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New Case Tests the Retroactive Reach of Windsor

New Case Tests the Retroactive Reach of Windsor

July 9, 2014

Authored by: benefitsbclp

Following a spate of district court cases in response to United States v. Windsor, 133 S. Ct. 2675 (2013), some same-sex surviving spouses are asking retirement plan sponsors to review previously denied death benefit claims.  Among them has emerged Passaro v. Bayer Corp. Pension Plan in the United States District Court in Connecticut, which attempts to reach into the past to claim Qualified Preretirement Survivor Annuity (“QPSA”) benefits post-marriage, but pre-Windsor.  The key issue in this case will be the retroactive application of Windsor to qualified retirement plans.

In the complaint, the plaintiff alleges that the pension plan denied him benefits of a QPSA in violation of the terms of the plan and of governing federal law.  The state of Connecticut recognized same-sex marriages beginning November 12, 2008, and the plaintiff was married in the state later that month.  The spouse vested under the plan died in January 2009.  When the plaintiff requested benefits under the plan, the plan sponsor denied the request citing section 3 of the Defense of Marriage Act (“DOMA”).  On June 26, 2013 the Supreme Court declared section 3 of DOMA unconstitutional in Windsor, and the plaintiff unsuccessfully appealed the denial of plan benefits in early 2014.  The plaintiff then filed his complaint in May 2014.

The question here is whether the Court’s decision in Windsor can have a retroactive effect to require payment of a QPSA to a surviving spouse when the pensioner died before the opinion was issued.  The

Hobby Lobby & the Religious Freedom Restoration Act of 1993

Hobby Lobby & the Religious Freedom Restoration Act of 1993

July 7, 2014

Authored by: benefitsbclp

SCOTUSYou’ve seen all the headlines…  Supreme Court issued its decision in the Hobby Lobby case on the last day of its 2013-2014 term.  Sure, maybe it wasn’t as closely watched and groundbreaking as the Court’s -2012 decision upholding key provisions of the Patient Protection and Affordable Care Act (“ACA”), but it is a very big deal for certain employers.  Which ones?

Well, as discussed in our post following the Hobby Lobby oral arguments, the owners of certain closely-held for-profit organizations (namely Conestoga, Hobby Lobby, and Mardel) challenged the ACA’s preventive care requirement mandating coverage of all FDA-approved contraceptive drugs, devices, and related services.

While these companies do not object to most contraceptives now required to be provided by ACA’s market reforms, they oppose certain forms of emergency contraception (which they believe are abortifacients) and certain contraceptive devices (IUDs) on religious grounds.  The crux of the lawsuit is that these organizations believe the ACA’s contraceptive mandate  violates the rights afforded them both statutorily – under the Religious Freedom Restoration Act (“RFRA”) –  and constitutionally – under the Free Exercise Clause of the First Amendment.  Legally, the primary issue before the Court was whether RFRA’s protections for any “person” whose religious exercise is substantially burdened by government extends to corporations.

In a 5-4 ruling, the high Court held that the HHS contraceptive mandate violates RFRA as applied to closely-held corporations.  Writing for

Do you know the Yard-Man (inference, that is)?

As a child, you may have sung “do you know the Muffin Man?,” but as an employer you should make sure you know the Yard-Man inference.

Read the Small PrintThe “Yard-Man inference” comes from the Sixth Circuit’s decision in Auto Workers v. Yard-Man, Inc.  In that opinion, the Sixth Circuit created a presumption that retiree welfare benefits vest on retirement, unless a collective bargaining agreement clearly states otherwise.

However, the inference that these types of benefits vest has not been well received in all courts. For example, the Third Circuit has held the exact opposite: that retiree welfare benefits granted under a CBA expire with the CBA unless the agreement explicitly states otherwise.  Auto Workers v. Skinner Engine Co..

The split between the Circuits has likely contributed to the Supreme Court’s recent decision to review the case of M&G Polymers USA, LLC v. Tackett, which directly addresses the “Yard-Man inference.”

