Sixth Circuit Court of Appeals Rules Cash Balance Plans Not Inherently Age Discriminatory
The Sixth Circuit Court of Appeals affirmed the district court ruling in Drutis v. Rand McNally; Quebecor World that Quebecor’s cash balance plan is not inherently age discriminatory under pre-PPA law. It is the third appellate court to arrive at the same verdict, following the Cooper v. IBM and Register v. PNC decisions. The decision adopts a similar analysis to that used in the Cooper and Register cases, and quotes heavily from the earlier appellate decisions. [October 2007]District Court Rules No Accrual Rule Violation in "Greater of" Transition
A district court has specifically rejected the argument that a “greater of” hybrid plan conversion violates the accrual rules. In Wheeler v. Boeing, the court ruled that plans do not have to aggregate separate benefit formulas for accrual-rule testing, and that the IRS’s interpretation of the regulations is unpersuasive and not entitled to any deference. [October 2007] Court Permits Plan NRA Based on Service
The federal district court for the northern district of Illinois recently ruled that defining normal retirement age (NRA) by years of service does not violate ERISA, thereby eliminating the need for a whipsaw calculation. [October 2007] Court Upholds EEOC’s Regulation Allowing Plans to Coordinate Retiree Health Benefits With Medicare
The U.S. Court of Appeals for the Third Circuit recently upheld the Equal Employment Opportunity Commission’s (EEOC’s) proposed regulation to allow employers to coordinate retiree health benefits with Medicare benefits. Finding that the regulation was “reasonable” and “necessary and proper in the public interest,” the appeals court upheld a lower court’s decision to lift an injunction, permitting the regulation to stand. The EEOC is now free to finalize its rule, thereby giving employers license to coordinate retiree medical benefits with Medicare. [August 2007] Supreme Court Rules Merger Is No Way
To Terminate a Plan
In Beck v. PACE International, the U.S. Supreme Court ruled that a plan merger is not a method of plan termination, so in choosing whether to merge plans or to undergo a standard plan termination, the sponsor is not making a fiduciary decision. The ruling confirms that choices about a plan’s future — such as changing the plan design, freezing or terminating the plan and recovering excess assets — are not fiduciary decisions subject to ERISA. [August 2007] Supreme Court Declines to Review Cooper v. IBM and Appellate
Court Rules That Cash Balance Plans Are Not Age-Discriminatory
The U.S. Supreme Court has declined to review the appellate court decision in Cooper v. IBM, thereby ending the litigation. The case — one of the most controversial pension decisions in many years — significantly influenced the Pension Protection Act, which clarified, prospectively, that hybrid defined benefit plans are not inherently age-discriminatory. [February 2007] U.S. Appeals Court Upholds Dismissal of Maryland’s Health Insurance Law
On January 17, 2007, the United States Court of Appeals for the Fourth Circuit affirmed a lower-court
decision that ERISA preempts the Maryland Fair Share Health Care Fund Act, which would have
required nongovernmental employers with 10,000 or more workers to spend at least 8 percent of their
payroll on health care or pay the difference in taxes.
[February 2007] Age-Discrimination Claims Against Cash Balance Plans Still Have Life
Two recent decisions show there is still life in age-discrimination claims against cash balance plans. In Re J.P. Morgan Chase, the district court for the Southern District of New York denied the plan’s motion to dismiss an age-discrimination claim, applying an analysis that considers all cash balance plans inherently age-discriminatory. [December 2006] New Jersey Court Affirms the Rights of Same-Sex Couples
In Lewis v. Harris, decided October 25, 2006, the New Jersey Supreme Court ruled that same-sex couples in New Jersey are entitled to the same rights and benefits enjoyed by heterosexual couples under state marriage laws. [December 2006] Court Rules ERISA Preempts Maryland Health Insurance Law
In Retail Indus. Leaders Association v. Fielder, a federal judge in Maryland ruled that ERISA preempts the Maryland Fair Share Health Care Fund Act, which was slated to become effective January 1, 2007. [December 2006] New Jersey Court Affirms the Rights of Same-Sex Couples
In Lewis v. Harris, decided October 25, 2006, the New Jersey Supreme Court ruled that same-sex couples in New Jersey are entitled to the same rights and benefits enjoyed by heterosexual couples under state marriage laws. [December 2006] Court Rules That Service Cannot Define NRA and Affirms That Cash Balance Plans Are Not Inherently Age-Discriminatory
The federal district court for the Southern District of New York recently ruled that defining a plan’s normal retirement age (NRA) by years of service violates ERISA if it makes the NRA earlier than age 65. It also follows a majority of courts by ruling that cash balance plans are not inherently age-discriminatory. [November 2006] Court Rules IBM’s Cash Balance Plan Is Not Age-Discriminatory
