Adjunct Law Prof Blog

Sworn Statement For Disablity Benefits Estopps Police Officer From Pursuing An ADA Claim

Butler v Village of Round Lake Police Dep't,___F.3d___(7th Cir. October 27, 2009), is an important decision to be aware of. The court held that a police sergeant with an incurable lung condition was judicially estopped from asserting that he could perform the essential functions of his job because of his testimony at an earlier disability pension hearing.

The plaintiff sergeant supported his application for a disability pension with "certificates of disability" from his physicians, which stated that he was "permanently disabled from the police service." The pension board found that he was qualified as disabled, awarding him benefits. While continuing to collect his pension, the sergeant filed suit against the city under the ADA alleging that he was denied a reasonable accommodation.

Claiming disability benefits and asserting ADA claims are not always mutually exclusive, explained the Seventh Circuit, but a sworn assertion that an employee is "unable to work'" will appear to negate an essential element of an ADA case, unless the employee offers a sufficient explanation. To be sufficient, an explanation must warrant a reasonable juror's conclusion that the employee cannot perform the essential functions of his job with or without an accommodation. Here, the sergeant failed to offer any evidence that he could have performed the essential functions of his job during the relevant period, with or without accommodations. While the pension board did not consider whether an accommodation would have permitted the sergeant to continue working, there was no accommodation that would have sufficed, held the Seventh Circuit, affirming the district court's grant of summary judgment to the city.

Mitchell H. Rubinstein

9th holds state's practice of disapproving insurance policies containing "discretionary clauses" not preempted by ERISA

Standard Insurance Co v Morrison, ___F.3d___(9th Cir. October 27, 2009), is an interesting ERISA preemption decision. Many employers have insurance policies which provide discretion to administrators in interpreting those policies. This is because under Firestone and Met Life, if litigation erupts, the decisions of those administrators would be given judicial deference.

What if a state refuses to approves insurance policies that contain such discretionary clauses? Is it preempted? No says the 9th Circuit. The Ninth Circuit found that, while ERISA preempts almost all state laws relating to employee benefit plans, it does not preempt those state laws that regulate insurance. The disputed practice, specific to the insurance industry, was directed at ERISA plans, a form of insurance, and limited what insurance companies could and could not include in their policies. Additionally, the circuit court found that, in removing the discretionary clause, the practice would likely lead to a greater number of paid claims, thereby increasing the benefit of risk pooling. The company also argued that the practice would conflict with ERISA's exclusive remedial scheme, but the court found that the practice did not create an additional remedy, but instead merely pushed ERISA suits to "proceed with their default standard of review." Lastly, the court found that the practice, which was intended to eliminate insurer advantage, was consistent with the savings clause of ERISA. As the practice did not create a new substantive right, offered no additional remedies and did not institute any procedures opposed to ERISA, the Ninth Circuit ruled that it was not preempted by ERISA.

Mitchell H. Rubinstein

2ndCir: Oral promise not enough to alter terms of ERISA plan

Ladouceur v Credit Lyonnais, ___F.3d____(2d Cir. September 30, 2009), is an important ERISA decision to be aware of. The 2d held that an alleged oral representation made to employees about how their pension benefits would be calculated after a company merger was not enough on which to base ERISA claim for breach of fiduciary duty. Oral promises cannot vary the terms of an ERISA plan, the court noted. This principle "applies with equal force to alleged breaches of fiduciary duty when the alleged breach is an oral representation that purports to change an ERISA benefit plan,"  "[W]e see no reason to give the statement effect by re-characterizing it as a breach of fiduciary duty."

Mitchell H. Rubinstein

Supremes May Grant Cert Golden Gate Rest. Ass'n v. San Francisco, U.S., No. 08-1515,

Workplace Prof Blog reported on Oct. 6, 2009 that the Supremes asked the Solicitor General of the U.S. for her views on  Golden Gate Rest. Ass'n v. San Francisco, U.S., No. 08-1515, For my students out there, this issue could not be more timely as we are covering this in my Pension and Employee Benefits class next week. I cannot imagine that cert will not be granted. Indeed, those are the views of Professor Medill in her Employee Benefits Casebook supplement as well. Why? For one, the 9th Circuit decision conflicts with the 4th Circuit decision in Fielder. Second, there are not many bigger issues than health insurance and from a public policy perspective whether these minimum benefits statutes are preempted is quite important. The Supreme Court has also made a mess of ERISA preemption jurisprudence and this gives the Court the opportunity to clarify.

