violate the sponsor or administrator's fiduciary duty to plan participants. Finally, the Court clarified that a plan does not need to show economic harm to be entitled to a declaration that ERISA preempts a state law. Instead, mere interference with a central matter of plan administration is sufficient harm to provide legal standing.

san fran 2016 minimum health care spending requirements

-January 1, 2015 January 1, 2016 Percent Change Large 100+ employees $2.48/hour paid $2.53/hour paid 2.0% increase Medium 20 - 99 employees $1.65/hour paid $1.68/hour paid 1.8% increase Small 0 - 19 employees Exempt Exempt Not applicable -In 2014, the HCSO was amended to phase out revocable employer expenditures. In 2015, at least 60% of expenditures were required to be irrevocable and for 2016, at least 80% of the health care expenditures for each employee must be irrevocable — that is, they must be payments that the employer has not retained and cannot recover, even if the employee leaves the job. Irrevocable expenditures include payments to an insurer for medical premiums, payments to the city of San Francisco and contributions to a health savings account. Beginning January 1, 2017, 100% of the employer expenditures must be irrevocable to count toward the minimum spending requirement.

when does an employer have erisa plan

-Many ERs might assume that an ERISA plan is not created until they actually set up a plan, write a plan document and take formalized steps to create a plan -ERs can inadvertently create an ERISA plan or find themselves in a situation where a common "ongoing administrative scheme" can be construed to be an ERISA-governed benefits plan → ER can find itself with an ERISA plan that is not in compliance with ERISA requirements -3-part test to determine whether an ERISA plan exists - 1) whether a plan exists 2) whether the plan falls within the DOL's safe-harbor provision 3) whether the plan was established or maintained by ER with the intent to benefit EEs -One of the key areas considered is a determination of whether there is an "ongoing administrative scheme" as opposed to a "one-time, lump sum payment triggered by a single event" that does not require an administrative scheme -Example: the court found that an ER has unintentionally created a LTD plan that was governed by ERISA - the court concluded that a reasonable EE could conclude that it was an ER-sponsored plan; therefore, despite the ER's intent, the LTD program met the requirements that establish an ERISA benefit plan -There is a safe harbor exemption from ERISA for certain types of voluntary benefits plans - must be no ER contributions, participation by EE is voluntary, the ERs role in the plan is limited to collecting premiums through payroll deductions and remitting them to an insurer and the ER does not receive any compensation for its services other than reasonable compensation for administrative services Before establishing any new benefits program or changing an existing program that provides benefits to EEs, ERs should ensure that their attempt at providing for EEs does not have unintended consequences & periodically audit their practices to ensure that ERISA governed plans are not inadvertently created

supreme court justices to consider whether erisa preempts state healthcare databases

-he question here is whether the Employee Retirement Income Security Act of 1973 (ERISA) preempts state statutes that provide for "all payer" health care databases - designed to provide comprehensive state-level information about the distribution of health care services provided in the state and the costs of providing them. -The case comes to the Supreme Court because ERISA plans provide some, though obviously not all, health care in Vermont. Because Vermont's statute requires those plans to provide data, it imposes a burden on them that they otherwise would not have, which comes in addition to the numerous reporting and disclosure obligations the plans already have for the federal Department of Labor. -For three reasons, I think Liberty Mutual faces a difficult task. First, as a doctrinal matter - something the Court could write in an opinion to explain the result - the purposes of the database are far from any of the core purposes of ERISA (ensuring safe investment of the funds of the plans, ensuring that employers operate the funds as fiduciaries for the benefit of the employers, and the like). Liberty Mutual can say that the statute's interest in health care intrudes on the core purpose of ERISA health plans, but it is a bit much to suggest that ERISA should make federal courts instinctively skeptical of state efforts to regulate health care. On that point, Vermont provides a powerful presentation of a long historical tradition of data collection about health care, consistently supported (if not required) by the federal government. -Second, it is plain that the exclusion of ERISA plans from the database would undermine its quality in critical ways. All agree that the patients of non-ERISA providers are not representative of the population of patients. Thus, a database that excludes ERISA care would be systematically unrepresentative, directly weakening the quality of statistical inferences the database might support. An especially effective amicus brief from the American Hospital Association explores the importance of this kind of data in efforts to monitor, understand, and improve the efficiency of health care. -The most devastating problem, though, is the position of the United States. If the real question is - and I think it probably is - whether the Vermont process imposes an unjustified burden on ERISA plans, then the Department of Labor's view that Vermont's process is a good one should just about sound the death knell for Liberty Mutual. Among other things, the Solicitor's General's brief in support of Vermont fully supports the state's contentions that the burdens of disclosure are trivial. The Solicitor General points out that Medicaid has chosen to provide data to the program. The briefs even point out that the federal government has provided a grant to support the development of the database. Whatever else Vermont's statute does, it is in the view of the federal government plainly a good thing -I don't think any Justice will be inclined to say that, even if the database is a good idea, it just can't be reconciled with ERISA, and so Congress should fix it if it's such a good idea.

