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ERISA

CIGNA Corp. v. Amara

Issues

When a corporation’s summary plan description and actual retirement benefit plan are inconsistent, is the proper standard for measuring harm a standard of “likely harm” rebuttable by the defendant after a showing of “harmless error,” or must a plaintiff show “detrimental reliance” on the inconsistency?

 

CIGNA Corporation changed its employee retirement plan from a traditional defined benefits plan to a cash balance plan. Under the Employee Retirement Income Security Act (“ERISA”), companies that change their retirement plan must release a summary plan description (“SPD”) that outlines the changes for employees in a manner that the average employee can understand. CIGNA released an SPD that described the change but did not mention a “wear-away” period during which the enrolled employees would continue earning credits under the plan while their minimum benefit would remain the same for a period of time. The Respondents, current and former CIGNA employees, sued in federal court, alleging that the inconsistency between the SPD and the actual benefit plan violated ERISA. The district court found for the plaintiffs, using a standard of “likely harm” to determine whether the employees were harmed by the inconsistency between the SPD and the original plan, and the Second Circuit affirmed. CIGNA appealed, arguing that a showing of “detrimental reliance” on the part of the employees is required before they can receive a remedy. The Court’s decision will likely affect the contents of SPDs and the availability of pension benefit plan class actions.

Questions as Framed for the Court by the Parties

Whether a showing of "likely harm" is sufficient to entitle participants in or beneficiaries of an ERISA plan to recover benefits based on an alleged inconsistency between the explanation of benefits in the Summary Plan Description or similar disclosure and the terms of the plan itself.

Respondents, Janice C. Amara and others (collectively “Amara”), are current and former employees of CIGNA CorporationSee Amara v. CIGNA Corp., 534 F. Supp. 2d 288, 295 (D. Conn.

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Additional Resources

· United States Department of Labor: Employee Retirement Income Security Act

· Society for Human Resource Management, Allen Smith: Supreme Court Will Review ERISA Plaintiffs' Showing in Summary Plan Description Case (July 7, 2010)

· Richard Glass: Is It Time to Re-Examine What it Means to Fulfill Your 401(K) Fiduciary Responsibilities? (Mar. 10, 2008)

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Conkright v. Frommert

Issues

Whether a district court must defer to an ERISA plan administrator’s proposed remedy for an ERISA violation, where the violation resulted from a prior interpretation by the plan administrator.

 

Courts generally give deference to discretionary decisions made by ERISA pension plan administrators. This case will test the limits of that deference and will decide if a court is obligated to defer to a plan administrator’s proposed remedy for an ERISA violation, when the cause of the violation itself was the administrator’s prior interpretation. Petitioners and their amici argue that allowing judges to involve themselves in ERISA pension plan determinations without deferring to decisions made by the plan administrator will increase the costs and uncertainty of maintaining pension plans. Respondents and their amici, on the other hand, argue that deferring repeatedly to a plan administrator will increase costs through more and prolonged litigation, and will be unfair to plan participants who justifiably rely on promised benefits to plan for retirement.

Questions as Framed for the Court by the Parties

1. Whether the Second Circuit erred in holding, in conflict with decisions of thisCourt and other Circuits, that a district court has no obligation to defer to an ERISA plan administrator's reasonable interpretation of the terms of the plan if the planadministrator arrived at its interpretation outside the context of an administrativeclaim for benefits.

2. Whether the Second Circuit erred in holding, in conflict with decisions of other Circuits, that a district court has "allowable discretion" to adopt any "reasonable"interpretation of the terms of an ERISA plan when the plan interpretation issue arises in the course of calculating additional benefits due under the plan as a result of an ERISA violation.

 

The Employee Retirement Income Security Act (“ERISA”), 29 U.S.C.

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Additional Resources

•       FindLaw: Pension Plans and ERISA

•       United States Department of Labor: ERISA

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Fifth Third Bancorp v. Dudenhoeffer

Issues

When a company maintains an employee stock ownership plan, do plan managers have discretion to decide whether to remain invested in employer stock based on long-term, rather than short-term, goals, or do the managers have to change investment tactics to minimize losses and maximize present value for the investors? 

John Dudenhoeffer and Alireza Partovipanah are former employees of Fifth Third Bancorp. As part of their benefits plan, they contributed to an employer stock ownership plan (“ESOP”). By participating in the plan, employees have an option to invest in Fifth Third stock as well as several other funds. In a two-year span, stock value for Fifth Third dropped dramatically. Dudenhoeffer and his fellow class members argue that Fifth Third made misleading disclosures regarding the health of the stock and that the trust managers failed to represent the best interests of the trustees by allowing employees to continue to invest in the company. Fifth Third argues that there is a strong presumption in favor of ESOP managers and their decisions to invest stocks based on long-term company goals. The decision in this case will affect the duties that employers owe to employees who invest in ESOPs and the protection afforded to employee-investors.