If cert is granted, my own view is that despite the Davila presumption against preemption, these types of laws interfere with uniform plan administration which the Supremes have repeated found so important. Whats more is that what is at issue in the 9th Circuit is a local law. How many local laws are plan administrators going to be expected to be familiar with. I also do not believe that such laws are within the savings clause as they do not regulate insurance as defined in the Supreme Court decision in Miller. 

This is an important case to watch.

Mitchell H. Rubinstein

Revoking Lawyers Public Pension Violated Due Process

There has been something of a scandal in New York concerning several attorneys who represented school districts, but also appeared on the payrolls of school districts in order to be eligible for a pension. The lawyers' worked at private firms and some say, they charged their clients less because of this arrangement. But is it legal and are these lawyers entitled to a public pension?

D'Agostino v. DiNapoli, __Misc. 3d___, NYLJ Aug. 27, 2009  (Albany Co. 2009), does not finally decide any of these issues, but the court does hold that the Comptroller cannot unilaterally act to  deny a pension without due process. A New York Law Journal article about this important case is available here.  I am sure this case will be appealed.

This case does not concern ERISA and I hope my students all know why. (Hint, we just covered this)

Mitchell H. Rubinstein

Health Care Bill Released

The Americans Healthy Future Act of 2009 has been released, here. Workplace Prof Blog has an excellent analysis of the Bill which appears here. The Bill spans 223 pages and is quite complicated. While I doubt that this is the final say on the matter, it does appear that we are getting close. Note, there is no public option in the Bill.

Mitchell H. Rubinstein

Lifetime health benefits are vested, but scope of benefits can be modified

Reese v CNH America, ___F.3d___(6th Cir. July 27, 2009), is another important employee benefits case coming out of the 6th circuit. An employer promised in a collective bargaining agreement to grant retirees healthcare for life, the Sixth Circuit held. However, a lifetime grant of benefits does not mean the scope of those benefits must remain intact. This suit was filed by retirees after the employer eliminated their PPO health plan and imposed a managed care plan. The contract and related documents were silent as to subsequent modifications to the benefits, and the manner in which the parties had applied the contract provisions suggests the parties contemplated "reasonable modifications," the court reasoned. Thus, to the extent the district court held the benefits must be maintained precisely at the level provided for in the bargaining agreement, the court was reversed. The case was remanded for the lower court to determine what types of changes are permissible.

Mitchell H. Rubinstein 

9th holds Plaintiff was ERISA plan participant even though he had withdrawn his assets

Harris v AmGen, Inc,, ___F.3d___(9th Cir. July 14, 2009, is an interesting ERISA case. A former employee was an ERISA "plan participant" even though he had withdrawn all of his assets from a defined contribution plan. Thus, he had standing to assert an ERISA claim against his former employer for breach of fiduciary duties. The employee alleged his employer breached its fiduciary duties by allowing the defined contribution plans to purchase and hold the company's stock while knowing that the stock price was artificially inflated. The district court dismissed the claim, finding the employee lacked standing because he already had cashed out of his plan account and therefore he was not a plan participant. However, the Ninth Circuit held an ERISA plan participant who no longer has assets in the plan has statutory standing to assert fiduciary duty claims—agreeing with the First and Third Circuits, which have granted plaintiffs standing to pursue such claims even when the plaintiffs had cashed out.

This decision is short by ERISA standards (15 pages) and it is an important one to be aware of. 

Mitchell H. Rubinstein 

9th Holds Non-signatory employer was not liable for ERISA contributions

Trustees v NYCA, Inc, ___F.3d____(9th Cir. July 15, 2009), is an interesting decision. The 9th holds that a joint employer that was not a signatory to a collective bargaining agreement is not liable under ERISA for contributions to an employee benefit plan. Trustees of multi-employer employee benefit plans sued a non-signatory employer, contending the employer was liable under ERISA for contributions made as a joint employer. The appeals court held the joint employer theory could not be used to impose obligations on the non-signatory company. The court reasoned that the trustees' attempt to impose obligations over and above those required by the bargaining agreement directly conflicts with the plain language of ERISA. However, the signatory joint employer could be liable for contributions based on the gross compensation the two employers paid to the employee. The bargaining agreement obligated employers to contribute an amount equal to a specific percentage of the gross compensation, but did not identify which employer paid the gross compensation. As the language was ambiguous, the appeals court remanded the question for a determination of the parties' past practice.

This is an important employee beneifts decison. However, I suspect that this issue does not come up very often.

Mitchell H. Rubinstein

When Should You Start Collecting Social Security Benefits??