dcs effort to regulate pharmacy benefit managers rules invalid

A 2004 District of Columbia law that would have made pharmacy benefit managers "fiduciaries" was ruled invalid Held that states and municipalities cannot impose such requirements on PBMs Because PBMs provide claims administration services for self-insured ERs, they are governed by ERISA, which preempts state and municipal laws affecting EE benefit plans AccessRx Act - sought to regulate PBMs by imposing fiduciary duties on the companies and requiring them to disclose certain financial information including rebates, discounts and similar payments A national trade association filed suit shortly after the law's passage, arguing that it was preempted by ERISA; also argued that it is preempted by the Commerce Clause and violates the First amendment and the Takings Clause The appellate court agreed the law was preempted by ERISA

erisa and aca

A key congressional goal in passing ERISA was to streamline the administration of private-sector EE benefit plans throughout the US and thereby free ERs from complying with various state and local requirements ERISA supersedes any and all state laws "insofar as they relate to any EE benefit plan" and trumps any state or local laws that "conflict with" ERISAs substantive provisions "Insurance savings clause" - saves from preemption laws regulating insurance, banking or securities ACA: large ERs must either offer FTE who average at least 30 hours of service per week in a given calendar month and their dependents health coverage that is affordable and provides minimum value or make an "assessable payment" to the IRS if at least one full-time EE enrolls in marketplace coverage and receives a premium subsidy ACA also required each state to establish a health insurance marketplace in order to facilitate the purchase of individual health insurance Prior to the ACA Hawaii - the first jurisdiction to impose an "ER mandate" requiring nearly all ERs to provide health benefits to at least some categories of their workers New York - the Suffolk County Fair Share for Health Care Act required large retail ERs to pay a "public health cost rate" for each of an ERs EEs San Francisco - "Healthy San Francisco" - generally requiring ERs with 20 or more EEs to make certain health care expenditures for some of their EEs working in San Fran by purchasing health insurance coverage and/or making specified payments to the city Massachusetts - in addition to instituting an individual requirement that all residents have coverage satisfying minimum creditable coverage standards or pay a penalty, this law required ERs with 11 or more FTEs to either offer group health plan to which the ER makes "fair and reasonable" premium contributions or pay an annual fair share contribution to a state trust fund Vermont - requiring ERs to pay an assessment on behalf of each of their "uncovered" FTEs Maryland - required an ER with 10,000 or more EEs to pay the state the difference b/w 8% of the ERs payroll and the amount the ER spent on HC coverage for its EEs Status of Pre-ACA laws: Hawaii - Congress included a reference to the PHCA - ERs must still comply New York - law not enforced San Francisco - Healthy San Francisco remains effective, but the ACA affect some ER compliance obligations Massachusetts - requirement that residents have MMC or pay a penalty remains in effect Vermont - law still in effect, but legislative repeal to it Maryland - law was not enforced The DOL had planned to issue a proposed regulation to "clarify the circumstances under which health care arrangements established or maintained by state or local governments for the benefit of non-governmental employees do not constitute an employee welfare plan" covered by ERISA The provision is generally understood to mean that a state can impose requirements that are more expansive than the ACA's requirements so long as the state-imposed requirements do not prevent the implementation of the ACA - or could inhibit the uniform administration of the ACA nationwide and be preempted by ERISA on that basis Since the ACA's passage, states and localities have not enacted legislation attempting to impose more stringent requirements on self-funded plans Had Congress not enacted the ACA, other states and localities may well have passed various types of employer fair share/pay-to-play laws, and, ultimately, the Supreme Court may have weighed in on the ERISA preemption question