Enter Sen. Rockefeller (D-WV), with the “Bankruptcy Fairness and Employee Benefits Protection Act of 2014” which aims to turn the “Yard-Man inference” into a rebuttable presumption and to require employers to include information about modification of benefits in their summary plan descriptions, among other items.  The Act has been seen by some as an effort to get out in front of the Supreme Court’s review of the “Yard-Man inference.”  The Act would:

  • Require employers to

U.S. Supreme Court: Inherited IRAs Are Not Exempt from Bankruptcy Estate

June 24, 2014


Retirement Fund JarThe Bankruptcy Code allows debtors to exempt from their bankruptcy estate certain “retirement funds”, including amounts held in an individual retirement account (IRA) or Roth IRA.  The Code is silent, however, on whether amounts held in an inherited IRA are subject to creditors’ claims in bankruptcy.  The U.S. Supreme Court resolved that issue recently in Clarke v. Rameker, holding that funds held in inherited IRA accounts are not exempt from creditors’ claims.

The debtor in this case inherited her mother’s IRA and was receiving periodic distributions from the account.  At the time of the debtor’s bankruptcy filing, the inherited IRA had just over $300,000 left in it.  The debtor claimed that the exemption under the Bankruptcy Code for “retirement funds” covered her inherited IRA.  Her creditors challenged this assertion, and ultimately, the U.S. Supreme Court agreed with them.  The exemption for “retirement funds” does not apply to amounts in an inherited IRA.

An IRA, whether personal or inherited, may be one of the only sources of assets of the debtor in a bankruptcy proceeding.  Creditors now have a clear means of attacking an attempt to exclude inherited IRA assets from the bankruptcy estate.


Same-Sex Spouse Exclusion under Health Plan Does Not Violate ERISA

The LawEarlier this month,  a New York Federal District Court held that the exclusion of same-sex spouses from coverage under a health plan, even though coverage is provided to opposite-sex spouses,  does not violate the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).  This is one of the first cases addressing equality of coverage for same-sex spouses under plans governed by ERISA since the U.S. Supreme Court held in U.S. v. Windsor that Section 3 of the Defense of Marriage Act was unconstitutional.  (Click here or here or here for more information)

The Health Plan Exclusion

Roe attempted to enroll her same-sex spouse in the self-funded health plan sponsored by her employer.  The plan provided spousal coverage, but did not define spouse.  However, the plan contained a specific exclusion for same-sex spousal coverage: “Same sex spouses and domestic partners are NOT covered under this plan.”

The Employee’s Claims

  1. Section 510 of ERISA.  The employee asserted that the employer violated Section 510 of ERISA by interfering with her right to cover her same-sex spouse under the plan.  Section 510 of ERISA prohibits an employer from discriminating against a participant for exercising a right to which she is entitled under the provisions of a plan.  However, the court said that since the employee was still employed and did not suffer any change

Autism Spectrum Disorder and ABA Treatment – New Legal Theories Facing Self-Insured Plans?

May 29, 2014


492969231Federal law governing mental health benefits is giving rise to a new wave of lawsuits against self-insured ERISA welfare benefit plans.  Plan sponsors should carefully consider their current scope of coverage to avoid litigation risk and ensure fair benefits for participants.

ERISA and other governing federal laws historically have not required that plan sponsors or insurers provide any particular coverage or level of benefits.  Thus, plans and insurers could pick and choose what type of benefits and coverage to offer.

Even with the passage of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (the “Parity Act”), plans and insurers were not required to offer any mental health benefits.  However, the 2008 Parity Act requires group health plans and health insurance issuers that offer mental health benefits to do so in a manner that meets the parity rules.  At a high level, the parity rules mandate that the financial requirements (such as co-pays and deductibles) and non-quantitative treatment limitations (such as visit limits) applicable to mental health or substance use disorder benefits are no more restrictive than the predominant requirements or limitations applied to substantially all medical/surgical benefits.

Treatment for Autism Spectrum Disorders (“ASD”) has become a much-discussed and frequently-litigated topic in the wake of passage of the Parity Act and the advent of market reforms triggered with adoption of the ACA.  While the ACA

The Sound of Silence: SCOTUS To Review Rules Governing Vesting of Retiree Health Benefits under CBAs

Old Woman ShhhhThe Supreme Court has granted review in a case that will resolve a long-standing circuit split concerning the vesting of retiree health care benefits.  On May 5th, the Supreme Court granted certiorari in the case of M&G Polymers USA, LLC v. Tackett. In reviewing Tackett, the Supreme Court will have the opportunity to decide whether silence concerning the duration of retiree health-care benefits in collective bargaining agreements means the parties intended those benefit to vest and therefore continue indefinitely or whether such benefits are vested only where there is a clear statement that health care benefit are intended to survive the expiration of the collective bargaining agreement.