On August 7, the Seventh Circuit Court of Appeals ruled that IBM’s cash balance plan is not inherently age-discriminatory. In a strongly worded decision, the court rejected arguments against hybrid plans, specifically: (1) that compound interest is age-discriminatory, and (2) that the accrual rate of the normal retirement annuity benefit is the only standard for judging age discrimination. This decision, along with the recently passed pension reform legislation, should give hybrid plan sponsors a measure of confidence that their plans can withstand legal and legislative scrutiny. [August 2006] Delaware Supreme Court Upholds Chancery Court in Disney Case
On June 8, the Delaware Supreme Court upheld the Chancery Court’s decision that Walt Disney’s officers and directors did not violate their fiduciary duty in hiring and firing former president Michael Ovitz (Watson Wyatt Insider, September 2005). [July 2006] New Tax Law Affects Benefit Plans, IRAs — and Possibly Pension Reform
President Bush signed the Tax Increase Prevention and Reconciliation Act (H.R.4297, P.L.109-222) into law on May 17, 2006. The act removes income restrictions on converting traditional IRAs to Roth IRAs. It also imposes new penalties and reporting requirements on managers of
tax-exempt entities — including qualified plans, IRAs and other tax-favored arrangements, as well as charities and more traditional tax-exempt organizations — who engage in certain tax-shelter transactions. [July 2006] Delaware Court Finds Disney Board Did Not Violate "Business Judgment" Standard in Ovitz Case
A Delaware court recently ruled that Walt Disney's officers and directors did not violate their
fiduciary duty in the hiring and firing of former President Michael Ovitz. [September 2005] Supreme Court Rules That ERISA Preempts State Patients' Rights Laws
The U.S. Supreme Court has ruled that ERISA preempts state laws that allow health plan participants to sue their health plans for denying coverage. [August 2004] Supreme Court Rules ADEA Does Not Prohibit Reverse Age Discrimination
The U.S. Supreme Court recently ruled that the Age Discrimination in Employment Act (ADEA) does not prohibit employment or benefit practices that favor older workers over younger workers, even when the younger workers fall within the ADEA’s protected class. [April 2004] Cash Balance Debate Continues in Congress and the Courts
The controversy over cash balance plans continues to play out. The first appellate court to consider
whether the plan design violates federal age discrimination laws has ruled in favor of the plans. [January 2004] Litigation Against Enron Goes Forward
After the Enron accounting scandal and bankruptcy, participants in the company’s retirement plans filed lawsuits charging alleged fiduciaries with liability for the plans’ investment losses. [November 2003] Court of Appeals Affirms Wear-Away Does Not Violate ERISA
The First Circuit Court of Appeals has affirmed the decision in Campbell v. BankBoston, becoming the first appellate court to consider age discrimination claims against a cash balance plan. [April 2003] DOL Releases “Friend of the Court" Brief in Enron Litigation
In August, the U.S. Department of Labor (DOL) filed a “friend of the court” brief in Tittle v. Enron Corp. (S.D. Tex.), indicating that although the DOL is not a party to the litigation, it wishes to advise the court on the case. [November 2002] Supreme Court Rules Against ERISA Preemption of State Law
In Rush Prudential HMO, Inc. v. Moran, the Supreme Court recently ruled that a state statute allowing for an independent review of certain denials of benefits is not preempted by ERISA for an insured group health plan. [August 2002] Court Rules That Not Covering Prescription Contraceptives Violates the PDA
In a case of first impression, a federal district court in Seattle ruled in Erickson v. Bartell Co. that an employer violated the Pregnancy Discrimination Act (PDA) by not covering prescription contraceptives under the group health plan. This ruling specifically affects employers in the western district of Seattle—but may reveal a trend in cases to come. [July 2001] No Relief from the Supreme Court on the ADEA and Retiree Health Plans
Last August, in Erie County Retirees Assoc. v. County of Erie, Pennsylvania, the Third Circuit Court of Appeals held that the Age Discrimination in Employment Act (ADEA) applies to retirees and retiree health plans. As long as that ruling stands, employers in Pennsylvania, New Jersey, Delaware and the Virgin Islands who offer their over-65 retirees less coverage than their under-65 retirees may be violating the ADEA (unless their plan meets the safe harbor test). [April 2001] Supreme Court Holds That State Employees May Not Sue under ADA
In Board of Trustees v. Garrett, the Supreme Court recently ruled that Congress exceeded its constitutional authority when, under the Americans with Disabilities Act, it subjected the states to suits brought by private citizens in federal court for money damages. [April 2001] Court Rules that Failure to Cover Infertility Treatments Does Not Violate the ADA
On October 2, 2000, in Saks v. Franklin Covey, a district court in New York dismissed Rochelle Saks' claims against her employer, Franklin Covey, for failure to cover specific infertility treatments. Saks sued Franklin Covey when its self-insured plan failed to cover costs for her intrauterine insemination and in vitro fertilization.