erisa preemption primer

Congress enacted ERISA primarily to establish uniform federal standards to protect private EE pension plans from fraud and mismanagement - it also covers most other types of EE benefit plans, including health plans Applies to all EE pension, health, and other benefit plans established by private-sector ERs (other than churches) or by EE orgs such as unions Does not apply to plans administered by federal, state, or local governments or plans established solely to meet WC, unemployment compensation or disability insurance laws Pension plans: ERISA provides detailed standards for vesting, funding, solvency insurance, disclosure and reporting to plan participants, beneficiaries, and the U.S. DOL, nondiscrimination, and administrator fiduciary requirements Health plans: fewer standards - administrators' fiduciary standard and requirements for plan descriptions to be given to enrollees, reporting to the federal government, and certain minimum standards ("continuation" health coverage; group plan guaranteed issue and renewability; pre-existing condition exclusion requirements; nondiscrimination in premiums and eligibility; maternity hospital length-of-stay standards; post-mastectomy reconstructive surgery; and limited mental health "parity") ERISA's preemption clause make void all state laws to the extent that they "relate to" ER-sponsored health plans - ERISA prohibits both state laws that directly regulate ER-sponsored health plans, such as mandating that ERs offer health insurance, and some laws that only indirectly affect plans, such as regulating the provider networks ERISA plans may use Congress has begun to exercise more control over insurance and managed care, creating new models of federal-state jurisdiction 1996 ERISA amendment prescribes minimum maternity hospital length-of-stay, but allows certain specific types of state maternity laws Require insurers to provide both mental health parity and breast cancer reconstruction for post-mastectomy patients Mandate insurance markets reforms, prescribing several specific areas where state laws may differ from federal law The U.S Department of Labor is responsible for administering and enforcing the ERISA law and setting policy for the conduct of EE benefit plans Much of the uncertainty about whether ERISA affects a proposed state HC initiative or policy results from differing court interpretations of the preemption provisions across the country Lower courts are left to decide ERISA cases with only limited Supreme Court guidance on many current state health policy issues Exception that allows states to continue to regulate "the business of insurance" - allow states to regulate traditional insurance carriers conducting traditional insurance business; however some courts have held that states cannot regulate all activities of insurers "Savings clause": states can regulate the terms and conditions of health insurance, for example, the benefits in an insurance policy or the rules under which the health insurance market must operate "Deemer clause": prohibits states from regulating plans that "self-insure" by bearing the primary insurance risk - created two classes of ER-sponsored health plans: Plans funding coverage through insurance are subject to state insurance regulation, while those that self-insure are completely beyond state jurisdiction → both are ERISA plans but only fully-insured are subject to some types of state oversight Estimated that b/w 33% and 50% of EEs throughout the country are in self-insured plans, # varies among states States have authority over insurance covering a majority of people in the private insurance market, but have no authority over self-funded ERISA plans and they share regulatory authority with DOL over a significant share of people insured through workplace health plans How might ERISA affect state health care access programs? Prohibits an ER mandate, b/c it directly "relates to" ER-sponsored health plans An individual mandate that requires each state resident to obtain insurance coverage might avoid an ERISA challenge if it in no way referred to ER-sponsored health plans Publicly funded programs would raise preemption concerns if they attempt to tax ERISA plans or if they impose duties on ERISA plans Even a tax preference can raise an ERISA preemption problem if the state law conditions the tax advantage on certain design features It is likely that ERISA does not invalidate traditional state standards governing insurer solvency, market conduct, advertising, and fair practices requirements unless Congress were to enact federal law in these areas States have begun to regulate managed care plans, for example, by adopting standards for provider network structure, enrollee choice of provider, and definitions of services such as emergency care An important ERISA implication for state health insurance regulation is that it establishes a largely unregulated sector, self-insured ERISA plans Because ERISA plans include all private sector employer plans (not just those that self-insure), ERISA preempts state court damages suits against managed care plans and other insurers — not just against self-insured employee plans — challenging benefit denials State health policymakers need information in order to monitor health care access, costs, and quality - can collect this information only from providers, such as hospitals, or traditional insurers and managed care plans, but unclear about TPAs Only Congress can grant states an exemption from ERISA's preemption provisions; the U.S. Department of Labor does not have the authority to grant ERISA waivers