Collect Now, or Later? Timing Social Security Benefits is an important New York Times article which most people close to retirement should read. The central thesis of the article is that while it is temping, you should not begin to collect benefits as soon as your eligible too. Why? If you wait to collect, your check will be larger. The biggest risk most people have is that they will live longer and have a smaller check. As the article explains:

That logic may sound reasonable now. But in reality, the bigger risk is that you will live to a ripe old age. You can claim Social Security any time from age 62 to 70, but the longer you wait, the larger your monthly check. And many people come out ahead if they wait at least until their full retirement age, which is different from the day you stop working for good. For people born 1943 to 1954, full retirement age is 66, and it creeps up for younger people.

What do you stand to lose by taking benefits early? Take those who are set to receive $1,000 a month at their full retirement age. If they sign up for benefits at age 62, they will collect only $750. But if they wait until 70, they will earn extra credit and receive up to $1,320 a month — nearly a third more.

At first glance, it seems that everyone should wait until they are 70. But that is not the case. The answer depends on many factors, including when you stop working, how much you have in savings, whether you are healthy, whether you are married or single and whether your spouse earns more — or less.

It may be impossible for some households to wait because the breadwinner has lost a job or is no longer able to work. And planners agree that it is smarter to collect earlier if it will prevent you from accumulating debt.

But if you can wait, think of the money you aren’t receiving during that period as a payment of sorts for an annuity that will pay a higher, guaranteed stream of income later, if you live a long time (or at least longer than your savings last), financial experts say. 

Mitchell H. Rubinstein

Happy Belated Birthday To Medicare

July 30, 2009 marked the 44th Birthday of Medicare. To millions of Americans it seems like Medicare is an entitlement and that it always existed. However, nothing could be further from the truth. The AFL-CIO blog ran an interesting story about it in the context of todays heath care debate which provides in part:

Seniors and health care activists across the country are celebrating the 44th birthday of Medicare today by lobbying for improvements to the program and expanding quality, affordable health care for all.

In more than 30 events in 17 states across the country, members of the Alliance for Retired Americans are honoring Medicare’s success and outlining a positive agenda for comprehensive health care reform legislation that will help current and future retirees.

Thousands of Alliance members are holding birthday parties, sending letters to the editor to their local newspapers and visiting the local offices of lawmakers to call for real health care reform, not cosmetic changes.  

Calling Medicare “a great American success story,” which has helped reduce senior poverty by two-thirds, Alliance Executive Director Ed Coyle says. . .

Mitchell H. Rubinstein

9th holds retirees have standing to sue for benefits

Poore v Simpson Paper Co, ___F.3d___(9th Cir. May 21, 2009), is an important case involving employee benefits.The 9th Circuit holds that early retirees had standing to pursue a claim that their employer violated ERISA by eliminating their health benefits and it withdrew its September, 2008, panel decision to the contrary. The circuit previously held the retirees did not have standing to sue because their benefits were not vested. However, the Supreme Court, in its 2008 decision in LaRue v DeWolff, Boberg and Associates, “loosened the requirement that the claimed benefits be `vested,’ at least insofar as vested means permanently fixed and unalterable.” Thus, the court now concluded the retirees “need not show their health benefits are vested in the way that pension benefits are vested.” It was sufficient, for standing purposes, simply to show they were plan “participants”—a showing made to the appellate court’s satisfaction.

Mitchell H. Rubinstein

Employers Spend 30% of Compensation On Employee Benefits 30%

Workplace Prof Blog is reporting on a new statistics just released from the Department of Labor’s Bureau of Labor Statistics
These stats show that slightly over 30% of employee compensation consists of fringe benefits. The average wage (not including fringe benefits) was $20.49 per hour. If my math is correct, that is $819.60 per week and $42, 619 per year.

Mitchell H. Rubinstein

Termination Of Long Term Disablity For Employee With AIDS Does Not Violate ERISA

Jenkins v. Price Waterhouse, ___F.3d____(7th Cir. May 4, 2009), is an important ERISA decision. The 7ht held that the decision to terminate long term disability benefits of an Employee with AIDS did not violate ERISA. Why? Because the employee's medical condition improved. At least 4 health professionals concluded that the plaintiff could at least attempt full time sedentary employment.

Under ERISA, when a plan instills an administrator with discretion to determine eligibility for benefits, as most plans due, the court applies a very deferential arbitrary and capricious standard. All that is needed is rational support in the record for the decision to stand. Moreover, under Met Life v. Glenn, 128 S.Ct. 2343 (2008), when the administrator is operating under a "conflict of interest" (in that the administrator both determines  benefits and has the obligation to pay benefits-as many plans due), the standard of review remains the same, but that conflict is a factor that can be examined to see if there was an abuse of discretion.  

