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Employee Benefits
University of Minnesota Law School
Monahan, Amy B.


1) Overview:

a) Legal sources

i) Three primary statutes

(1) Internal Revenue Code


(3) ACA (which has been codified in three places)

(a) Public Health Sertvices Act

(b) The Tax Code


ii) Some sections are in both ERISA and the Tax Code

iii) The Parts of the PHSA that were modified trump ERISA if there is a conflict.

b) Federal intervention.

i) Why necessary?

(1) Lack of security:

(a) No vesting requirement. Ers could tamper by firing before benefits were available

(b) No funding requirements. BK, mismanagement, etc.

(2) Corruption and mismanagement of funds

(a) Kickbacks for choosing investments that weren’t in best interests

(b) Investments that would benefit business rather than participants

(c) Self-dealing, and conflicts of interest transactions

(3) Crazy conflicts between state laws, etc.

ii) Primary purpose: protect individual rights to benefit plans

c) Big picture

i) Federal subsidization

(1) Most expensive tax expenditure: Er sponsored health plans – 161.5 Billion

(2) Second: Er sponsored retirement plans – 135 billion

ii) Modern shift from defined benefit to defined contribution

iii) Increased importance of health benefits. That wasn’t a big issue back in the 70’s.

iv) Americans living longer. Amount of retirees increasing.

v) Poor savings of Americans in general.

d) Including part-time workers, in 2013,

i) 63% of all (part-time or full-time) private industry workers had access to a retirement plan

(1) 49% participated (the take up rate)

ii) 85% of full-time private industry workers had access to a health plan (thru your employer or spouse)

(1) 64% participated

e) Importance:

i) Micro: Ee benefits are key to Americans’ financial security

ii) Macro: Er retirements hold 8.9 Trillioin as of the end of 2013.

f) Course overview: The big stuff:

i) Plan administration

(1) ERISA scope

(2) ERISA requirements

ii) Specific types of plans

(1) Retirement

(2) Health

iii) Fiduciary responsibilities

iv) ERISA claims and remedies

v) ERISA Preemtion

2) Types of Plans

a) Single Er plan: company A pays into a plan. Plan pays Ees.

b) Multi-Er plan/union plan: company A B and C pay into a plan that pays out to A B and C employees in union context.

c) Multi Er plan: same as above, but no union.

3) ERISA scope:

a) Applies to plans, not Ers.

b) Per §4: any benefit plan (c below) (as defined in §3.3, including welfare plans under 3.1 and pension plans under 3.2) established or maintained (d below) by and Er that affects IS commerce. (doesn’t apply to public plans).

i) 3.1 very broad

ii) 3.2 designed to root out disguised pension plans

iii) Pension plans in sections 1, 2, 3, 4, 5.

iv) Welfare plans in 1, 4, 5, 6, 7.

c) What is a plan?

i) Irrelevant stuff

(1) If just buying insurance for Ees, can still be a plan

(2) If Er is a fiduciary, not necassirly a plan exists

(3) Not enough to show that ER made “any decision” to provide the type of beneits described in erisa. Donovan v. Dilligham.

ii) Ultimate Q:

(1) Does a plan, fund, or program actually exist.

(a) In light of the circumstances, could a reasonable person ascertain:

(i) Intended benefits

(ii) Beneficiaries

(iii) Source of financing

(iv) Procedures for receiving benefits

(v) Need for ongoing plan administration

(b) Citation: Fort Halifax Packing v. Coyne.

d) What is established or maintained?

i) Funding / administering a plan = “establishing or maintaining”

ii) Exceptions

(1) See DOL Reg. (29 C.F.R.) § 2510.3–1(j): welfare benefit plan does not include group plan which

(a) No contributions are made by an employer or employee organization;

(b) Participation the program is completely voluntary for employees or members;

(c) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer; and

(d) The employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.”

(2) Other exceptions

(a) Ee discount programs are not ERISA plans

(b) If ER continues to pay someone out of normal ee compensation fund through its normal payroll practices, no ERISA plan exists. Other practices like flowers or Ee cafeterias subsidized by business are not ERISA plans. DOL Reg. § 2510.3–1.

e) Difference between Pension and Welfare plans

i) Hallmark of a pension plan is the provision of retirement income or some other deferral of income extending to the termination of covered employment or beyond. ERISA 3.2.

ii) What is income?

(1) It is not limited to cash. Income under ERISA is like income under the tax code

(2) It includes “anything that can be valued in terms of currency” including food vouchers issued by a grocery store. Musmeci v. Schwegmann Giant Super Markets.