There has long been a split among the circuit courts regarding the requirement for vesting of retiree health care benefits providing through a collective bargaining agreement.  The Sixth Circuit’s decision in Tackett represented the circuit’s long-standing view that such silence is evidence that the parties’ intended the health-care benefits to vest and continue for the retiree’s life (known as the “Yard-Man presumption,” named for an early retiree health care decision, UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983)).  On the other end of the spectrum, the Third Circuit requires a clear statement that health-care benefits are intended to survive the termination of the collective bargaining agreement in order to to find that such benefits are vested. The

Hobby Lobby, Religious Freedom, ACA, and Contraception

Last month, the Supreme Court heard oral arguments in Sebelius v. Hobby Lobby Stores, Inc., and Conestoga Wood Specialties Corp., two highly anticipated cases that deal with the Affordable Care Act (“ACA”), religious freedom, and women’s access to contraception.

Hobby Lobby and Conestoga, each a closely-held family-owned corporation, have challenged the ACA’s preventive care requirement mandating coverage of all FDA-approved contraceptive drugs, devices, and related services.  Although the companies’ owners do not object to most contraceptives, they oppose emergency contraception and certain devices on religious grounds.  They contend that the required coverage of certain contraceptives violates their rights under the Religious Freedom Restoration Act (“RFRA”) and the Free Exercise Clause of the First Amendment. Generally, the RFRA is aimed at providing exceptions to laws that substantially burden a person’s free exercise of his or her religion. The question before the Court was whether secular for-profit companies can exercise religion.

While it will be a few months before a decision is issued, the dialogue during oral arguments posed many compelling questions.  Justice Sotomayor asked Paul D. Clement, who represented the corporations, how courts are to determine whether a corporation holds a particular religious belief:  whose beliefs control, the majority of shareholders; the corporate officers; what happens to the minority?  She and Justice Kagan asked how far corporation’s religious objections might extend.  Would blood transfusion and vaccines be objectionable?  What should occur if other employers in the future claim that they have religious objection to sex discrimination laws,

Don’t Miss the April 15th Deadline to File a Protective Refund Claim for 2010 FICA Tax!

As you may recall from our earlier post, the 6th Circuit held in U.S. v. Quality Stores, that severance payments made to employees in connection with an involuntary reduction in force were not “wages” subject to FICA taxes. This decision was contrary to published IRS guidance and created a split in the courts. In October of last year, the United States Supreme Court agreed to review the case and on January 14th, it heard oral arguments. The Supreme Court is expected to issue a ruling by the end of June.

Taxpayers may be entitled to a FICA tax refund if the decision is upheld by the Supreme Court on appeal. In order to preserve the right to a refund, taxpayers must file a protective claim before the applicable statute of limitations runs. As we previously reported in a post last year, the deadline to file a protective order for severance payments made in 2009 was April 15, 2013. At this time, the deadline to file a protective claim for 2010 severance payments is quickly approaching on April 15, 2014. We encourage any employer who made involuntary severance payments in 2010 to consider filing a protective claim now on Form 941-x in order to preserve the right to a refund if the 6th Circuit decision is upheld.


Supreme Court Clarifies Effect of Motions for Attorney’s Fees on Finality

January 29, 2014


In a decision issued on January 15, the Supreme Court clarified that a pending motion for attorney’s fees does not prevent a judgment on the merits from becoming final for appellate purposes under 28 U.S.C. §1291, even when those fees are contractually provided for.

Ray Haluch Gravel Co. v. Central Pension Fund of the International Union of Operating Engineers & Participating Employers involved the timeliness of an appeal of a judgment against an employer in an ERISA case. The employer was sued by a union for failing to make contributions, required under a collective bargaining agreement, to various benefit funds. The agreement included a provision requiring the employer to pay any attorney’s fees incurred by the union in collecting payments owed to the benefit funds.

The district court entered judgment on the merits, awarding the union far less than it had requested, and more than a month later issued another order awarding attorney’s fees pursuant to the agreement. The union appealed the judgment on the merits, but waited until after the district court entered its fee award to do so.

On appeal to the First Circuit, the employer contended that the union’s appeal was untimely, as it had not filed its notice of appeal until almost two months after the entry of the merits judgment. Although the Supreme Court had held in Budinich v. Becton Dickinson & Co., 486 U.S. 196 (1988), that outstanding petitions for attorney’s fees do not prevent judgments from becoming

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