The decision is realatively short and is well written. It would make a wonderful teaching case. The case may be interesting to researchers for another reason. It is full of statistics concerning the life expectancy of persons with AIDS.

Mitchell H. Rubinstein 

CBA's language suggested healthcare benefits were vested, could not be changed

Retirement benefits cases are always difficult for courts to decide. Cases involving health insurance are even more difficult to decide. Tackett v M&G Polymers, USA, ___F.3d___ (6th Cir. April 3, 2009), is one such important case primarily dealing with retiree health insurance.
The 6th held that a group of retired employees presented a plausible claim that their former employer unlawfully required them to pay part of their healthcare costs. Hence, the employees could go to trial on their claim that their benefits vested and could not be changed. The court cited collective bargaining agreement language suggesting that retirees would receive a "full Company contribution" toward their healthcare premium costs. This language indicated to the court that the employer and the employees' union intended the employer to pay eligible retirees' expenses. In agreement with prior Sixth Circuit case law, the court also indicated that vesting of health benefits was likely tied to their pension eligibility. On a jurisdictional issue, the court also held that Labor Management Relations Act, §301, did not require the employees to show a violation of the agreement before a hearing on the merits, pointing to eligibility language that was sufficient to survive a motion to dismiss. However, the lower court properly dismissed their claim for relief under Employee Retirement Income Security Act, §502(a)(3), because § 502(a)(1)(B) provided them with a means for obtaining complete relief.

Mitchell H. Rubinstein

NYC Pensions

Many employees do not fully understand the pension system which they are enrolled in. Jeff Friedlander's March 23, 2009 New York Law Journal article entitled A Brief Introduction To NYC Pension Law may help (registration required). As the article states:

First, there is no single New York City pension fund; there are five: the New York City Employees' Retirement System (NYCERS), which is the largest of the group, the New York City Police Department Pension Fund, the New York City Fire Department Pension Fund, the New York City Teachers' Retirement System, and the New York City Board of Education Retirement System.¹ These funds are each administered by a different board of trustees, with authority shared by public and union representatives. With close to 600,000 active and retired members and assets exceeding $83 billion, the city funds are cumulatively one of the largest public pension systems in the country.²

The second salient feature of the system is that all five pension funds are defined benefit plans. That is, retirees who have made their required member contributions receive a specified amount at retirement, generally based on years of service and salary, as opposed to defined contribution plans, in which benefits generally are based on amounts contributed and the investment earnings on those contributions.

Defined benefit plans have become rare in the private sector, where defined contribution plans are now the norm. In times of fiscal austerity and poor market conditions, a member of a defined benefit pension plan holds a very valuable asset.

The final initial point is that city pension benefits are contractual rights that are protected by the New York state constitution from any diminishment or impairment.³ This means that budget cuts or other cost saving measures can never target existing pension benefits, and the Legislature is barred from amending the pension laws to diminish in any way the benefits of existing members or retirees.

Once a benefit is conferred, it cannot be taken away. Therefore, any consideration of pension reform aimed at reducing pension costs must be directed solely at the benefits of prospective new members of the system.

The article then goes on and summarizes recent litigation in this important area of public sector employment law.

Mitchell H. Rubinstein

Delphi may eliminate retiree health benefits

In re Delphi Corp,___ Bank. Rep. ___ (S.D.N.Y.March 10, 2009) is an interesting case. A bankruptcy judge held that  Delphi Corp may eliminate retiree health care benefits. Section 1114 of the Bankruptcy Code, which provides that a debtor in possession "shall timely pay and shall not modify any retiree benefits," does not apply in this instance because the Delphi retirees' benefits had not vested. Delphi has "very clearly" made the showing that the benefit plans are modifiable at will; thus, the company had the right to terminate or modify the benefits unilaterally pursuant to non-bankruptcy law. The court noted that some 15,000 present and former employees will be impacted by the ruling, "many of whom would clearly be affected in very dire ways." However, Delphi had put off this measure for nearly four years, and "over the last two or three months their business, like the auto business generally, has gone through such enormous adverse changes that I recognize that such changed circumstances lead them to make this decision now."

