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ERISA Notes

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Form 5500 Filings and Other Required Disclosures: Which Deadlines Have Been Extended and Which Have Not

July 1, 2020

Form 5500 Deadline Not Extended

For those Retirement Plans intending to file Form 5500s this year, please note the DOL has not extended the filing date as of this writing.  The Form is still due by July 31, 2020 for those whose Plan year is between July 31, 2019 and July 31, 2020. We do not expect an all-encompassing extension of the deadline to be issued. If your Plan is in this situation and is still in need of an extension, we recommend you contact the DOL in advance of the due date, request an extension, state the reasons why, and provide a proposed definite date upon which the Form 5500 will be filed. Also, check with your Accountant for assistance.

Disclosure Related Extensions and Deadlines

The DOL has also issued guidance extending posting and filing dates for other disclosure-related notices required of Health and Welfare Plans on account of the current circumstances. Notices due from March 1, 2020 until 60 days following the end of the pandemic (“Emergency Period”) – such as annual funding notices, benefit statements, notice of benefit determinations, summaries, etc. – will not be considered late. Since the DOL has recognized that the disruption caused by COVID-19 may make it difficult or impossible to meet public disclosure posting and filing requirements in a timely manner, all that is required is a “good faith effort to file required public disclosure reports.” “Good faith” includes electronic posting of the required notices using email, text messages, and posting on continuous access websites to communicate with plan participants and beneficiaries whom the plan fiduciaries reasonably believe have effective access to such forms of communication. Plans should keep record of all communications with plan participants and beneficiaries to demonstrate the good faith effort. In such cases, the DOL will not pursue a civil enforcement action with regard to a delinquent or deficient report when these reporting violations are attributable to COVID-19. Time will also not be counted during the Emergency Period for determining deadlines for benefit claims, appeals of adverse determinations, requests for external review and filing of documents in support thereof, special enrollment periods, COBRA notices, COBRA premium payment deadlines, and COBRA election periods. Plans should be sure to toll time during the Emergency Period (including the 60 days following) and notify Participants accordingly.

Final Rule Regarding Electronic Noticing

Effective July 27, 2020, the DOL adopted a Final Rule which allows Retirement Plan administrators to use electronic media as a default option to furnish information to participants and beneficiaries of Plans subject to ERISA. Prior to this rule, participants had to opt-in to receive paperless notices. Now, participants must opt-out of electronic delivery if they prefer to receive paper copies of disclosures in the mail. The DOL expects this to significantly reduce the costs and burden of mailing documents, especially during the COVID-19 emergency. The Final Rule does not apply to Health and Welfare Plans at this time. Plans must meet certain requirements which can be reviewed here.

Contact our firm if you have any questions.

COVID-19 Guidance for Health Plans Regarding Treatment Coverage

June 30, 2020

Health & Welfare Trustees and professionals should be advised that on June 23rd, the Employee Benefits Security Administration ("EBSA") issued new and clarified guidance on coverages that must be extended to Coronavirus (“CV”) related procedures and treatments. Here, EBSA clarified what it had earlier stated with regard to CV treatment: it is to be covered with essentially no cost-sharing.

Diagnostic laboratory services are covered and the new guidance clarifies that ERISA plans are to, in essence, cover any/all CV related laboratory costs.

Our recommendation is simply that your Plan confirm with its insurers that they are in compliance with the EBSA directives/guidance. Some Plans may want to issue formal directives to their insurers and others may want to pass resolutions directing that such coverage be provided, depending upon current Plan language.

Health Plan Costs for Coronavirus have been Offset by Reduced Hospital Visits

May 1, 2020

Coronavirus has ravaged the economy, but the one surprising sector that has seen increased profits has been health insurance providers.

As Americans and hospitals have delayed elective surgeries and non-emergency treatment during the Coronavirus pandemic, healthcare spending has actually declined in recent months. Health Plan costs have remained about the same as these reduced services have been offset by the costs of COVID-19 related care.

COVID-19 and California’ Stay at Home Orders have also reduced traffic-related injuries caused by collisions by 60% in the state, and bicyclists and pedestrians saw a 50% reduction in traumatic injuries.  Some auto insurance carriers are offering rate reductions as a consequence.

While this trend may be short term as the economy begins to return to normal, health plans could largely benefit from an overall annual 2020 reduction in costs as COVID-19 related care lessens and the  gradual demand for other services such as elective care resumes.