san fran health care mandate

Court ruled that San Francisco's HC ordinance could get under way while the court considers the ERISA preemption challenge - the mandate requires ERs to spend specific amounts on HC for or on behalf of their EEs A federal trial court tried to block the ordinance on the grounds of ERISA preemption, but the appellate court lifted the injunction The ER mandate took effect for covered ERs with 50 or more EEs on Jan 9, 2008 and for ERs with 20 to 29 EEs, the law took into effect on April 1, 2008 The ordinance has two key components: an ER health spending requirement and a city-sponsored health access program called Healthy San Francisco, which is funded in part by ER contributions Nonprofit ERs with fewer than 50 EEs and for-profit ERs with fewer than 20 EEs are exempt The covered ER under the ordinance is one that is "required to obtain a valid San Francisco business registration certificate from the San Fran tax Collector's office" Covered EEs are those who have been employed for 90 days or work a minimum number of hours per week; managerial and supervisory EEs whose earnings exceed a specified threshold are exempt & EEs eligible for benefits under Medicare; EEs who do not want coverage must submit a voluntary waiver form to their ER identifying the type and source of other coverage Health care expenditures include amounts paid to covered EEs or to a 3rd party on behalf of covered EEs - ERs must make these payments quarterly, no later than 30 days after the end of the quarter Providing uniform coverage to some or all covered EEs will comply with the spending requirement as long as the average hourly expenditure per EE meets or exceeds the above expenditure rates The HC expenditure rate will increase 5% ERs must maintain EE records for four years - must include items that establish compliance with the ER spending requirements Not spending the required amounts will trigger assessment of up to 1.5 times the originally required expenditures, plus up to 10% interest penalty on unpaid expenditures beginning on the payment due date $500 penalty for failing to maintain or retain accurate and complete records and a $500 penalty for failing to satisfy the annual reporting requirement Lawsuit - claimed that the ER spending requirement imposed conditions on an EE welfare benefit plan and was preempted by ERISA The trial court concluded that the ordinance was "connected to" an ERISA benefit plan because 1) it regulated the same types of benefits that fall within the purview of ERISA, 2) it imposed reporting, disclosure, funding or vesting requirements for ERISA-type plans and 3) it regulated certain ERISA relationships, such as ER/plan and ER/employee relationships - found that the requirements directly and indirectly affected the relationship between private ERs and the provision of HC coverage, a relationship that has traditionally been governed by ERISA But the Court of Appeals lifted the injunction imposed by the trial court Finding that ERISA does preempt the ordinance could deal a blow to state health care reform, suggesting that states cannot require ERs to spend a specific amount on health coverage for EEs or mandate ERs to provide health coverage to EEs Finding that ERISA does not preempt the ordinance would create a conflict b/w two federal appellate courts - and possibly spark more litigation across the country

erisa preemption notes after pcma v district of columbia

For most if not all EBPs, internal administration of beneficiary's pharmaceutical benefits is a practical impossibility b/c it would mean forgoing the economies of scale, purchasing leverage, and network of pharmacies only a PBM can offer The Court of Appeals found that a substantial part of the District's law regulating pharmacy benefit managers was preempted Recurring themes that arise in everyday concerns about which claims are preempted and why A state law relates to an EBP is it has a connection with or reference to such a plan The District found it inconveniently stuck with the fact that its law regulating PBM's impinged plan benefit administration. (The law imposes fiduciary responsibilities; disclosure of rebates and pass through of discounts, among other things) As the PCMA points out, in none of the cases cited by the District did the state law regulate a third party who administered employee benefits on behalf of a plan. Those cases therefore suggest only that the relationship among ERISA entities is an area of ERISA concern, not that the objective of uniformity in plan administration is for some reason inapplicable simply because a plan has contracted with a third party to provide administrative services Plan administration includes "determining the eligibility of claimants, calculating benefit levels, making disbursements, monitoring the availability of funds for benefit payments, and keeping appropriate records in order to comply with applicable reporting requirements

supreme court denies request to review federal appellate court ruling

Justices on the US Supreme Court have turned away a request to review a federal appellate court ruling backing a long-disputed HC spending law by the city of San Fran - leaving the decision of the 9th US circuit The fight over the law centered on whether it was legally pre-empted by ERISA, which was designed to provide national uniformity in workplace benefit plans The Obama Administration was rethinking the Bush Administration's position that the san Fran law did not run afoul of ERISA The recently passed federal law cuts back on the possibility other local governments will follow San Fran's lead

sixth circuit affirms decision finding entities with any control over funds are fiduciaries

