Special COVID-19 Health Insurance Enrollment Windows and Waivers

As a result of the ongoing COVID-19 pandemic, we are observing all sorts of never-before-seen changes in the fully-insured group health plan space.  Many insurers are liberally waiving their normal rules to accommodate the continuation of coverage to employers and employees in their time of need.  Although the accommodations are welcome, employers need to exercise caution before allowing employees to take full advantage of the changes.  There are ERISA and tax law implications to consider that are often left out of the insurer announcements related to coverage enhancements, and employee communications of legal mandates are key.

Special Enrollment Event

Some insurers are treating the COVID-19 pandemic as a special enrollment event and are permitting employers to enable employees to enroll in group health plan coverage during a limited mid-year window. However, for employers that offer group medical plan benefits to employees on a pre-tax basis, the tax rules under Section 125 of the Internal Revenue Code need to be considered.

           The Current Tax Law:  Section 125 does not permit employees to change their coverage elections due to a pandemic.  Instead, the current tax law requires a permissible election change event to allow a change to pre-tax benefit elections, and the employer’s Section 125 plan needs to include that election change rule.

Permissible election change events, which have been firmly established by the IRS for years, include employment changes, such as a commencement of or return from an unpaid leave of absence or a change in the worksite, but only if the change is because of and corresponds with a change in status that affects eligibility for coverage under an employer’s plan.  This established definition might fit for the COVID-19 related changes some employees are experiencing, but not all.  Insurers are proposing to allow even active employees who have experienced no employment change to enroll in coverage.

The Section 125 plan election change rules also allow changes in the case of “significant” coverage changes.  However, absent further guidance, it is unclear whether the IRS would view the group health plan coverage changes mandated by the Families First Coronavirus Response Act or other future legislation as “significant.”

           Actions for Employers:  If the Section 125 regulations serve as an impediment to what an employer wants to do, it is possible to implement coverage elections outside of Section 125 plans.  This means that employees who enroll in a plan during the special COVID-19 enrollment window would need to pay the employee portion of the premiums for coverage with after-tax dollars.  Before pressing “go,” note:

  • Many payroll systems are not set up to accommodate both pre-tax and post-tax group medical plan deductions. This question must be resolved in consultation with payroll teams or providers before this opportunity is offered.
  • Most employees do not expect their group medical insurance premiums will be subject to taxation. Communicating with employees about the taxation aspects of this enrollment decision at the same time the opportunity is presented to employees is key to setting employee expectations and avoiding future conflict.
  • Other employee benefit plan documents, including wrap plans, need to be reviewed and amended, as needed, to effectuate this unique coverage offering.

Waiver of Eligibility Conditions

Other insurers are waiving active service and hours of service eligibility conditions.  However, remember that, under ERISA, the terms of the plan control benefit entitlements.  Thus, even though insurance carriers will not enforce their rights to cancel coverage when the plan terms are not followed, employers still need to be vigilant in ensuring that their plan documents reflect the coverage being offered.  Employers should seek amendments to policies and plans to reflect the leniencies extended by insurers.  And employers should seek written confirmation (including detailed definitions of important terms such as “furlough” and “temporary leave of absence”) of any changes in an insurer’s eligibility conditions.

Answers to Your Questions

Our employee benefits team is on the front lines of handling these unique issues presented by COVID-19 responses taken by employers, insurers, and government regulators.  We help employers understand the legal issues and develop strategies to meet changing business needs.  Please contact us if we can help.

COVID-19 Update – Ohio Changes Rules for Health Insurance Coverage

The Ohio Department of Insurance (ODI) has issued guidance pursuant to Governor Mike DeWine’s emergency declaration and March 9, 2020, order directing state agencies to implement procedures consistent with recommendations from the Department of Health. The ODI guidance applies to insurance companies, multiple employer welfare arrangements, non-federal governmental health plans, and other entities subject to the jurisdiction of the ODI.

Under Bulletin 2020-03, group health plan eligibility restrictions were lifted, premium increases limited, and rules for continuation of coverage expanded. Insurers must allow employers to continue coverage for employees who would otherwise be ineligible as a result of a reduction in hours worked. Further, any “active at work” provision will not operate to limit eligibility for coverage under a group health policy.

As for premium rates, insurers are prohibited from increasing premiums based on a reduction in enrollment due to COVID-19. Insurers also are mandated to provide insureds with the option to defer premiums for up to 60 days, interest-free.

For health plans with at least one active employee enrolled, all former employees are eligible for continuation coverage under COBRA (applicable to employers with 20 or more employees) or for 12 months under the Ohio continuation rules for smaller employers. For employees that lose coverage, there will also be a special enrollment period and waiver of certain enrollment procedures when coverage is purchased on the federal exchange.

Please contact a Jackson Lewis attorney if you have any questions.

Employee Benefits Issues to Consider Before Deciding to Furlough or Terminate Employees During the COVID-19 Pandemic

With the combination of our nation’s response to COVID-19 and the resultant economic downturn, employers of all sizes face the moral and financial dilemma of evaluating employee headcounts while businesses are grappling with the reality of the current situation.  Many employers are considering furloughs, or other types of approved leaves of absences, to reduce immediate payroll, hoping the downturn lasts for a period of a few weeks instead of months. Other employers are opting to implement systemic reductions in the workforce and let employees go.  The focus of this article is to highlight that different employment actions produce different employee benefits consequences that must also be part of any employment decision.