[December 2000] Foreign Affiliate Escapes Judgment for Withdrawal Liability
In Central States, Southeast and Southwest Areas Pension Fund v. Reimer Express World Corporation, the Seventh Circuit Court of Appeals ruled that a multiemployer plan could not execute a judgment for withdrawal liability against the foreign parent of a contributing employer.
[December 2000] Participant in Health FSA Wins Denied Claim
In Grande v. Allison Engine Co., an employee successfully sued his employer and health plan for denying a claim he submitted to his health flexible spending account (FSA). [November 2000] Courts Rule Against Plans in Cash Balance Distributions
Ruling against a cash balance plan's method of determining lump sums and reversing an earlier district court decision, two federal courts of appeal have held that lump sum distributions cannot be determined simply by reference to the cash balance account.
[October 2000] Court Protects Severance Benefit
In Bellas v. Westinghouse, a court of appeals has held that a "permanent job separation" benefit in Westinghouse's pension plan was a protected plan benefit, and thus could not be eliminated by an amendment to the plan. The court's ruling contradicts both formal guidance from the IRS stating that similar benefits are not protected, and an IRS determination letter ruling that Westinghouse's amendment to its plan complied with qualification requirements.
[October 2000] Participants Challenge First Union's Use of Own Funds
Participants Challenge First Union's Use of Own Funds Current and former employees of First Union Corporation, the sixth largest bank holding company in the United States, are suing their employer as sponsor of their 401(k) plan. [November 1999] Calculation of Cash Balance Distributions Upheld
Ruling in favor of a cash balance plan's method of determining lump-sum distributions, a Georgia federal district court has determined that plan participants cannot enforce IRS requirements for calculating distributions under ERISA. [June 1999] EEOC Proposes Regulations on Waiver Enforcement
The EEOC has proposed regulations based on the Supreme Court's decision last year in Oubre v. Entergy Operations. [June 1999] Supreme Court to Address States' Immunity from ADEA Claims
The Supreme Court has agreed to address the issue of whether state employers have immunity from Age Discrimination in Employment Act (ADEA) claims under the 11th Amendment to the U.S. Constitution. [March 1999] Supreme Court Dismisses Participants' Claim to Excess Assets
The Supreme Court has essentially dismissed a participant suit against an overfunded contributory plan sponsor for breach of fiduciary duty. [March 1999] HMO Liability Law Gets First Test
Medical liability for managed care and other health plans has become a significant issue, attracting attention from Congress as well as state governments. Last year, Texas became the first state in the nation to allow lawsuits against HMOs and other health plans when treatment decisions adversely affect a patient's health. Now, the family of a man who committed suicide after being released from the hospital is suing his health plan. [December 1998] Cash Balance Plan Sponsor Wins Legal Challenge
The plan sponsor of a cash balance plan has successfully defended a legal challenge by former plan participants for additional benefits. [December 1998] Restricted Deduction Timing for Bargained Plans Upheld
The Ninth Circuit Court of Appeals has affirmed the decision in Lucky Stores v. Commissioner that a contributing plan sponsor that accelerated its deduction for regularly scheduled contributions to a multiemployer defined benefit plan was not entitled to the additional deduction. [October 1998] Court Orders Participant to Pay Attorney's Fees
In Foley v. Bethlehem Steel, the U.S. Federal District Court for the Western District of New York ordered a retiree to pay $15,000 for filing a frivolous, time-barred claim under ERISA. [September 1998] Supreme Court Rules in COBRA Case Involving Dual Coverage
In Geissal v. Moore Medical Corporation, the Supreme Court ruled that employers must provide COBRA continuation coverage to individuals who have other group health plan coverage before the date of their COBRA election. [July 1998] Court Rules That Retiree VEBA Requires Separate Reserve
A Court of Appeals for the Second Circuit has held that in order for contributions to a retiree medical benefit "reserve" to be tax-deductible under Voluntary Employees Beneficiary Association (VEBA) funding rules, their purpose must be solely to fund postretirement benefits. [June 1998] Vesting Former Employees at Plan Termination Not Required for Out-of-Business Employers
A Michigan district court has ruled that partially vested former participants do not have to be vested upon plan termination if the employer went out of business. [May 1998] Supreme Court Rules on Consequences of Ineffective ADEA Waiver
The Supreme Court has ruled that an employee's failure to return severance benefits she received in exchange for an ineffective waiver of age-related discrimination claims does not stop her from pursuing those claims in federal court. The January 1998 decision in Oubre v. Entergy Operations, Inc. serves as a reminder of the needs for strict compliance with the legal restrictions on Age Discrimination in Employment Act (ADEA) waivers. [March 1998]
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