Plan must clearly describe when coverage begins and when coverage ends Typically problems surface when the ER discovers that someone has been out on a disability leave far in excess of the FMLA period, but has never been taken off the benefit plan A decision from the 6th circuit court of appeals reveals another problem that arises when the ER seek stop-loss coverage for the COBRA expenses of a former EE who was offered COBRA "late" under the terms of the written plan CLARCOR Inc. v. Madison National Life Insurance Co. held that the ERs stop-loss insurer did not have to cover excess claims incurred by a former EE who was offered COBRA at the expiration of her STD leave The ER had a practice of allowing EEs on STD leave to continue coverage as if they were active EEs, but this practice was not written into a plan document or the stop-loss policy Court held that no stop-loss coverage was available for expenses incurred under the former EEs COBRA coverage b/c she was not an eligible participant under the terms of the ERs plan or stop-loss policy The specific exclusion for late COBRA notice provided an alternative bases for the court to uphold the denial of insurance coverage for her claims, regardless of whether or not she had been an eligible participant Underscores the importance of ensuring that the ER has a written welfare benefit plan, and that plan reflects all of the ERs practices w/ respect to loss of coverage and COBRA elections The terms of a stop-loss policy need to be reviewed against the ERs plan provisions to ensure that they are consistent

the dols move to increase erisa audits

Recent rumblings that the DOL plans to substantially increase the number of ERISA compliance audits it conducts each year - many companies and experts are not deliberately doing things incorrectly, but there are significant opportunities for error and audit ERISAs 2012 budget proposal include additional staff to conduct these audits - based on concerns with how plan sponsors are managing these plans Estimate that ¾ plans audited have had an ERISA violation HR departments need to double-check that: the people running the plan known the plan document inside and out, plan operations must be in compliance with the plan document, and the plan document must be in compliance with laws and regulations - all required amendments must be made SPDs are often the main target of audits The second most frequent items in DOL audits is related to HIPAA - specifically the requirement under HIPAA that plans inform participants about special enrollment rights Health and welfare plans may pose greater risks than retirement plans Putting together a plan document that satisfies the requirements of ERISA and putting together a SPD that satisfy the requirements of ERISA are absolutely essential to being in compliance Smaller ERs typically tend to run into trouble Other areas of risk: delayed deposits of contributions, decision about what compensation will be used to determine the deferrals that participants are making, inadvertently excluding people who should have been eligible (most often part-time EEs), ERs that offer matching funds may sometimes provide a match to someone who was not supposed to get it, hardship distributions One critical first step in ensuring compliance is clarifying where responsibility lies It is important for organizations to: have good ERISA counsel, have a plan consultant that can do a fiduciary review, ensure that actions are documented, understand that DOL will look at timely remittance of participant deferrals, ensure that you have complied with the rules of fee disclosure by the appropriate deadlines, ensure that if you've had any recommendations from independent auditors you've addressed them Have a checklist and have a clearly identified repository for your information

dol to address erisa preemption of state health reform

The DOL has notified the OMB that it proposed to issue regulations regarding when HC reform efforts on the part of the state and local governments are subject to ERISA preemption The DOL proposed to amend its current regulation to clarify the definition of "employee welfare plan" under ERISA - to identify certain practices that do not implicate "employee welfare plan" Are likely addressing the case which involves San Fran ordinance which was upheld b/c it was reasoned that it is not preempted by ERISA The DOL took the opposite position arguing that the ordinance is preempted by ERISA ERISA preempts "any and all state laws insofar as they may now or hereafter relate to an EE benefit plan" (EE welfare plan or EE pension plan) The states are generally free to regulate matters such as ER payroll practices, certain on-premises facilities for EEs, certain holiday gifts, EE discounts, voluntary group benefit programs and others - without implicating ERISA preemption

preemption again this time as a michigan tax

SIIA is appealing a federal court ruling that said ERISA did not pre-empt a 2011 Michigan law imposing a 1% tax on paid health care claims The Judge disagreed with PIIAs challenge and believes the law does not mandate any particular benefit structure or bind administrators to certain benefit structures SIIA is appealing the ruling because they remain convinced that the law creates admin obligations on self-insured group health plans, which compromise ERISAs clear intent of providing national regulatory uniformity of such plans SIIA is also concerned that if this law goes unchallenged, other states will impose similar taxes

