Wednesday, March 12, 2014
Congratulations to blog-emeritus Paul Secunda for being named Vice-Chair of the Department of Labor's ERISA Advisory Council. According to the announcement:
U.S. Secretary of Labor Thomas E. Perez today announced the appointments of five new members to the 2014 Advisory Council on Employee Welfare and Pension Benefit Plans, known as the ERISA Advisory Council. He also announced the 2014 chair and vice chair of the council, which are Neal S. Schelberg and Paul M. Secunda respectively.
"The dedicated experts who volunteer to serve on the ERISA Advisory Council are a wonderful resource," said U.S. Secretary of Labor Thomas E. Perez. "I have no doubt the 2014 council will build upon the impressive body of benefits research and analysis begun by their predecessors."
. . . Secunda is a professor at Marquette University Law School in Milwaukee, and he has authored books and articles on employee benefits law. He previously practiced labor law in Philadelphia, and Secunda is a past chair of the section on employee benefits and executive compensation of the Association of American Law Schools.
Nice job, Paul!
Thursday, February 27, 2014
This has been a busy semester for the Labor and Employment Law Program at Marquette University Law School. In addition to the Speaker Series I wrote about this past Tuesday, we are also honored to be hosting the Third Annual ERISA, Employee Benefits and Social Insurance National Conference (program at this link) on March 28, 2014 (this follows up to wonderful ERISA conferences at Washington University Law and Michigan Business the two previous years).
To say we have an embarassment of riches does not quite capture the remarkable array of papers that are to be presented. When you add a terrific luncheon keynote speaker in the person of Assistant Secretary of Labor for the Employee Benefit Security Administration, Phyllis Borzi, the cool factor (even for ERISA) is off thc charts.
Panels include papers on ERISA claim and plan issues, the Affordable Care Act and ERISA, the future of public pension plans and other non-ERISA pension plans here and abroad, bankruptcy issues surrounding pensions and other legacy costs, and emerging challenges for social insurance and pension programs.
Should be a great program!
Tuesday, February 25, 2014
I am excited to announce the kick-off of a new speaker series in labor and employment law, sponsored by the Labor and Employment Law Program at Marquette University Law School.
We are really starting the program off with a bang.
On March 27th, in conjunction with the Third Annual ERISA National Conference at Marquette, Assistant Secretary of Labor and head of the Employee Benefit Security Administration (EBSA) Phyllis Borzi will be speaking about the Affordable Care Act. You can register here.
Finally, on April 8th, Professor Takashi Araki, former Dean and Professor of Law at the University of Tokyo Law School and Visiting Professor this semester at Harvard Law School, will be coming to speak about contemporary topics in Japanese employment law. You can register here.
All events are scheduled at noon and include lunch.
Friday, February 21, 2014
Last spring, the Wefel Center for Employment Law at Saint Louis University held a fantastic symposium on Teaching Employment and Labor Law. I can say that with appropriate modesty because I had very little to do with it. The symposium was organized by Tonie Fitzgibbon, my amazing colleague, who has been the Director of our center for twenty years, and who was the Assistant Director at its inception. I'm pretty sure it was my colleague Miriam Cherry's idea, and Matt Bodie, Elizabeth Pendo, and I all agreed it would be a good topic. In addition to us, Marion Crain and Pauline Kim (Wash. U.), Rachel Arnow-Richman (Denver), Laura Cooper (Minnesota), Marty Malin (Chicago-Kent), Nicole Porter (Toledo), Joe Slater (Toledo), and Kerri Stone (Florida International) all gave presentations.
The Saint Louis University Law Journal has just published the papers connected with the symposium, so now everyone can read about what we who were there got to hear. From the table of contents:
Teaching Employment and Labor Law Symposium
Susan A. FitzGibbon
Teaching Employment and Labor Law
A Holistic Approach to Teaching Work Law
Marion Crain & Pauline T. Kim
Employment Law Inside Out: Using the Problem Method to Teach Workplace Law
Teaching Employment Discrimination Law, Virtually
Miriam A. Cherry
A Proposal to Improve the Workplace Law Curriculum from a Compliance Perspective
Nicole Buonocore Porter
Teaching the Post-Sex Generation
Kerri Lynn Stone
You should check them out.
February 21, 2014 in Conferences & Colloquia, Disability, Employment Common Law, Employment Discrimination, Faculty Presentations, Labor Law, Pension and Benefits, Public Employment Law, Scholarship, Teaching | Permalink | Comments (1) | TrackBack (0)
Thursday, February 20, 2014
The Departments of Labor, Treasury, and Health and Human Services have announced the publication of final regulations implementing a 90-day limit on waiting periods for employer provided health coverage.