(3) àIncome is “gain or recurrent benefit usually measured in money.” Lukhard v. Reed.

iii) What about unemployment plans? Don’t they seem like plans under 3.2? Yes, but mentioned specifically in 3.1. Statute trumps.

iv) Severance pay plans are welfare plans rather than pension plans if:

(1) The plan payments are not contingent on the employee’s retirement;

(2) The payments do not exceed twice the employee’s annual salary; and

(3) Payments cease within twenty-four months of termination of employment.” M 33 (citing DOL Reg. § 2510.3–2(b)).

(4) à if both under two years and twice salary, not ERISA. If fails to meet that, it is gov

f) Who is an employee?

i) ERISA says “individual employed by employer” 3.6.

(1) Difference between Ee and IC

(a) Degree of control test: the more control an ER has to determine the manner and means of work, the more likely it is that Ee.

(i) “[Courts] consider the hiring party’s right to control the manner and means by which the product is accomplished. Among the other factors relevant include

1. The source of the instrumentalities and tools;

2. The location of the work;

3. The duration of the relationship between the parties;

4. Whether the hiring party has the right to assign additional projects to the hired party;

5. The extent of the hired party’s discretion over when and how long to work; the method of payment;

6. The hired party’s role in hiring and paying assistants;

7. Whether the work is part of the regular business of the hiring party;

8. Whether the hiring party is in business;

9. The provision of employee benefits; and

10. The tax treatment of the hired party.”

(ii) àNationwide Mut. Ins. Co. v. Darden, 503 U.S. 318 (1992).

(b) Example: Vizcaino v. Microsoft Corp. Freelance computer programmers who worked for long periods of time for Microsoft (on its premises), did the same job as employees but were paid through a different department were employees, not independent contractors despite Microsoft labels, waivers, etc.

(c) Working owners: If owners are not the only persons who are eligible for benefits from the plan, and they work for the company, they may qualify as

ets, liabilities

(a) Provided to participants in defined benefit plans

(2) Timing

(a) 120 days w/ plan with 101+ participants

(b) 210 days after plan year with 100 and less

(3) Penalty under 502(c)(1)

(4) Paid to participants who don’t get notice

vi) Periodic benefit statement

(1) Description of vested benefits

(a) Provided to participants in pensions

(2) Timing varies by type of plan

(3) 502c1 penalties paid to each participant who is not given a timely notice

vii) Blackout period notice

(1) Advance notice of period during which participants cannot direct or diversify investments

(2) Notice at leat 30 dats before blackpouot

(3) Monetary penalty under 502c7

viii) Diversification notice

(1) Participant has right to diversify

(2) 30 days before rights commence

(3) 502c7 penalties

ix) Information upon request

(1) Documents requested in writing under 104b4

(2) 30 days after request

(3) daily penalty under 502c1

c) Is there anything in ERISA § 104(b)(1) that is not superseded by ACA § 1001?

(1) Yes and no. The ACA completely supersedes the last sentence of ERISA § 104(b)(1), which is the only portion of the section that has the 60-day-after disclosure requirement.

(2) So post ACA, you either have to disclose 60 days before or 210 days after. There is nothing that still has to be disclosed 60 days after.

(3) This is basically a notice requirement. Do not confuse with ERISA § 204(h)’s notice requirement. ERISA § 204(h) is a little bit more specific in what you have to tell people, but in practice, the substance of these disclosures aren’t really different. Maybe ERISA 204(h) disclosures tend to be a bit more involved because it’s often harder to explain a change in pension formula than a change like “NO MORE MATCHING CONTRIBUTIONS.” All that’s different is (1) the timing as far as when the notice/disclosure must be made and (2) the changes to which the disclosure/notice requirement applies—the disclosure requirements are broader than the notice requirements.

d) ACA disclosure requirements:

i) SMM (above)

ii) SBC:

(1) Uniform definitions of insurance and medical terms

(2) Scope of coverage for each category of benefits

(3) Exceptions reductions limitations of coverage

(4) Illustrations of coverage

(5) Warning that its only an outline

(6) Website where plan language is

(7) Can’t exceed four pages

iii) New reporting requirements to HHS/DOL/IRS

(1) No grandfathered plans: quality of care report

(2) All plans: claims data

(3) Minimum essential coverage

(4) W2s

(a) Shows how much Er pays for Ee health insurance premiums

e) Penalties/enforcement for non-compliance

i) ERISA has some penalties for non-compliance

ii) See above. Courts discretion under 502(c)(1)

(1) Courts consider

(a) Length of delay

(b) Time and expense incurred by requester

(c) Extent wo which requester was prejudices/harmed by NC

(d) Presence or absence of bad faith