Impact of CARES Act on
Retirement and Health Plans

March 31, 2020

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or “Act”) which contains several provisions that will impact employee benefit funds. Below is a summary of the changes, many of which only apply to defined contribution plans and are temporary or apply in times of a medical health crisis only. For retirement plans, CARES Act changes may be adopted immediately, but amendments formally adopting the change need to be enacted by December 31, 2022.  

Retirement Plans

Early Distributions: Waives the 10-percent early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for COVID-19-related reasons on or after January 1, 2020, for those experiencing hardship from Coronavirus (“Qualified Participant”).  In addition, income from such distributions would be subject to tax over three years, and the taxpayer may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions.

Increased Loans Amounts: The CARES Act also increases the limit on loans from qualified plans to $100,000 up to the full vested balance of the Qualifying Participant’s balance. The loan repayment start date may be delayed up to one year for any loan taken before December 31, 2020.

Qualified Participants: Qualified Participants include 1) those diagnosed with Coronavirus, a spouse or a dependent; 2) someone who experiences financial hardship such as being laid off, furloughed, or experiencing reduced hours; or 3) someone who cannot work due to a lack of childcare. Plan administrators may rely exclusively on an employee’s certification that they qualify for early distribution or a loan under the CARES Act.  However, Plans should develop a written or electronic certification process as part as their administrative procedure, to keep the process streamlined, including a list of documentation required by the Plan to be included with the Participant’s claim (e.g., proof of loss of income, etc.).

Temporary Waiver of Minimum Distribution Rules: Waives the required minimum (“RMD”) rules for certain defined contribution plans, e.g., 401K Plans, and IRAs for calendar year 2020. This provision provides relief to individuals who are required to withdraw a limited amount of funds from such retirement accounts during the economic slowdown due to COVID-19 and permits the individual to withdraw more than the RMD without penalty.  Normal taxes would still apply. HOWEVER, the CARES Act is silent on RMDs for defined benefit pension plans.

Single-Employer Defined Benefit Funding Relief: Provides single employer pension plan sponsors with more time to meet their funding obligations by delaying the due date for any contribution otherwise due during 2020 until January 1, 2021. At that time, contributions due earlier would be due with interest.

Expansion of DOL Authority: The DOL may postpone certain ERISA filing deadlines for a period of up to one year in the case of a public health emergency.

HEALTH PLANS

Effective immediately, the following new Coronavirus related requirements are in effect and apply to all group health plans, including self-insured plans and grandfathered plans under the Affordable Care Act (ACA):

Plans must cover Coronavirus tests without cost to participants: Both the Families First Act and the CARES Act require plans to cover services related to testing for Coronavirus. Neither law requires plans to cover services for treating Coronavirus. What this means is Plans must cover the full cost of the test and any appointment relating to testing including in-person or telehealth office visits, urgent care visits and emergency room visits related to Coronavirus testing without co-pays, deductibles, or other limitations (but not treatment).  Some plans are voluntarily adding benefits for treatment so check with yours.

Diagnostic Reimbursement: If the plan has a negotiated rate with the provider that was in effect before January 27, 2020, that rate will apply throughout the public health emergency. If the plan does not have a negotiated rate with the provider, the plan must either reimburse the provider the cash price for the service that is listed by the provider on a website or negotiate a lower reimbursement rate. The CARES Act requires providers of diagnostic tests to post their cash price on a website.

HSA-qualified HDHPs may provide remote-care services before the deductible is met: The CARES Act permits, but does not require, HDHPs to waive deductibles for all telehealth or remote care services in plan years beginning on or before December 31, 2021, without impacting the plan’s status as an HDHP. This is not limited to COVID-19, and remote care services can be provided for non-Coronavirus reasons. They may also choose to provide treatment services for Coronavirus before the deductible is met.

Coverage of Qualifying Coronavirus Preventive Services and Vaccines: The Act requires plans to cover any coronavirus preventive services without cost-sharing.  In addition, HSA and Flexible Spending Account funds may be used for the purchase of over-the-counter medical products, including those needed in quarantine and social distancing, without a prescription from a physician. The Act also redefines feminine hygiene products as HSA covered products which can be purchased with pre-tax dollars.

What Plan Professionals Need to Know About Coronavirus

March 11, 2020

While the situation is changing fast, literally daily, we believe there are certain conclusions and recommendations we can make to aid Trustees and Plan professionals in taking steps to fulfill their responsibilities to the Plans on which they sit and to those Plan participants.

As the situation develops, watch this article for updates.