The final regulations require that no group health plan or group health insurance issuer impose a waiting period longer than 90 days after an employee is otherwise eligible for coverage. The rules do not require coverage be offered to any particular individual or class of individuals, and it doesn't affect non-time-period conditions for eligibility, such as meeting certain sales goals, earning a certain level of commission, or successfully completing an orientation period. Requiring employees to complete a certain number of hours before becoming eligible for coverage is generally allowed as long as the requirement is capped at 1200 hours. The rules also address situations in which it cannot be determined that a new employee will be working full-time.
The departments are issuing a companion proposed rule for comment. That rule would limit the maximum duration of an otherwise permissible orientation period to one month. This proposal will be open for public comment. Comments must be filed by April 25, 2014.
Both the final and proposed rule are scheduled to be published on Monday, February 24, 2014.
Monday, January 27, 2014
DeBofksy on How Courts Interpret the Meaning of “Civil Action” as Applied to Benefit Disputes Under ERISA
Mark D. DeBofsky (DeBofsky & Associates, P.C. and John Marshall Law School) has just posted on SSRN his new paper: How Courts Interpret the Meaning of “Civil Action” as Applied to Benefit Disputes Under ERISA.
Here is the abstract:
Congress authorized claimants seeking employee benefits to bring a “civil action” to recover benefits due or obtain appropriate equitable relief. 29 U.S.C. § 1132(a). The Federal Rules of Civil Procedure contemplate only one form of civil action; and civil actions are to be adjudicated utilizing the procedures specified by the civil procedure Rules and by the Federal Rules of Evidence. Yet federal courts have denied ERISA benefit claimants the right to take discovery normally permitted in civil actions, the right to trial by jury, and even, in most cases, the right to a trial in open court involving the examination and cross-examination of witnesses.
This article explores how the courts developed a quasi-administrative law regime governing ERISA benefit disputes despite Supreme Court rulings defining the contours of what a “civil action” should consist of. The article further examines how ERISA cases are litigated and the scope of ERISA adjudications. Questions as to whether the current regime for litigating ERISA cases violates claimants’ Constitutional due process rights are also raised, along with a discussion as to whether remands of ERISA cases violate the finality rule of Article III of the U.S. Constitution.
Very interesting issue in ERISA law. Many take the current scheme of benefit disputes for granted, but Mark raises some troubling litgation and constitutional issues surrounding the current practice of law in this area of employee benefits law.
Friday, January 24, 2014
The Fourth Circuit issued an opinion yesterday on an issue of first impression under the ADA as it's been amended by the ADAAA. In Summers v. Altarum Institute Corp, the court held that a temporary disability can be a disability for purposes of the Americans with Disabilities Act, reversing a dismissal and remanding the case for further proceedings.
The plaintiff was a government contractor who was assigned to a workplace he had to travel some distance to get to. One day, on the way to work, he fell getting off of his train and seriously injured both legs. Without surgery, pain medication, and physical therapy, it would likely be a year before he would be able to walk, and with that treatment, it would likely be seven months. Almost immediately after the injury, the plaintiff suggested to his employer ways that he could work remotely and then work up to working again on site for the client, but instead of working on a plan, his employer encouraged him to take short term disability and then later terminated him. The plaintiff sued, alleging that he was discharged because of his disability.
The district court dismissed his claim, holding that "a temporary condition, even up to a year, does not fall within the purview of the [A]ct,” so the plaintiff failed to allege that he was disabled within the meaning of the ADA. The court also suggested that the plaintiff was not disabled because he could have worked with the assistance of a wheelchair.
The court of appeals held that the plaintiff was substantially limited in the major life activity of walking even though he would eventually be able to walk again. The court acknowledged that under pre-ADAAA precedent, namely Toyota v. Williams, 534 U.S. 184 (2002), that temporary disabilities were not covered. In the ADAAA, though, Congress explicitly expanded the definition of disability and explained it was doing so to reverse the effects of narrowing Supreme Court decisions including Toyota.
Moreover, Congress directed the EEOC to revise its regulations to broaden the definition, and the EEOC did so after notice and comment. The revised regulations provide that effects of an impairment lasting even less than six months can be substantially limiting enough to constitute a disability. Duration of the impairment is one factor to consider, but severity of the impairment is also important. The more severe the impairment, the shorter the duration needed for the impairment to substantially limit a major life activity. Finally, the court held that the cause of the impairment was not relevant, at least between whether an impairment was caused by a long-term or permanent disability or an injury because the EEOC's regulations use impairment and injury interchangeably in several places in the regulations. The court gave all of these regulations Chevron deference finding that they were highly reasonable interpretations of the amended statute.