Questions as Framed for the Court by the Parties

  1. Whether the Sixth Circuit erred by holding that Respondents were not required to plausibly allege in their complaint that the fiduciaries of an employee stock ownership plan (“ESOP”) abused their discretion by remaining invested in employer stock, in order to overcome the presumption that their decision to invest in employer stock was reasonable, as required by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1101, et seq. (“ERISA”), and every other circuit to address the issue.
  2. The complaint in this case alleges a breach of the fiduciary duties of loyalty and prudence, in violation of ERISA § 404(a)(1), 29 U.S.C. §1104(a)(1), by the trustees of an employee pension benefit plan that invests in the stock of the employer. The question before the Court is whether those allegations are inadequate on their face unless they establish that the employer’s financial status is dire.

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Facts

John Dudenhoeffer and Alireza Partovipanah are former employees of Fifth Third Bank. See Dudenhoeffer v. Fifth Third Bancorp, 692 F.3d 410, 414 (6th Cir. 2012).

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Gobeille v. Liberty Mutual Insurance Company

Issues

Does the Employee Retirement Income Security Act of 1974 (ERISA) preempt Vermont data reporting laws, which require companies that process insurance claims to report certain medical claims data to the state?

 

Vermont enacted legislation that created a “unified health care database” designed to improve the affordability and quality of health care in Vermont by collecting and analyzing statewide data on insurance claims.  See Liberty Mut. Ins. Co. v. Donegan, 746 F.3d 497, 500–01 (2d Cir. 2014); see also Vt. Stat. Ann. tit. 18 § 9410(a)(1)Liberty Mutual offers a health insurance benefit plan to Vermont residents; the Employee Retirement Income Security Act of 1974 (“ERISA”) governs benefit plans. See id. ERISA requires benefits plans to make claim data reports to the Department of  Labor,  and generally preempts any state laws that relate to an employee benefit plan.  See id. at 503. In August 2011, the Vermont Department of Banking, Insurance, Securities and Health Care Administration (the “Department”) subpoenaed claims data from Blue Cross and Blue Shield of Massachusetts, the company that administers Liberty Mutual’s Plan. See id. at 502. In  district  court, Liberty Mutual sought to enjoin the subpoena, arguing ERISA preempted Vermont’s reporting requirements. See id. On appeal, the Court of Appeals for the Second Circuit held that ERISA did preempt the reporting requirements. See id. But Alfred Gobeille, chair of the Vermont Green Mountain Care Board, maintains that ERISA does not preempt Vermont’s law, because (1) Vermont’s law falls under the traditional state power to regulate health care, (2) the law does not infringe any core function of ERISA, and (3) Congress intended for states to retain the ability to collect health care data. See Brief for Petitioner, Alfred Gobeille at 25. Liberty Mutual counters, arguing that Vermont’s reporting requirements conflict with Congress’s intent to create a uniform federal reporting regime, and thus constitute precisely the kind of state law that Congress intended ERISA to preempt. See Brief for Respondent, Liberty Mut. Ins. Co. at 13. The Supreme Court’s resolution of this case will impact the cost to consumers of purchasing health care, the quality of that care, and the resources that the insurance companies must spend on claims data reporting procedures. See Brief of Amici Curiae AARP et al., in Support of Petitioner at 9-10, 11; Brief of Amici Curiae The American Benefits Council et al., in Support of Respondent at 24, 27-28.

Questions as Framed for the Court by the Parties

May Vermont apply its health care database law to the third-party administrator for a self-insured ERISA plan?

Liberty Mutual Insurance Company administers a health plan, the Liberty Mutual Medical Plan (the “Plan”), which covers 84,000 people nationwide and 137 people in Vermont. See Liberty Mut. Ins. Co. v. Donegan, 746 F.3d 497, 501 (2d Cir.

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Hardt v. Reliance Standard Life Insurance

Issues

Whether ERISA § 502(g)(1) requires a party to be a prevailing party before a court can award attorney fees, and if so, whether Hardt satisfies that standard.

 

Petitioner, Bridget Hardt (“Hardt”), a former employee of Dan River Inc., brought suit against Respondent, Reliance Insurance Co. (“Reliance”), the insurance provider for Dan River Inc., in an attempt to recover attorney’s fees for a previous suit Hardt had brought in the Eastern District of Virginia to recover benefits pursuant to Dan River Inc.’s Group Long-Term Disability Insurance Program Plan (“the Plan”). The Eastern District remanded the case to Reliance, which, under ERISA, not only administers the Plan, but also decides whether an applicant is entitled to benefits. On remand, Reliance provided Hardt with the requested benefits. Hardt now sues seeking attorney’s fees under ERISA § 502(g)(1). Reliance counters that Hardt did succeed on the merits in the lower court and, therefore, cannot satisfy ERISA’s definition of “prevailing party.” Hardt, on the other hand, argues that the text of the statute does not include a prevailing party standard as a prerequisite to recovering attorney fees. In this case, the Supreme Court will decide whether ERISA § 502(g)(1) requires a party to succeed on the merits before attorney’s fees may be awarded and, if so, whether Hardt satisfies that requirement.