Impact on Health and Retirement Plans

Health plans should make sure they are structured to deal with significant numbers of their own employees as well as plan participants needing either prolonged leave and/or medical treatment. Trustees, plan participants, and plan professionals should review their SPDs and other documents to make sure they know what coverage exists for testing and treatment and that the financial condition of the Plan is viable during a sustained period of economic slowdown. Most recently, many insurance plans have unilaterally announced special coverage for Coronavirus testing and treatment. Should any emergency changes to these plans with respect to contribution levels, coverage, or investment policies be necessary, the Trustees as well as bargaining parties must be involved and ready to act.

For Retirement Plans, staying the course is key. The investments in which these plans are engaged, as guided by competent plan professionals, e.g. investment consultants, actuaries, accountants and the like, should not be harmed by short term market swings, especially if sufficiently diversified.  Therefore, unless this outbreak becomes prolonged and lasts for years, there should be little concern about the long term health of Retirement Plans. 

Coronavirus and Market Predictions applicable to both Health & Welfare and Retirement Funds

As Coronavirus spreads rapidly, it is likely to have a large impact on First Quarter earnings for many funds. While some investments may rebound quickly, others in manufacturing, travel, and entertainment industries could be hit hard with a lingering effect. This last week, the mortality rate stood at 3% of all reported cases, and for the first time new cases are spreading faster in countries outside of China, such as Italy, than within China where it originated. If Coronavirus hits pandemic status in the United States, this will further impact economic growth for entertainment and travel companies, as Americans spend the most on travel followed by the Chinese.

In an effort to stem the spread of the economic impact, the United States Federal Reserve used their emergency powers to cut rates last week, something they have not done since the 2008 Financial Crisis. Although this rate cut did not help initially, in the long run it will likely soften the blow to the U.S. economy. However, it is difficult to determine how and when the global economy will rebound from this downturn.  As of now, Asian economies are the most vulnerable and if the virus is not contained quickly, there may be a recession in East Asia.

Economic Impact

Plan professionals should expect volatility to remain elevated and should plan for this outbreak to continue for the foreseeable future.  Growth rates will be very low for many companies, and may be near zero for Chinese companies in the first quarter. Therefore, investors must continue to be cautious moving forward, to diversify Plan assets, and implement defensive strategies.   

SECURE Act Becomes Law

January 29, 2020

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was signed into law on December 20, 2019.  It is possibly the worst acronym for a law we have ever heard.  In any event, the SECURE Act and other provisions in the new law are touted as bipartisan reforms that will increase access to workplace retirement plans and expand retirement savings. We view them as largely favoring businesses, but, in this instance, is not a particularly bad result, although much more could have been done for the benefit of workers. The legislation will impact defined contribution (DC) plans, defined benefit (DB) plans, individual retirement accounts (IRAs), and 529 plans.

Importantly, some key provisions of the new law include reforms to help address the retirement “coverage gap” by permitting open multiple employer plans (MEPs), thereby expanding access for workers currently without a workplace savings plan. Other provisions, including delaying the starting age for required minimum distributions (RMDs) from age 70½ to age 72; increasing the automatic-enrollment safe harbor escalation cap to 15%; and eliminating the age limit for contributing to a traditional IRA, enable workers to save more and longer, thus enhancing their ability to strengthen their retirement savings.

This legislation may have an almost immediate impact on plan sponsors, participants, and those of you who have, or your members who have, invested in IRAs, with some of the provisions effective on January 1, 2020.  The legislative changes may require Plan Amendments and other administrative adjustments, so be sure to consult your plan professionals.

Specific descriptions of the provisions in the new law are available HERE. If you would like more information, please contact us through the website.

Pension Reform Update

January 2, 2020

Now that Democrats have taken control of the House, there is renewed interest in building a case for saving underfunded corporate and union-sponsored defined benefit pension plans, by passing the “Butch Lewis Act,” on which we previously reported. Without passage, some economists are predicting a failure-to-act will cost taxpayers nearly $500 billion.  At present, the Butch Lewis Act has passed the House, but the Senate has expressed no interest in voting on the proposal and is, instead, considering a far more conservative possible legislative alternative.

On November 20, 2019, Senators Chuck Grassley and Lamar Alexander released a Multiemployer Pension Recapitalization and Reform Plan proposal. The proposal was released in the form of a white paper and a technical explanation and has not been introduced as a legislative bill yet. The proposal incorporates the work of the 2018 Joint Select Committee on the Solvency of the Multiemployer Pension System. Generally, it seeks to have the Pension Benefit Guaranty Corporation (PBGC) multiemployer pension plan insurance program adopt characteristics of the single employer pension insurance program.