Regarding the possibility that the impairments might last less time with surgery, pain medication, and physical therapy, and that the plaintiff could be mobile enough to get to the workplace with a wheelchair, the court noted that those factors could not be considered in deciding whether the plaintiff had a disability. Doing so may have been appropriate under pre-amendment Supreme Court precedent, namely Sutton v. United Airlines, 527 U.S. 471 (1999), although the court did not cite to that case. Again, Congress specifically abrogated that case along with the other cases that narrowed the definition of disability. The court of appeals noted that the EEOC regulations prohibited considering mitigating measures, and even more importantly, that to consider an accommodation which would allow the plaintiff to work before considering whether he was an individual with a disability turned the proper inquiry on its head in a way that would eviscerate the ADA.
The plaintiff had also raised a failure to accommodate claim at the district court level, but did not raise it on appeal, and so the court of appeals did not analyze that claim.
This case is a very important one for a number of reasons. It is the first court of appeals case to consider whether a person who suffers a temporary impairment can be considered disabled under the ADA. The decision also confirmed that the disability question is not going to be, in many cases, a big hurdle for a plaintiff, and that the EEOC regulations should be afforded deference. It also provides a context-specific test for determining whether a person is disabled that sticks to the statutory language of whether the impairment at issue substantially limits a major life activity. Substantiality is to be considered both as a question of duration, but also as a question of quantity and quality.
The case will obviously impact many situations in which worker injuries cause relatively serious and relatively long-lasting impairments, and may impact whether employers can continue to distinguish in accommodations between on-the-job and off-the-job injuries. It also may influence whether at least some limitations caused by pregnancy have to be accommodated. Thus, this is a decision with potentially far-reaching consequences.
h/t Jonathan Harkavy
Wednesday, January 8, 2014
Feuer on Questions of Justice and Law Raised When an Employee Benefits Plan Beneficiary Strangles His Grandmother, the Participant, to Death
On what might already have won best title of the year for a paper, Albert Feuer has a new piece out entitled: Questions of Justice and Law Raised When an Employee Benefits Plan Beneficiary Strangles His Grandmother, the Participant, to Death, 32 Tax Management Weekly Report 1756, 12/23/2013.
The following is a brief summary provided by Albert:
A recent New York Daily News story, “NYC Law Firm Files Suit to Bar Slain Employee's Killer from Collecting on 401(k),” describes a heinous crime, and suggests the crime was compounded by foolish employee benefits law that may permit the slayer to keep the death benefits. My article responds that the so-called slayer rule that deprives a slayer of a plan participant of the participant’s death benefits may lead to injustice in some cases. Moreover, I argue that ERISA allows state criminal law to deprive the slayer of such benefits, but does not allow state non-criminal law to deprive the slayer of such benefits, and adherence to the slayer rule may create tax qualification issues for pension plans.
Another interesting, pulled-from-the-headlines piece by Albert involving the intersection of the real world and ERISA. Check it out when you have the chance.
Monday, December 16, 2013
Unanimous Supreme Court in Heimeshoff Permits Contractually-Based SOLs in ERISA Denial of Benefit Cases
This morning, the United States Supreme Court issued its decision in Heimeshoff v. Hartford Life & Accidental Life Ins. Co., concerning statute of limitation accrual issues for benefit claims under Section 502(a)(1)(B) of ERISA.
The Court unanimously held that Hartford's Long Term Disability Plan's requirement that any suit to recover benefits be filed within three years after “proof of loss” is due is enforceable. More specifically, "[a]bsent a controlling statute to the contrary, a participant and a plan may agree by contract to a particular limitations period, even one that starts to run before the cause of action accrues, as long as the period is reasonable." Causes of action for benfit under ERISA do not start to accrue until a final internal appeal decision. Because Heimeshoff failed to file a claim for long-term disability benefits with Hartford within the contractual SOL period, the Court concluded her claim was rightfully denied by Hartford.
While ERISA does not provide a statute of limitations for denial of benefit claims, many plan administrator have in place a contractual 3-year limitations period like Hartford's. Writing for the unanimous Court, Justice Thomas held the Plan’s limitations provision enforceable under the rule set forth in Order of United Commercial Travelers of America v. Wolfe, 331 U. S. 586, 608, which provides that a contractual limitations provision is enforceable so long as the limitations period is of reasonable length and there is no controlling statute to the contrary. This conclusion was especially supported, according to the Court, by the ERISA principle that contractual limitations should be enforced as written under ERISA's written plan rule.
