The Tenth Circuit’s recent split decision in M. v. Premera Blue Cross, No. 18-4098 (July 24, 2020), poses a significant threat to the deferential standard of review typically applied to benefit plan claim determinations, and imposes a new burden on plan administrators.

More than 30 years ago, the Supreme Court held in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989), that benefit denials are “reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Applying the Firestone doctrine, lower courts have consistently applied the substantially more deferential “arbitrary and capricious” or “abuse of discretion” standard of review to benefit denials when the plan at issue granted the plan administrator (or relevant fiduciary) discretionary authority consistent with the Firestone case.

The Tenth Circuit, in Premera, changes that standard.


Continue Reading Tenth Circuit Decision Puts New Emphasis on Including Discretionary Authority Language in Summary Plan Descriptions

The Internal Revenue Service (IRS) issued Notice 2020-52 on June 29, 2020, making it temporarily easier for employers to suspend or reduce matching contributions and nonelective contributions to safe harbor 401(k) plans mid-year.

As described in our earlier blog post, the Internal Revenue Code of 1986, as amended (the “Code”) imposes rules that limit the ability of employers to suspend or reduce safe harbor matching contributions and safe harbor nonelective contributions, in the middle of a plan year, to a plan that is intended to be a safe harbor plan under sections 401(k) or 401(m) of the Code (such a plan referred to below as a “safe harbor plan”). Notice 2020-52 eases several of those restrictions for a limited period of time in recognition of the ongoing economic effects of the COVID-19 pandemic. The relief also applies to plans subject to section 403(b) of the Code that apply section 401(m) safe harbor rules.
Continue Reading IRS Eases Ability of Employers to Reduce or Suspend Safe Harbor Matching and Nonelective Contributions

Many plan administrators and participants have struggled with how to satisfy certain qualified plan spousal consent rules while social distancing guidelines have been in effect. The Internal Revenue Service (IRS) provided much-needed relief on that topic in Notice 2020-42, published on June 3, 2020 (the Notice).

By way of background, IRS regulations require that

On May 21, 2020, the US Department of Labor (DOL) and the Employee Benefits Security Administration (EBSA) issued final regulations expanding the use of electronic disclosures for retirement plans. The regulations provide a new safe harbor that will substantially ease the use of electronic delivery by retirement plan administrators to satisfy the disclosure requirements of Title I of the Employee Retirement Income Security Act of 1974 (ERISA). The new regulations were published in the Federal Register on May 27, 2020, and they take effect on July 27, 2020 (though the DOL will not take enforcement action against a plan administrator that relies on the regulations’ new safe harbor before that date).

Continue Reading The DOL Embraces Wider Use of Electronic Notices for ERISA Disclosures

The IRS and the Treasury Department, acknowledging the widespread impact of COVID-19, have issued Notice 2020-29 and Notice 2020-33, granting much-sought flexibility for flexible spending accounts (“FSAs”) and health plans.  Though the Section 125 cafeteria plan rules applicable to FSAs and health plans already permitted some limited election changes in the case of changes in status (for example, in the event of significant cost or coverage changes), they did not address the wide array of changes that many participants have wanted to make based on the ripple effects of the COVID-19 crisis.  In addition, the existing Section 125 rules required that any change to the election be consistent with (as determined under the rules) and on account of the applicable change in status.

Continue Reading Flexibility for Flexible Spending Accounts in Light of COVID-19

During the economic downturn associated with the COVID-19 pandemic, some 401(k) plan sponsors may be considering a mid-year reduction or suspension of matching contributions or nonelective contributions to their 401(k) plans as a cost-saving measure. Generally, whether the matching or nonelective contributions may be reduced or suspended will depend on the specific terms of the plan. In addition, in the case of  a plan that is intended to be a safe harbor plan under sections 401(k) or 401(m) of the Internal Revenue Code of 1986 as amended (the “Code”), the Code imposes particularly restrictive rules limiting mid-year changes. The following summarizes steps that a plan sponsor must take to reduce or suspend matching or nonelective contributions to its safe harbor plan during the plan year without jeopardizing the plan’s tax-qualified status.

Continue Reading Reducing or Suspending Matching or Nonelective Contributions Under a Safe Harbor Plan

The Department of Labor (together with the Treasury Department) has issued helpful deadline relief for participants and beneficiaries in health, disability, other welfare and pension plans, as well as for plan sponsors and administrators of such plans, during the COVID-19 National Emergency.  The guidance came just in time for plan administrators at risk of missing the deadline for distributing annual funding notices, which was April 29 this year.

Continue Reading DOL Issues COVID-Related Deadline Relief

In the third and final of a series, our employment and benefits teams take an in depth look at the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act” or the “Act”) affecting employment, compensation, payroll taxes and paid leave. Read more on the Mayer Brown COVID-19 Blog.

In the second of a series, our benefits team takes an in depth look at the provisions of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) affecting retirement plans. Changes include new coronavirus-related distributions, modified plan loan rules, and a temporary waiver of required minimum distributions.  Read more on the Mayer Brown

When an employee separates from employment with a severance payment, the employee will frequently agree to a broad release of claims against the employer. Special concerns arise when applying a general release to potential claims that arise under the Employee Retirement Income Security Act of 1974 (ERISA). Although participants cannot be forced to forfeit their vested pension benefits or the assets in their individual retirement plan accounts, there have been a spate of class action lawsuits in recent years alleging that retirement plan fiduciaries breached their duties under ERISA § 502(a)(2). When faced with a prior release agreement, ERISA plaintiffs often argue that participants cannot individually waive fiduciary breach claims because they are bringing them on behalf of the plan. The Seventh Circuit rejected that argument in Howell v. Motorola, Inc., 633 F.3d 552 (7th Cir. 2011), dismissing the plaintiff’s fiduciary breach claim in a stock drop action because he had knowingly and voluntarily executed a general release. Other courts, however, have held that individual releases do not bar ERISA fiduciary breach claims brought on behalf of the plan. See, e.g., In re Schering Plough Corp. ERISA Litig., 589 F.3d 585, 594 (3d Cir. 2009). While neither the D.C. Circuit nor the district court had to directly address this issue—the argument was not properly raised by the plaintiff—they both concluded in a victory for plan sponsors that the plaintiff’s prior release agreement barred her fiduciary duty claims under ERISA § 502(a)(2).

Continue Reading D.C. Circuit Holds That a Participant Who Signed a Release Could Not Assert ERISA Fiduciary Breach Claims on Behalf of Her Retirement Plan