Questions as Framed for the Court by the Parties

1. Whether the Fourth Circuit erred in holding that ERISA § 502(g)(1) provides a district court discretion to award reasonable attorney's fees only to a prevailing party? 

2. Whether a party is entitled to attorney's fees pursuant to § 502(g)(1) when she persuades a district court that a violation of ERISA has occurred, successfully secures a judicially-ordered remand requiring a redetermination of entitlement to benefits and subsequently receives the benefits sought on remand?

Bridget Hardt, worked as an executive assistant to the president of a textile manufacturer, Dan River Inc.; in 2000, she was diagnosed with carpal tunnel syndrome (“CTS”) and had surgery on both wrists to relieve the pain. See Hardt v. Reliance Standard Life Ins. Co., 336 Fed. Appx.

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Additional Resources

·      Wex: Law about ERISA

·      Department of Labor: Health Plans & ERISA

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Heimeshoff v. Hartford Life & Accident Insurance Co.

Issues

Does the statute of limitations for judicial review of an adverse determination on a disability benefits claim begin to accrue at the time specified by an insurance policy or when the claimant files an ERISA disability claim?

Julie Heimeshoff was a longtime Wal-Mart employee who became ill and applied for long-term disability benefits from the Hartford Life & Accident Insurance Company (“Hartford”). Hartford denied her claim and Heimeshoff sued under ERISA to challenge the insurance determination. The district court granted Hartford’s motion to dismiss because Heimeshoff had missed the filing deadline, and the Second Circuit affirmed. The Supreme Court will now consider when the statute of limitations starts to accrue for judicial review of an adverse determination on a disability benefits claim. Heimeshoff argues that a bright-line rule is necessary under federal law so that potential plaintiffs will be able to understand the filing deadline. Hartford contends that the statute of limitations on an ERISA disability claim should be determined by an insurance plan’s accrual provision unless the provision is unreasonable. The Supreme Court’s decision will impact the administration of long-term disability plans. A bright-line rule would lead to more compressed time periods in which claimants would be required to seek judicial review, while a reasonableness rule would lead to possible inefficiencies and inconsistencies in administration. The Court’s decision will impact insurance companies’ control over the statute of limitations on review of ERISA disability claims and the period during which disabled employees can seek relief through the courts.

Questions as Framed for the Court by the Parties

When should a statute of limitations accrue for judicial review of an ERISA disability adverse benefit determination?

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Facts

Petitioner Julie Heimeshoff worked for Respondent Wal-Mart Stores Inc. (“Wal-Mart”) from 1986 to 2005 and eventually became Senior Public Relations Manager. See Heimeshoff v. Hartford Life & Accident Ins. Co., 2012 WL 171325 at 1 (D. Conn. 2012). During that time, Heimeshoff developed symptoms of fibromyalgia, irritable bowel syndrome, and lupus. See id. These symptoms worsened until Heimeshoff could no longer work in June 2005.

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Hughes v. Northwestern University

Issues

Whether allegations that an employer 403(b) retirement plan charged excessive fees when lower cost investment products and services were available are sufficient to bring a claim for a breach of fiduciary duty under ERISA?

This case asks the Supreme Court to determine the standard to bring a claim that applies to a breach of fiduciary duty under the Employment Retirement Income Security Act (“ERISA”) for allegations of excessive investment fees and recordkeeping fees. April Hughes and other employees at Northwestern University brought suit, claiming Northwestern’s breach of fiduciary duty in ERISA retirement plans, pointing to a large investment option menu and higher-than-average fees. In particular, petitioner April Hughes and others argue that an ERISA’s fiduciary duty of care stems from trust law, and that Northwestern’s imprudent investment and recordkeeping decisions caused excessive fees and breached their duty of care. Respondent Northwestern University answers that context-specific scrutiny is the proper standard for fiduciary duty under ERISA, and that its plan’s cost reflects its prudent investment and recordkeeping decisions. The outcome of this case will impact those people that participate in savings programs that are offered by their employers and the employers themselves, as well the fiduciary duties of said employers, the rights of the beneficiaries, and the available investment options of the beneficiaries. 

Questions as Framed for the Court by the Parties

Whether allegations that a defined-contribution retirement plan paid or charged its  participants fees that substantially exceeded fees for  alternative available investment products or services are sufficient to state a claim against plan fiduciaries for breach of the duty of prudence under the Employee Retirement Income Security Act of 1974?