There may still be limitations in place in the future to finding these contractual SOLs valid. If the limitations period is unreasonably short or if there is a controlling statute to the contrary, the Plan’s limitations provision can be overridden. Moreover, the Court held that courts are well equipped to apply traditional doctrines, such as waiver or estoppel and equitable tolling that nevertheless may allow participants to proceed on stale claims. However, consider in this regard Heimseshoff in light of U.S. Airways vs. McCutcheon.
Although Heimeshoff says traditional equitable doctrines may circumscribe application of statutes of limitations to protect participants, McCutcheon said plans can include terms that explicitly preclude application of traditional equitable doctrines. So does this mean that employers will quickly amend their plans to preclude application of equitable doctrines? It very well could be the case.
Here, in any event, the period was not unreasonably short and, in fact, most internal benefit appeals are completed within one year so that there should be sufficient time for most ERISA plaintiffs to bring their suit in a timely manner. Even Justice Ginsburg remarked in oral argument that there might have been essentially legal malpractice in this case in that Heimeshoff's attorney may have failed to diligently pursue her claim (she had about a year to file her case even after her internal appeal had been finally denied).
Although this decision may not be that important in the long-run as there is not much evidence that plan administrators have used these SOLs to prevent participants to bring claims, the one part of the decision that seemed fanciful to me was this idea that plan participants and beneficiaries "agree" with their plans to these SOLs. The Court said this with regard to this critical aspect of the case: "the parties have agreed by contract to commence the limitations period at a particular time."
As I wrote previously when oral argument occurred in this case in October, benefit plans are classic contracts of adhesion with usually no bargaining between the parties taking place. It is legal fiction to say that most participants consented to this provision. Nevertheless, it is hard to argue, under the circumstances, that this unilateral term is unreasonable, as long as equitable principles and regulations exist to prevent plan administrators from gaming the system to prevent judicial review of claims decisions. Whether such equitable principles will continue to exist, however, post-Heimeshoff and McCuthcheon is anyone's guess but I am skeptical.
Somwhat called this case. Here is what I wrote in October: "I fear this pro-employer/pro-plan sponsor court will adopt the written plan requirement rule and permit the plan sponsor to unilaterally set in the plan document an accrual date and a length for the statute of limitations."
Susan Bisom-Rapp (Thomas Jefferson) and Malcolm Sargeant (Middlesex U. Business School, UK) have just posted on SSRN a working draft of their new paper, It's Complicated: Age, Gender, and Lifetime Discrimination Against Working Women—The U.S. and the U.K. as Examples. Susan presented this at the 8th Annual Colloquium on Recent Labor and Employment Law Scholarship held by our friends at UNLV. From the abstract:
This paper considers the effect on women of a lifetime of discrimination using material from both the U.S. and the U.K. Government reports in both countries make clear that women workers suffer from multiple disadvantages during their working lives, which result in significantly poorer outcomes in old age when compared to men. Indeed, the numbers are stark. In the U.S., for example, the poverty rate of women 65 or older is nearly double that of their male counterparts. Older women of color are especially disadvantaged. The situation in the U.K. is comparable. One study, analyzing gender and age group, found that women in the U.K. were at a greater risk of poverty throughout their working lives. That study revealed a significant statistical difference in poverty risk between men and women under the age of 50, which decreased for the 50-64 age group, and then increased dramatically for those 65 and older, resulting in a poverty gap that was more than twice the average for the whole population in the UK.
To capture this phenomenon, this paper develops a model of "Lifetime Disadvantage," which considers the major factors producing unequal outcomes for working women at the end of their careers. One set of factors falls under the heading "Gender-Based Factors." This category concerns phenomena directly connected to social or psychological aspects of gender, such as gender stereotyping and women’s traditionally greater roles in family caring activities. A second set of factors is titled "Incremental Disadvantage Factors." While these factors are connected to gender, that connection is less overt, and the disadvantage they produce increases incrementally over time. The role of law and policy in ameliorating or exacerbating women’s disadvantages is considered in conjunction with each factor, revealing considerable incoherence and regulatory gaps.
An effective and comprehensive regulatory framework could help compensate for these gender-based disadvantages, which accumulate over a lifetime. Using the examples of the U.S. and the U.K., however, we demonstrate that regulatory schemes created by "disjointed incrementalism" (policies that tinker along the margins without considering women’s full life course) are unlikely to vanquish systemic inequality on the scale of gender-based lifetime discrimination.
Really interesting work.