The Multiemployer Pension Recapitalization and Reform Plan proposal is based on a shared responsibility framework in which employers, unions, workers and retirees would make a sacrifice to shore up the PBGC’s role as an insurance company. A “limited infusion of taxpayer dollars” would be proposed to help the PBGC insure some liabilities of soon-to-be insolvent plans. Without reforms, the PBGC reports the multiemployer insurance program would be insolvent no later than 2026. The PBGC fiscal year 2019 report showed a deficit of $65.2 billion, compared to a deficit of $53.9 billion in 2018.

Here are some characteristics of the Senate proposal:

Expand PBGC Existing Partition Authority

Partitioning permits PBGC to carve off “orphan” pension benefit liabilities attributable to employees whose employers previously withdrew from the multiemployer plan. The plan with unfunded liabilities requires financial assistance from the PBGC while the healthy plan continues.

PBGC would only grant an order for a special partition if it determines that the plan sponsor has adopted all reasonable measures to avoid insolvency, including benefit suspensions no greater than 10%.

The Teamsters Central States Pension Plan, the Road Carriers Local 707 Pension Plan and the United Mine Workers of America Plan would be automatically eligible for partition.

In order for the partition program to operate effectively, a limited amount of federal taxpayer funds would be transferred to PBGC. There would be provisions intended to protect taxpayers from risk.

Plans approved for a liability removal under the new partition program would be subject to the following conditions: PBGC would appoint an independent trustee to the board, PBGC would be authorized to remove the board of trustees if it can demonstrate mismanagement and replace the board with an independent trustee pursuant to a court order, Trustees would have ten-year term limits with a transition rule for existing trustees, Executive directors would have 12-year service limits with a transition rule for an existing director.

Increase the PBGC Maximum Monthly Benefit

The PBGC maximum guaranteed monthly benefit would increase by about $600 per month. This is intended to reduce the risk of significant reductions in retirees’ benefit payments should a plan become insolvent.

Increase the Multiemployer Plan Flat-Rate Premiums

Multiemployer plan flat-rate premiums would significantly increase from $29 (in 2019) to $80 per participant per year. For comparison, the single employer plan flat-rate premium is $80 (in 2019) per participant per year.

Add Multiemployer Plan Variable-Rate Premiums

Multiemployer plan variable-rate premiums for underfunded plans would be payable to PBGC. The per-participant amount of the variable-rate premium would equal 1% of the current unfunded liability divided by the number of participants and would be determined on a per-participant basis for purposes of applying a cap. In no case would the cap be higher than $250 per participant. For comparison, the single employer plan variable-rate premium cap is $561 per participant in 2019.

Add Employer, Union and Retiree Copayments

A monthly $2.50 fixed rate copayment would be imposed on each union and participating employer for each active employee covered under the plan pursuant to a collective bargaining agreement. Multiemployer plans would be responsible for collecting the copayments and transmitting them to PBGC on a monthly basis.

Plans would be required to withhold copayments from retirees receiving benefit payments and transmit the “premiums” to PBGC on a monthly basis. The copayments would be a fixed percentage of benefit payments with the percentage determined by the funding zone status ranging between 3% (for a plan in endangered status) and 10% (for a partition plan). Retirees who are elderly or disabled would generally be exempt.

Change Funding Zone Status Categories and Measurement

Plans would be required to look further into the future in estimating their financial status, institute a form of “stress testing” to check whether a plan can remain financially sustainable through potential economic and demographic “shocks,” and bolster the steps a plan must take when it begins to show signs of financial hardship. New incentives for multiemployer plans to improve their funding status would be available by establishing new upper-tier zones for very healthy plans, which would be subject to fewer restrictions as long as they continue to demonstrate financial health and an ability to weather potential financial shocks and protect participant benefits.

Add Incentives for Mergers

The proposal would eliminate the MPRA requirement to restore benefit suspensions in a merger between a stable zone or higher plan and a critical zone plan. PBGC would be directed to create withdrawal liability methods that would permanently insulate employers in a stable zone or higher plan that merges with a declining plan from withdrawal liability attributable to the unfunded liabilities of a declining plan at the time of the merger. The proposal would eliminate the MPRA requirement that financial assistance in a facilitated merger be necessary for the merged plan to remain solvent before PBGC may provide such assistance.