April Hughes, Laura Divane, and others (collectively referred to as “Hughes”), employees at Northwestern University (“Northwestern”), entered into defined contribution plans, administered and developed by their employer Northwestern, under the Employee Retirement Income Security Act (“ERISA”). Divane, et al. v. Northwestern University, et al. at 983.

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Intel Corp. Investment Policy Committee v. Sulyma

Issues

Does the three-year limitations period under Section 413(2) of the Employee Retirement Income Security Act of 1974 (“ERISA”) start to run when the plaintiff learns of an alleged breach of fiduciary duty or when the plaintiff has access to relevant information that shows the alleged breach but did not read or understand that information?

The Supreme Court will decide when Section 1113(2) of the Employee Retirement Income Security Act’s statute of limitations begins to run. Both parties agree that the text of Section 1113(2) establishes that the three-year statute of limitations runs from the date on which the plaintiff had actual knowledge of a violation, but dispute what actual knowledge means. Petitioner Intel Corp. Investment Policy Committee argues that actual knowledge means being in possession of proof of the violation, whether a plaintiff is aware of the violation or not. Respondent Christopher M. Sulyma argues that actual knowledge means when the plaintiff is fully aware and understands that a violation took place. The Court’s decision will affect both employers’ incentives to offer retirement plans and also employees who struggle to  comprehend the complex and lengthy plan documents provided to them by their employers.

Questions as Framed for the Court by the Parties

Whether the three-year limitations period in Section 413(2) of the Employee Retirement Income Security Act, which runs from “the earliest date on which the plaintiff had actual knowledge of the breach or violation,” bars suit when all the relevant information was disclosed to the plaintiff by the defendants more than three years before the plaintiff filed the complaint, but the plaintiff chose not to read or could not recall having read the information.

Petitioners Intel Corp. Investment Policy Committee, et al. (collectively, “Intel Corp.”) employed Respondent Christopher Sulyma from 2010 to 2012. Sulyma v.

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LaRue v. DeWolff, Boberg & Assoc.

Issues

1. May an individual bring a claim on behalf of the plan under ERISA section 502(a)(2) for failure to follow the individual's investment instructions, where the only recovery would be to the individual's personal account?

2. When ERISA section 502(a)(3) limits a participant to suing for equitable relief, does that include reimbursement by a fiduciary for lost profits to a 401(k) retirement plan?

 

James LaRue, an employee of the management consulting firm DeWolff, Bobert & Associates, sued his employer for improper management of his 401(k) pension plan. Under DeWolff's pension plan, LaRue could choose among a variety of investment options for his individual account. In his suit, LaRue alleged that DeWolff failed to follow his investment instructions. LaRue sued under sections 502(a)(2) and 502(a)(3) of the Employee Retirement Income Security Act (ERISA). The Fourth Circuit held that neither section authorized LaRue's claim because it was an individual claim and because LaRue sought compensatory damages. LaRue argues that his claim benefits the plan as a whole rather than himself individually, and that he seeks equitable relief rather than compensatory damages. The outcome of this case will determine whether an individual can use these provisions to sue an employer for improper management of a pension fund.

Questions as Framed for the Court by the Parties

1. Section 502(a)(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. 1132(a)(2), provides that a "civil action may be brought ... by a participant ... for appropriate relief under section 1109 of this title." 29 U.S.C. 1109 states that "a fiduciary with respect to a plan who breaches any ... duties imposed upon fiduciaries ... shall be personally liable to make good to such plan any losses to the plan resulting from each such breach."

The First Question Presented is:

Does ? 502(a)(2) of ERISA permit a participant to bring an action to recover losses attributable to his account in a "defined contribution plan" that were caused by a fiduciary breach? Hereinafter, this will be referred to as the "502(a)(2) Question."

2. Section 502(a)(3) of ERISA, 29 U.S.C. 1132(a)(3), provides that a "civil action may be brought ... by a participant ... to obtain other appropriate equitable relief ... to redress ... violations" of the statute.

The Second Question Presented is:

Does ? 502(a)(3) permit a participant to bring an action for monetary "make-whole" relief to compensate for losses directly caused by fiduciary breach (known in pre-merger courts of equity as "surcharge")? Hereinafter, this will be referred to as the "502(a)(3) Question."

James LaRue, an employee of the management consulting firm DeWolff, Boberg & Associates ("DeWolff"), brought suit against his employer and his employer's 401(k) plan for breach of fiduciary duty with respect to administration of the plan, in which LaRue was a participant. See LaRue v. DeWolff, Boberg & Assoc., Inc.

Acknowledgments

The authors would like to thank Professors Davidson Douglas and Emily Sherwin for their insights into LaRue v. DeWolff.

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