Friday, December 13, 2013
Today, the United States Supreme Court granted certiorari in a case where the 6th Circuit found that a company may have breached its fiduciary duties under ERISA by continuing to offer company stock as a retirement plan investment option even after the value of the stock plunged.
The case is Fifth Third Bancorp v. Dudenhoeffer, No. 12-751 (don't ERISA cases have the best names?) and here is the decision below in the 6th Circuit. SCOTUSBlog says the case is likely to be heard in March. The Solicitor General had urged the Court to hear the case.
The issue is whether courts should apply a presumption of prudence or reasonableness (sometimes called the Moench presumption based on a similar case by that name in another circuit court) when a company, like Fifth Third, decides to retain investments in its own securities for its ESOP (employee stock ownership plan) when the stock's price dropped 74 percent because of the company's involvement in subprime mortgage lending. The employees in the retirement plan claim they were never alerted to the company's new riskier investment course.
Participants in Fifth Third's ESOP filed an ERISA class action, asserting that the company's actions violated their fiduciary responsibilities to plan participants and beneficiaries by imprudently investing in company stock. Initially, the U.S. District Court for the Southern District of Ohio had determined that Fifth Third did not violate ERISA because plan fiduciaries are entitled to a “presumption of prudence” permitting investment in their own stock and the plaintiffs had not overcome that presumption by showing that the company had plausibly abused their discretion in investing the ESOP money in the company stock.
The participants appealed to the 6th Circuit, supported by an amicus brief by the Department of Labor (DOL). The DOL maintains that the presumption of prudence should not apply and that plaintiffs had plausibly alleged a breach of fiduciary duty. The 6th Circuit agreed, at least as far as holding that the presumption should not be applied at the pleading stage of the lawsuit.
The 6th Circuit also held that Fifth Third acted as an ERISA fiduciary when it incorporated its Securities and Exchange Commission (SEC) filings into the ESOP's plan documents. The Court did not take cert. on a challenge to this finding.
The case law had been trending in favor of the presumption of prudence in these stock-drop cases in recent years, with the Sixth Circuit being a notable exception. It is always hard to predict where the Court will come out on ERISA fiduciary cases, but given that the Court granted cert. on the question as presented by the company (and did not re-write the question as requested by the Solicitor General), we may gain some insight. The question presented is:
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 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 . . . and every other circuit to address the issue.
Phrasing the question presented in such a leading manner suggests only one possible reasonable answer upholding the presumption of prudence in ERISA stock drop cases. But we shall see.
Monday, December 9, 2013
6th Cir: ERISA Remedy for Wrongful Denial of Benefits May Include Disgorgement Remedy under Section 502(a)(3)
Thanks to friend of the blog, Mark DeBofsky, for brining to my attention a potentially game-changing ERISA legal remedies case, Rochow v. Life Insurance Company of North America (6th Cir. Dec. 6, 2013).
Without seeking to lay out the byzantine world of ERISA remedial law, the important question in the case is whether a plaintiff can maintain both a Section 502(a)(1)(B) claim for benefits and Section 502(a)(3) claim for breach of fiduciary at the same time. If so, the question remains whether disgorgement of profits is cognizable remedy under Section 502(a)(3) against the insurance company for failure to pay the benefits on a timely basis.
Seems like this is the important holding by the 2-1 majority: “[W]e hold that disgorgement is an appropriate equitable remedy under § 502(a)(3) and can provide a separate remedy on top of a benefit recovery.” This is a welcome development for ERISA plaintiffs and their attorneys, as ERISA's rememdial scheme has been narrowly construed over the years to prevent plaintiffs from receiving full recovery for their losses.
The debate going forward is whether the Supreme Court's Varity case allows this outcome. That case stands for the proposition that where a plaintiff has a remedy for benefits under 502(a)(1)(B), a remedy on the same claim cannot be had for breach of fiduciary duty under 502(a)(3), as 502(a)(3) is only supposed to apply if no other provision does. It is the catch-all. Here, the court says essentially these are two different claims so Varity does not apply. It also says that the disgorgement sum of $3.7 million dollar is the appropriate remedy given the size of the benefit denied (almost $1 million disability claim), the time elapsed, and the fact that the benefit owed was commingled with other insurance company monies.
I think this conclusion is well-reasoned and consistent with other circuit decisions, but I suspect we will hear both the dissent’s “improper repackaging of the benefits claims” argument and that disgorgement is not a separate claim from the underlying benefits claim argument again soon. Indeed, I suspect the dissent's argument will gain some traction with conservatives on the 6th Circuit, which might make rehearing en banc more likely.