Change Withdrawal Liability Calculation

The proposal would replace the calculation of withdrawal liability under current law with a new basis for determining the liability based on a specified duration of annual payments that would correspond with the plan’s funded percentage. Mass withdrawal liability would be eliminated. Plans would be required to provide withdrawal-liability estimates to all contributing employers free of charge every three years. These changes are intended to encourage current employers to stay in the plan and new ones to join.

Modify Disclosure Requirements and Penalties

The annual funding notice and zone status notice would be modified. Information related to the multiemployer plan’s endangered or critical status would be shifted from the annual funding to the zone status notice. A more streamlined annual funding notice would provide information relevant to participants in better funded plans. A simplified zone status notice would offer more targeted information to participants in distressed plans. The notices would be required to be provided to participants and beneficiaries, to the bargaining parties, and jointly in electronic format to the PBGC and the secretaries of the Department of the Treasury and Department of Labor. Penalties for failure to provide information to government agencies and participants would be established or increased.

Establish New Composite Plans

Taking an idea from The Butch Lewis Act, with significant changes, multiemployer plans would be able to set up a new hybrid pension plan on a prospective basis, called a composite plan, which would pool employer contributions for investing but would only provide benefits to participants based on the contributions and any associated gains on their investment. Employers establishing a new composite plan would be relieved of withdrawal liability for benefits in the new plan. The new plan would not be PBGC-insured, so there would be no premiums to pay. The defined benefit plan would become a legacy plan. The proposal would include provisions to preserve legacy plan funding.

Next Steps for the Multiemployer Pension Recapitalization and Reform Plan Proposal

It’s likely the Senate Finance Committee members will be the first Congressional group to try to resolve differences. For example, Senator Sherrod Brown has concerns with some provisions, and Senator Rob Portman said the proposal will require some changes. Several members expressed a willingness to work together and compromise where needed. PBGC Director Gordon Hartogensis has said the Administration stands ready to work with Congress. As for the House, since this proposal does not include the Butch Lewis Act which was passed by the House, it is unclear how the Multiemployer Pension Recapitalization and Reform Plan proposal will be received by the House.

Generally, there is not much legislative activity expected in 2020 because of the November presidential election.

We are watching legislative developments in this area closely and will keep this section updated as we learn more.


ERISA LITIGATION SUMMARY


Supreme Court Decides New ERISA Case

June 30, 2020

On June 1, with Justice Kavanaugh writing the Opinion, the US Supreme Court upheld the 8th Circuit’s decision granting a Motion to Dismiss against class action Plaintiffs/Participants who had sued a defined benefit plan over misuse of Plan assets.  In this case, the Plan Trustees who were, of course, fiduciaries, ignored the advice of their consultants, under-diversified the Plan’s assets, invested them in high-risk equities, and caused a much larger loss than was considered normal during the 2008 market crash. They attempted to rectify this by contributing $339 million of Plan sponsor assets to the Plan, bringing it back to overfunded status. Because the participants lost the same amount a diversified portfolio incurred during that period, after the contribution -- the 8th Circuit said, no harm, no foul. In other words, Participants could not assert a breach of fiduciary duty if they did not suffer financial harm. Justice Kavanaugh glibly found that the Participants would receive the same retirement benefits as if the shenanigans had never happened. This case means Participants may not sue their plan fiduciaries for mismanagement if the fiduciaries contribute sufficient funds to the Plan to cover the loss.  Not only does this completely fail to hold fiduciaries accountable for mismanagement, it encourages risky and unethical behavior that could put many more Participants in harm’s way.  Another case in which the Court’s anti-employee pro-employer bias is on full display.

Ninth Circuit Decision: Ryan E. v. Entertainment Industry Flex Plan

June 30, 2020

The issue decided in Ryan E. was whether a Flex Plan had properly delegated discretion over claims and enrollment processing to its contracted third parties.

As many Trustees and Plan professionals know, Trustees must reserve, in writing and in the plan documents, the right to finally interpret and apply the terms of their Plan. Likewise, Trustees may routinely grant discretion to the Trust's insurance carriers, administrator, etc., to make routine interpretations with regard to eligibility and claims processing, subject to appeal.  In Bruch v. Firestone the United States Supreme Court held unless employee benefit plans include the "discretion to interpret and apply" language in plan documents, a reviewing court will place the burden of proof on the Plan. Where the correct language quoted above is set forth in the Plan’s documents, the burden of proof shifts to the Participant.

