Plans, Perks & Pay | Employee Benefits & Executive Compensation Blog

A U.S. Court of Appeals determined that arbitration on an individual basis is the proper forum for a participant’s claim that Charles Schwab breached its fiduciary duties and engaged in prohibited transaction under the Employee Retirement Income Security Act of 1974 (ERISA) by holding proprietary funds in its 401(k) plan.

Certain treatments for chronic conditions can now be covered by high deductible health plans (HDHPs) as preventive care before the deductible is met. Pursuant to an executive order, a new IRS notice will allow individuals with certain conditions, such as asthma or diabetes, to obtain coverage for treatments and medications, such as inhalers and insulin, without first meeting their high deductible.

On Friday, June 28, 2019, the U.S. Supreme Court agreed to hear a case involving a hotly debated ERISA topic: standing to bring breach of fiduciary duty claims in defined benefit plans. The court will review Thole v. U.S. Bank, Nat’l Ass’n, 873 F.3d 617, 628 (8th Cir. 2017), which the Eighth Circuit decided on statutory standing grounds. In accepting the case, the Supreme Court also certified the additional issue of whether the defined benefit plan participants have demonstrated Article III standing.

After more than two years since the U.S. Supreme Court issued its last decision^* in a case involving the Employee Retirement Income Security Act (ERISA), the court’s next term looks to be flush with ERISA issues. On June 10, 2019, the Supreme Court granted certiorari in a Ninth Circuit case addressing the “actual knowledge” standard in the statute of limitations for fiduciary breaches. Intel Corp. Investment Policy Committee, v. Sulyma, No. 18-1116.  The Supreme Court has granted certiorari in two ERISA cases in as many weeks, and it seems likely the court may grant review in at least one other case. Below is a summary of the cases that are or may be in front of the Supreme Court in the coming term.

On May 24, 2019, the U.S. Department of Health & Human Services (HHS) announced that it is issuing proposed revised regulations under Section 1557 of the Affordable Care Act that remove the redefinition of “sex” and certain regulatory burdens, including language taglines. The changes substantially roll back the original Obama-era regulations.

The Internal Revenue Service has updated the Employee Plans Compliance Resolution System (EPCRS) to allow for the self-correction of more failures. EPCRS is a program that allows plan sponsors to correct errors involving qualified plans (such as 401(k) plans, profit sharing plans, defined benefit pension plans, etc.) and certain other types of plans that, if left uncorrected, could jeopardize the tax-favored status of the plan. Revenue Procedure 2019-19 expands the self-correction program to include correction of certain loan failures and more corrections via retroactive amendment.

In April 2018, New York University was the first university to take to trial a case claiming it violated its ERISA fiduciary duties. And on July 31, 2018, it became the first university to win. Sacerdote v. New York Univ., No. 16-CV-6284 (KBF), 2018 WL 3629598 (S.D.N.Y. July 31, 2018).

More than a dozen lawsuits have been filed against prestigious colleges and universities claiming that they violated the Employee Retirement Income Security Act of 1974 (ERISA) in the operation of their Code Section 403(b) plans. Within the last year, University of Pennsylvania and Northwestern each won dismissal of their cases, and the University of Chicago settled its claims for $6.5 million. But NYU’s victory was the first to come after a trial, and the court’s finding of facts and conclusions of law provide lessons for ERISA fiduciaries — and not just those embroiled in their own fee cases.

On the same day the Ninth Circuit denied arbitration in Munro v. University of Southern California, a district also denied a motion to compel arbitration of a former employee’s ERISA breach of fiduciary duty and prohibited transaction claims in Brown v. Wilmington Trust, N.A., No. 3:17-cv-250 (S.D. OH July 24, 2018).

The U.S. Court of Appeals for the Ninth Circuit affirmed a district court’s opinion that the University of Southern California could not compel arbitration of ERISA claims brought by its employees despite the fact that the parties entered into a broad arbitration agreement. Munro v. University of Southern California, No. 17-55550 (July 24, 2018). The reason? The agreement did not extend to claims brought on behalf of the employees’ retirement plan.

In an unpublished opinion, the U.S. Court of Appeals for the Fourth Circuit found a lower court did not err when awarding no relief for a breach of fiduciary duty. (Pender v. Bank of America Corp., No. 17-1485, June 5, 2018.) Although Bank of America violated the Employee Retirement Income Security Act of 1974 (ERISA), the court found that it did not profit from its actions and, therefore, awarding damages would not be appropriate equitable relief.