I assume the defendant will move for reconsideration and/or rehearing en banc. I wouldn’t be surprised if the decision survives circuit review, if it is not appealed to the Supremes. Stay tuned, as this will likely change the way ERISA plaintiff attorney approach cases where the benefit denial is also amounts to a breach of fiduciary duty.
Monday, December 2, 2013
Ed Zelinsky (Cardozo) has an interesting post on his OUP blog discussing a possible compromise to the on-going dispute between for-profit religious corporations, like Hobby Lobby, and the Obama administration's Affordable Care Act's (ACA's) contraceptive coverage mandate.
Here's a taste:
This entire controversy is unnecessary. The tax law contains devices for reconciling the religious concerns of employers like Hobby Lobby with the policy of expanding medical coverage: health savings accounts (HSAs) and health reimbursement arrangements (HRAs). The current regulatory exemption from the contraception mandate should be amended to include for-profit employers and to exempt from the federal contraception mandate employers (both non-profit and profit-making) who maintain HSAs or HRAs for their respective employees. Compromise along these lines would respect the genuinely-held views of religious minorities while implementing the federal policy of broadening access to health care.
An HSA/HRA compromise would eliminate the complicity of religious employers in the provision of contraception methods to which they object while enabling such employers’ employees to obtain on a pre-tax basis any medicines or devices such employees want, including contraception to which their employers object. Employers’ payments into their employees’ HSAs and HRAs would be the equivalent of the cash wages paid to such employees, wages which the employees are free to spend as they choose.
Personally, I do not see a RFRA or free exercise problem with ACA's mandate because it is not a law that targets religion or otherwise substantially burdens religious rights of individuals, for-profit corporations do not and should have have free exercise rights, and the exemption from the law for for-profit religious employers would permit them to inappropriately interfere with the personal health care decisions of their employees. I also do not know what "religious minorities" Ed is referring to, since corporations like Hobby Lobby seek to impose their very much dominant Christian religious practices on their employees (Christian and non-Christian alike).
All that being said, Ed should be given credit for thinking outside of the box and coming up with a compromise which might satisfy both sides of the debate. The likelihood of this suggestion being taken up in the short-term now that the Supreme Court has granted cert. in the Hobby Lobby case is unlikely. However, if Hobby Lobby and similar religiously-oriented corporations should prevail (a real possibility with the current make up of the court), then this proposal might be a way in which this type of much needed health care coverage could be provided to employees of for-profit religious employers.
Monday, November 25, 2013
Dana M. Muir (Stephen M. Ross School of Business at the University of Michigan) has just posted on SSRN her recently published piece in the Iowa Law Review entitled: Choice Architecture and the Locus of Fiduciary Obligation in Defined Contribution Plans.
Here is the abstract:
The insights of choice architecture have led to expanded use of default settings in defined contribution (DC) plans in both the United States and Australia. The two countries have taken somewhat similar approaches to the content of default investment products. However, they differ significantly in how they allocate the legal responsibilities associated with those default investment products. This paper compares the two approaches, particularly regarding the role of disclosure and the assignment of fiduciary responsibility. It concludes that Australia’s approach offers two lessons for the U.S. First, disclosure to and education of participants who are defaulted into investment products is inadequate to negate conflicts of interest and investment risk. Second, fiduciary responsibility for default investment products should be co-located with investment expertise and management. The paper suggests development of a new investment product, Safe Harbor Automated Retirement Products (SHARPs), based on these lessons.
I have had the privilege of reading this piece previously and like all of Dana's piece, it does a remarkable job identifying a problem based on a comparative analysis and then providing a practical, on-the-money solution to the problem that all ERISA stakeholders should be able to embrace as an effective approach to these problems with defined contribution plans. I hope there are perceptive legislators out there paying attention who will sponsor such legislation soon in order to improve the US occupational pension system for all workers.
Monday, November 18, 2013
In Cosey v Prudential, (4th Cir. Nov. 12, 2013), the Fourth Circuit held that the common plan formulation "proof satisfactory to the administrator" does not unambiguously confer discretion on the administrator and thus subjects the administrator's decisions to de novo judicial review (as opposed to arbitrary and capricious review under the Firestone/Glenn standard).
Like Jon, I find this decision interesting, as it has the potential to cut back on the abuse-of-discretion standard of review for many ERISA plans. However, I suspect that in response to this Court's decision, we are likely to see many plan amendments adding language which more unambiguously states the plan's intention to get the benefit of Firestone discretionary review for its benefit determination decisions.