In Ryan E., Plan language identified Blue Shield ("BS") as the third party carrier and administrator, but the Plan and documents for specific coverages the Flex Plan offered described a very narrow identification for the "carrier”. As many of you know, BS has multiple subsidiaries, units and related entities. These are not always identified as BS or as being part of a single BS entity, but many of them were apparently involved in claims processing. Some of these related BS entities were easy to identify as mere sub-units within BS; others could have been entities totally outside of the BS corporate structure.  

This evidentiary point in Ryan E. caught the attention of the Ninth Circuit and not in a good way. Thus, the Ninth Circuit questioned whether the grant of discretion that clearly went to BS, also extended to the other possibly “hidden” entities involved in the claims process. In the view of the Ryan E. panel, if any of the other entities were not expressly BS sub-units or subsidiaries, those entities were not granted any discretion by the Flex Plan's plan documents and that would change the applicable burden of proof. However, the court opined there was not enough information in the record to determine which of the entities was or was not "an actual BS-related corporate entity." Thus, the case was remanded back to the trial court for more evidence on the issue of the identity of the entities involved in the claim litigated in Ryan E.

We have no doubt that if the evidence establishes an entity that participated in the claims process was not a direct BS-related entity, and "interpreted" the plan document in a manner that resulted in declining the claim, the outcome related to this shifting of the burden of proof could be unfavorable to the Flex Plan. Indeed, should the evidence establish that an unauthorized entity exercised discretion over the claim, the burden of proof would shift to the Flex Plan and that may be a difficult, as well as expensive, burden to overcome.

The good news is a simple fix.  We recommend Trustees and Plan professionals fine tune the Trust's SPD  and other related documents to ensure that the grant of discretion to third parties is broad enough to encompass any entity, including subsidiaries, with whom a third party  consults, uses, relies upon, delegates to, etc., when processing a claim or making other eligibility determinations.

Court Rules on ERISA’s Statute of Limitations

February 28, 2019

A federal district court dismissed a breach of fiduciary duty action based on a plaintiff’s failure to timely file his suit. Under ERISA, there are two (2) rather complicated statutes of limitations:

1)   Three (3) years from the earliest date on which the Plaintiff had actual knowledge of the breach; -or-

2)   Six (6) years from the date of the act that constitutes the breach or, in the case of a failure to act, the latest date on which the failure occurred or the act could have been cured.

In this decision, the court determined that the applicable limitations period began to run on February 17, 2011, which was the date certain amendments were made to plan documents.  That was the date of the act that constituted the breach. Because the plaintiff failed to bring his action until September 2017, seven (7) months longer than the six (6) year statute, the court found that the lawsuit was time barred under ERISA.

Litigation over disparities between mental health and medical benefits persist

February 28, 2019

Under both the ACA and the mental health parity and addiction equity act of 2008, “MHPAEA,” covered plans may not discriminate against the provision of mental health benefits–where coverage for a specific benefit, i.e., in-office doctor visits – is covered by the medical benefit component of a plan.  The mental component of that plan – if it exists – must provide coverage on the same basis and without discrimination.

Many plans sponsored by employers do not meet the requirements of the ACA nor the MHPAEA regarding discrimination between mental health and medical benefits.  This month, a federal court in New York allowed a lawsuit to go forward on theory that the Defendant employer’s benefit plan violated both the ACA and the MHPAEA because the plan(s) treated the coverage/out-of-pocket/reimbursement rates differently for the same type of doctor consultation, depending on whether the claim was for a medical event or for a mental health event.

Should the Plaintiff prevail, remedies would include a reformation of the plan to comply with the ACA and MHPAEA, applicable fines, and attorneys’ fees.  We recommend that all trustees review the benefit structures of their medical and mental health plans to insure that these structures comply with the ACA and MHPAEA.

Federal District Court Enforces Plan Documents

February 28, 2019

A federal district court in Georgia concluded that ERISA requires courts, when determining what benefits are available under an ERISA plan, to follow and enforce the relevant plan document.  Thus, where a plan document excludes a specific class of person or employee from its coverage, that exclusion must be enforced by the courts, and, unless illegality is shown, the court will have no jurisdiction to unilaterally reform or modify the plan document.

In this case, the relevant plan document specifically excluded a certain class of employee from a plan based upon the employee’s occupation and job duties.  Because this exclusion was not based upon a prohibited factor - such as age, race, health, marital status, etc. – the court found that the exclusion was lawful, and as such, enforceable.

 

 

 



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