Mitchell H. Rubinstein

DOL Issues Model COBRA Notices Under Federal Stimulus Legislation

The DOL issued model COBRA notices and instructions on its web site. This should be very helpful to both employers and employees. There are 4 sets of model notices which are as follows:

General Notice (Full version) Plans subject to the Federal COBRA provisions must send the General Notice to all qualified beneficiaries, not just covered employees, who experienced a qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event. This full version includes information on the premium reduction as well as information required in a COBRA election notice.

General Notice (Abbreviated version) The abbreviated version of the General Notice includes the same information as the full version regarding the availability of the premium reduction and other rights under ARRA, but does not include the COBRA coverage election information. It may be sent in lieu of the full version to individuals who experienced a qualifying event during on or after September 1, 2008, have already elected COBRA coverage, and still have it.

Alternative Notice Insurance issuers that provide group health insurance coverage must send the Alternative Notice to persons who became eligible for continuation coverage under a State law. Continuation coverage requirements vary among States, and issuers should modify this model notice as necessary to conform it to the applicable State law. Issuers may also find the model Alternative Notice or the abbreviated model General Notice appropriate for use in certain situations.

Notice in Connection with Extended Election Periods Plans subject to the Federal COBRA provisions must send the Notice in Connection with Extended Election Periods to any assistance eligible individual (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who:

1. Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and
2. Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

This notice includes information on ARRA�s additional election opportunity, as well as premium reduction information. This notice must be provided by April 18, 2009.

Mitchell H. Rubinstein

Retirees no longer AT&T plan participants, lacked ERISA claim

Chastain v AT&T, ___F.3d____(10th Cir. March 9, 2009), is an interesting decision. The 10th held that retired AT&T employees lacked standing to assert an ERISA claim against AT&T after their retirement benefits were transferred to AT&T spin-off Lucent Technologies and then eliminated in part, since the retirees were no longer participants in an AT&T benefits plan. As the court stated, "even if AT&T at one time had an irrevocable obligation to the appellants, it passed that obligation to Lucent when it passed the administration of the benefits plans to Lucent."  The court also stated that if the appellants have any colorable claim to vested benefits, it is against Lucent. The 10th declined to adopt the doctrine of "but-for" standing, which asserts plaintiffs would have been participants in an AT&T plan "but for the alleged malfeasance of a plan fiduciary," noting the Tenth Circuit has expressly rejected the doctrine and that its precedent on the issue "is unequivocal."

Mitchell H. Rubinstein

IRS and DOL Issue Guidance On COBRA 65% Subsidy Under Federal Stimulus Legislation

The IRS and the DOL have just issue guidance on the changes in COBRA as a result of the federal stimulus that we all heard so much about. The DOL Notice states:

                              

The American Recovery and Reinvestment Act of 2009 (ARRA)       provides for a 65% reduction in COBRA premiums for certain assistance       eligible individuals for up to 9 months. An assistance eligible individual       is a COBRA “qualified beneficiary” who meets all of the following       requirements:

COBRA Premium Reduction Fact Sheet        COBRA       FAQs for Workers & their Families     Job Loss Poster (8½" x 11") Job Loss Poster (11" x 17") Flyer for: Employers • Employees IRS Info on COBRA Premium Reduction

             

• Is eligible for COBRA continuation coverage at any time during the period beginning September 1, 2008 and ending December 31, 2009;        
•          

  Elects COBRA coverage (when first offered or during the additional election period), and        

•       Has a qualifying event for COBRA coverage that is the employee’s involuntary termination during the period beginning September 1, 2008 and ending December 31, 2009.       

      

Those who are eligible for other group health coverage (such as a spouse's plan) or Medicare are not eligible for the premium reduction. Other limitations may also apply. There is no premium reduction       for periods of coverage that began prior to February 17, 2009.

      

Individuals who request treatment as an assistance eligible individual and are denied such treatment by their group health plan may have the right to appeal to the Department. The Department is currently developing a process and an official application form that will be required to be completed for appeals.

• COBRA  Premium Reduction Provision  

• Joint  Explanatory Statement of the Committee of Conference on the COBRA Premium  Reduction Provision  

• COBRA Premium Reduction Fact Sheet  

• Job Loss Poster (8½" x 11")  

• Job Loss Poster (11" x 17")  

• Flyer for Employers • Flyer for Employees  

• COBRA Continuation Health Coverage FAQs for Employees  

• COBRA Continuation Health Coverage FAQs for Employers  

• Basic COBRA Information for employees • [Spanish]  

• Basic COBRA Information for employers • [Spanish]  

• Other Job Loss Resources  

• IRS Information on COBRA Premium Reduction  

• DOL Information Related to the American Recovery and Reinvestment Act of 2009

Mitchell H. Rubinstein