Friday, November 8, 2013
Our own Paul Secunda has a new paper available for download on SSRN: An Analysis of the Treatment of Employee Pension and Wage Claims in Insolvency and Under Guarantee Schemes in OECD Countries: Comparative Law Lessons for Detroit and the United States. Here is the abstract:
To put the plight of the Detroit city employees into an international and comparative context when it comes to considering how their pension and wage claims should be treated in bankruptcy, it is instructive to consider how similar employee pension and wage claims would be treated in corporate insolvencies in other countries. It is necessary to focus on corporate insolvencies in other countries as the relevant comparison because most other countries do not have government systems in which municipalities have the same financial independence to borrow money and take on debt as municipalities do in the United States as part of the municipal bond market. Additionally, exploring the corporate bankruptcy systems in other countries provides a beneficial way to consider how to approach municipal bankruptcy situations in the United States, especially since corporate and municipal bankruptcies in the United States have a number of features in common when it comes to employee creditor claims.
This article therefore undertakes a comparative analysis of the treatment of pension and wage claims in insolvency proceedings and under guarantee schemes in the thirty-four member countries of the Organization of Economic Cooperation and Development (OECD) to understand whether the United States’ approach to employee claims in bankruptcy (in both the corporate and municipal context) is consistent with international norms. After completing the comparative analysis (which is comprehensively set out in the Country-by-Country Appendix at the end of this paper), this article then highlights common approaches to these issues, as well as important distinctions, setting up a number of tables to summarize the results.
All in all, most OECD countries have adopted hybrid systems which combine both some form of priority for both pension and wage claims, as well as some form of guarantee fund to complement the insolvency system. It is especially important to have these guarantee funds in place because insolvency processes can last for years, while the guarantee schemes are more likely to pay employees their claims within weeks or months. Unfortunately, the United States provides only limited priorities in most bankruptcy proceedings (and no such wage or pension priorities in Chapter 9 municipal proceedings), a guarantee system under the Pension Benefit Guaranty Corporation (PBGC) that is limited to pension plans, and then only to private-sector defined benefit pension plans. Neither private-sector defined contribution plans nor public sector pension plans come under a guarantee scheme in the United States.
One possible approach to employee claims in both municipal and corporate bankruptcies would be to pass pension and bankruptcy reform laws similar to what Canada enacted in 2008 as part of its Wage Earner Protection Program Act (WEPPA). Unlike the American system, WEPPA provides limited absolute priorities for pension contributions and a broad array of wage claims in insolvency, as well as a robust wage guarantee scheme. As to the policy reasons supporting this approach, it appears that greater emphasis is placed on the need to protect the weakness of employees creditors in the insolvency process as opposed to focusing on the need to ensure the existence of cheap, accessible credit for companies and governments.
This article concludes that given the relative vulnerability of employees and the sophistication of most lenders, the United States should balance these interests to provide increased protection for employment claims during municipal and corporate insolvency proceedings through giving heightened priority treatment to employees pension and wage claims in bankruptcy in tandem with a federally-operated guarantee scheme for both pension and wages claims.
An important and timely topic, especially as the public pension crisis looms large in this country.
Wednesday, November 6, 2013
Congratulations to Neville Harris (Univ. of Manchester School of Law (UK)) on the publication of his new book: Law in a Complex State: Complexity in the Law and Structure of Welfare.
From the publisher:
Approximately half of the total UK population are in receipt of one or more welfare benefits, giving rise to the largest single area of government expenditure. The law and structures of social security are highly complex, made more so by constant adjustments as government pursues its often conflicting economic, political and social policy objectives. This complexity is highly problematic. It contributes to errors in decision-making and to increased administrative costs and is seen as disempowering for citizens, thereby weakening enjoyment of a key social right.
Current and previous administrations have committed to simplifying the benefits system. It is a specific objective of the Welfare Reform Act 2012, which provides for the introduction of Universal Credit in place of diverse benefits. However, it is unclear whether the reformed system will be either less complex legally or more accessible for citizens.
This book seeks to explain how and why complexity in the modern welfare system has grown; to identify the different ways in which legal and associated administrative arrangements are classifiable as 'complex'; to discuss the effects of complexity on the system's administration and its wider implications for rights and the citizen-state relationship; and to consider the role that law can play in the simplification of schemes of welfare. While primarily focused on the UK welfare system it also provides analysis of relevant policies and experience in various other states.
This book represents the culmination of Neville's project on 'complexity' in welfare systems throughout Europe. Although the book focuses on the United Kingdom and some other non-US countries, the lessons to be learned are valuable ones as we consider going forward how to improve the complex social insurance system that we have here in the United States.