sixth circuit employer breached its fiduciary duty by issuing inaccurate spd

The 6th circuit affirmed a district court's decision that a 3rd party administrator breached its fiduciary duties to a number of EE benefit plan sponsors by paying its own expenses with funds that were supposed to pay participant claims despite language in the relevant contracts that expressly stated that it was not a fiduciary Addressed the important question whether Professional Benefits Administrator (PBA) was a fiduciary under ERISA w/ respect to Plaintiffs' EE health benefit plan PBA as contractually obligated to keep plaintiffs' funds in segregated accounts and not to use these funds for its own purposes, but commingled and misappropriated the funds, and failed to pay hundreds of thousands of dollars in owed claims ERISA provides that a person is a fiduciary with respect to a plan to the extent he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets - court found that PBA was a fiduciary An entity exercising any authority or control over disposition of a plans assets is a fiduciary B/c PBA has the power to write checks on the plan account and exercised that power, it was an ERISA fiduciary to the extent that it did so PBA breached its fiduciary duty by using Plan assets for its own purposes, in what it described as a classic care of self-dealing This case raises important issues for plan sponsors who utilize third party administrators to assist in administration of their plans. It also highlights the fact that even if an administrative service agreement or other agreement attempts to limit fiduciary status, a party's actions may still cause it to be deemed a fiduciary

court finds spd created expectations of benefits

The US district court for the Northern District of California has ruled that AD&D claims for a man who completely lost vision in his left eye should be based on the SPD and not the plan document itself Although Robert had an eye disease since birth, he had partial vision in his left eye until an accident which cause him to poke his eye - a doctor said the pre-existing condition did not likely contribute to his injury The court found that the SPD had determined his reasonable expectations for benefits & Robert claims he was not provided with a plan document The court noted if language in the SPD could create different expectation than language of the document, the language most favorable to the plaintiff controls Robert was a participant in the AD&D plan - the policy defined "injury" as a bodily injury caused by an accident and resulting directly and independently of all other causes in a covered loss SPD stated that AD&D benefits are not payable for death and dismemberment due to most natural illnesses or diseases Robert underwent surgery to repair his retina, and complications from the surgery caused him to lose total vision in his left eye; his claim was denied

district court holds that Michigan tax on benefit payments is not preempted by erisa

The district court for the Eastern District of Michigan held that ERISA did not preempt the application of that tax to self-insured health plans ERISA preempts state laws that "relate to" an EE benefit plan - held that the law did not relate to a plan Used a two part test for determining whether a state law "relates to" an ERISA plan - does the state law "refer to" ERISA plans or does it have "a connection with" ERISA plans Interpreted the "reference to" standard narrowly - held that although the act referred to ERISA plans since it specifically mentioned them, reference alone was not sufficient and the statue must also impose an impermissible burdensome effect on ERISA plans - no impermissible burden on ERISA plans b/c the act did not single them out for treatment different from other entities that pay HC claims "Connection to" - if it mandates something, and if that mandate falls w/n the areas that Congress intended ERISA to control exclusively; the act clearly mandated something (a 1% tax on all paid claims), however the state tax was not preempted b/c it was assessed after the claims were processed and paid, and thus it did not upset or interfere with the actual claims process Therefore, resolution to the "relates to" question so the court did not address the other arguments It is likely that this decision will be appealed

court awards penalties for missing piece of spd

To comply with HC reform, many ERs will be faced with plan design changes; ERs must then ask, "How do I communicate this to my EEs?" Suggest that when making a benefit plan change, write it down All ERs need these documents Communicating changes to a benefit plan requires updating all of those documents where the ER originally wrote down the benefit plan details The Plan Document must be updated with a Plan Amendment. The Summary Plan Description must be updated by issuing a Summary of Material Modifications, and the Summary of Benefits and Coverage must be updated by issuing a Notice of Material Modifications. The key to getting this right is consistency b/w all of the documents; inconsistency can be the basis for an EE lawsuit Follow this life: ensure 1) ensure that Plan, SPDs and SBCs are current 2) prepare an appropriate document to update each Plan, SPD and SBC 3) do not provide EEs with inconsistent documents