Wednesday, October 30, 2013
Friend of the blog Marcy Karin (ASU) writes to remind us of a symposium/CLE that readers of the blog will be interested in, especially those of you in the New York area. On Friday, Hofstra's Labor and Employment Law Journal will be holding a symposium on health legislation and the workplace. Forging a Path: Dissecting Controversial Health Legislation in the Workplace. The symposium will take place at Hofstra University Club, David S. Mack Hall, North Campus, Hofstra University, on Friday, November 1, 2013, from 9 am to 3 pm.
The lineup is impressive. Here are the details:
Keynote Speaker: Phyllis Borzi, Assistant Secretary for Employee Benefits Security, U.S. Department of Labor
Panel 1: The Evolution of Anti-Discrimination Disability Laws: Defining Reasonable Accommodation and Disability
- Rick Ostrove ’96, Partner, Leeds Brown Law, PC
- Keith Frank ’89, Partner, Perez & Varvaro
- Marcy Karin, Clinical Professor of Law and Director, Work-Life Policy Unit, Civil Justice Clinic, Sandra Day O’Connor College of Law at Arizona State University
- Jeffrey Schlossberg ’84, Of Counsel, Jackson Lewis LLP
- E. Pierce Blue, Special Assistant and Attorney Advisor, Office of Commissioner Chai Feldblum, U.S. Equal Employment Opportunity Commission
Panel 2: Workplace Uncertainties Under the ACA: Preparing the Employer and Employee for the Road Ahead
- Jill Bergman, Vice President of Compliance, Chernoff Diamond & Co., LLC
- Steven Friedman, Shareholder and Co-Chair, Employee Benefits Practice Group, Littler Mendelson P.C.
Panel 3: The FMLA 20 Years Later: What Have We Learned and Where Do We Go From Here?
- Robin Runge, Professorial Lecturer in Law, George Washington University Law School
- Rona Kitchen, Assistant Professor of Law, Duquesne University School of Law
- Joseph Lynett, Partner, Jackson Lewis LLP
- Nicole Porter, Professor of Law, The University of Toledo College of Law
Registration is $100 per person. Includes continental breakfast, lunch and CLE credits. Free for Hofstra University students, faculty, staff and administrators.
Sponsored by: Littler Mendelson P.C.
October 30, 2013 in Conferences & Colloquia, Disability, Employment Discrimination, Faculty Presentations, Pension and Benefits, Scholarship, Worklife Issues, Workplace Trends | Permalink | Comments (0) | TrackBack (0)
Thursday, October 24, 2013
SCOTUSblog has links to documents filed earlier this week by the federal government in a number of cases concerning whether corporations have free exercise rights under the First Amendment. Companies like Hobby Lobby have argued that the contraceptive mandate as interpreted by the Executive Branch to enforce the Affordable Care Act's mandate that preventive women's health services be covered without cost sharing substantially burdens the religious rights of either the corporation or its shareholders, and that the mandate thus violates either the First Amendment or the Religious Freedom Restoration Act.
The Tenth Circuit agreed with Hobby Lobby, finding that the mandate likely violates RFRA, and the federal government has filed a writ of certiorari in that case. Hobby Lobby apparently agrees that the Court should take the case. There is a circuit split between the Tenth Circuit and the Third and Sixth Circuit on this issue, and the Seventh and Eighth have issued unpublished decisions, granting stays of orders to comply with the mandate pending appeal of the issues. Finally, the Ninth Circuit, the Second Circuit, and the Minnesota Supreme Court have all found that corporations or their shareholders have some free exercise rights in other contexts. For more on that and another of these cases, see the cert petition in the Third Circuit case: Conestoga Wood Specialties Corp. v. Sebelius.
The circuit split, and the general agreement among the parties that the Court should resolve this issue make it more likely the Court will take one of these cases. The real question is whether the Court will consider only RFRA, and decide just Hobby Lobby or consolidate all of the pending petitions, or will consider both RFRA and the First Amendment.
Wednesday, October 23, 2013
Katie Kennedy (The John Marshall Law School) has asked me to post this Call for Papers concerning the Center for Tax Law and Employee Benefits upcoming symposium on the Affordable Care Act.
Here are some of the details: The Center for Tax Law and Employee Benefits is hosting the 12th Annual Employee Benefits Symposium next April 2014. The topic is “The Implementation of the Affordable Care Act.” W. Thomas Reeder, one of the top officials in Washington’s Affordable Care Act Office, will be the keynote speaker; so the Symposium will also be an opportunity to have the ear of a government representative.
The due date for an abstract is Tuesday, November 5, 2013. The Symposium’s date is Friday, April 4, 2014.