No general rules apply to every situation, as all circumstances are somewhat unique.  Below is a list of several key issues employers must consider as they evaluate their employee benefits programs with an eye toward reducing payroll costs:

  • Don’t assume coverage continues during leaves or furloughs or automatically ends immediately upon termination of employment. Plan terms typically dictate whether active coverage can continue during short-term leaves of absence, whether paid or unpaid, and many plans have minimum hour requirements to maintain active coverage.  Employers that expand coverage for ineligible employees outside the terms of the plan or policy without consent from the insurer or stop loss carrier face significant financial exposure.
  • COBRA continuation coverage (or state continuation coverage, if applicable) generally must be offered for all group health plans when there is a loss of coverage because of a termination of employment or reduction in hours. An increase in the employee’s share of the premium because of his or her reduction in hours (including to zero, as in a furlough) is a loss of coverage for this purpose.
  • The Affordable Care Act employer penalty should be considered. Terminating the group health plan coverage for an employee when a leave or furlough begins may cause an ACA penalty for failing to offer coverage to 95% of full-time employees.  And the coverage offered must remain affordable to avoid an ACA penalty, which may require a continued or increased employer subsidy, whether on active or COBRA coverage.
  • Plan for how employees will keep paying monthly premiums/contributions to maintain coverage during any leave period. Failure to pay monthly premiums could cause coverage to lapse without COBRA protections for health, dental and vision plans, invalidate future Health FSA and Dependent Care FSA claim reimbursements and could also trigger obligations to reinstate life and other disability plan arrangements only through evidence of insurability.  Arrangements should be made in advance with employees about how they will keep contributing to any allowable coverage during leave, whether through a COBRA vendor, ACH payment from a personal checking account or by mail.
  • Before taking any employment actions, the employer should first determine whether it maintains or maintained any formal or informal severance plan or policy that provides a precedent for what benefits may be offered to terminated employees.
  • 401(k) and other retirement plan implications must be considered. A reduction in force, layoff or furlough could cause a “partial termination” under a 401(k) or other retirement plan rules, which triggers 100% vesting for affected participants.   Review hardship and other distribution provisions, and make sure plan loan provisions are reviewed and followed so that “deemed distribution” consequences may be avoided.  Service credit for vesting and employer contributions can also still be required during leaves or breaks in service.  “Safe harbor” match or other fixed contribution provisions should be suspended only after considering the potential ramifications and taking the required implementation measures. Employers should be vigilant in maintaining the same payroll deposit schedule for employee salary deferrals.
  • Employers should review all deferred compensation agreements and other employment agreements for any leave or termination impact. Such agreements may have short-term bonus payouts or other incentive payment obligations due to any “termination without cause” or other “separation from service” that cannot be altered without a review of all implications of Section 409A of the Tax Code. These rules generally prohibit employees from making salary deferral election changes mid-year (including canceling elections) and/or changing the timing of payments.

This is by no means an exhaustive list of all issues to consider before final decisions are made related to any short-term or long-term reduction in employee payroll.  Each employer must evaluate the issues to find the best options during these challenging times.  Please contact any of our Employee Benefit attorneys to help evaluate the issues based on your specific factual circumstances and plan designs.

CalSavers Not Preempted by ERISA

With an alarming number of American workers lacking adequate retirement savings, California and a handful of other states began implementing state-sponsored retirement savings programs.  The CalSavers Retirement Savings Program (CalSavers) was first launched as a pilot program in 2018 and then expanded to all eligible employers in the state in July 2019 in order to provide employees access to a retirement savings program without the administrative complexity for employers. CalSavers requires employers who do not offer employer-sponsored retirement plans to its employees, such as a 401(k) plan, to automatically enroll their employees into the CalSavers plan and to remit payroll deductions to the CalSavers trust for each employee who does not affirmatively opt-out of participation in the plan.  More…

Implications of COVID-19 on Your Health and Welfare Benefit Plans

Employers are grappling with employee benefit issues in response to the 2019 Novel Coronavirus (“COVID-19”).  Efforts are being made to pave the way for widespread testing by eliminating cost barriers such as deductibles, copayments, coinsurance, or High Deductible Health Plan restrictions to ensure employees and their families are proactively being diagnosed once symptoms present, to ensure proper care management for the participant, and to assist in preventing the spread of the virus.  Read on for more information about the changes that might impact your employer-provided health insurance and what you need to do to comply in this rapidly changing environment:

Remove Barriers to Coverage

  • Fully-Insured Plans:  Several states (including Washington, New York, California, Vermont, Maryland, Nevada, and Oregon) have issued mandates directing that fully-insured health plans regulated by the Department of Managed Health Care immediately reduce cost-sharing to zero for all medically necessary screening and testing for COVID-19.
  • Self-Insured Plans:  Many claims administrators are offering free testing for COVID-19 to self-funded plans, so employers sponsoring self-insured plans should check with their administrator regarding the voluntary waiver of COVID-19 testing costs.  Stop-loss policies usually have (advance) notice requirements that apply when the plan terms are changed, so consider notifying your stop loss carrier of any changes in coverage/benefits.
  • High Deductible Health Plans:  Last week the Internal Revenue Service issued Notice 2020-15 to confirm that until further guidance is issued, a High Deductible Health Plan (“HDHP”) still complies with HSA contribution guidelines if it provides health benefits associated with testing for and treatment of COVID-19 without a participant first satisfying the deductible.  The payment for such tests and treatment of COVID-19 under the HDHP can be considered “preventive care.”  More…
  • In Vitro Testing: The Families First Coronavirus Act (R. 6201) was passed by the U.S. House of Representatives in the early hours of March 14, 2020.  The bipartisan legislation, which currently applies only to employers of 500 or less, provides a number of important changes, but also makes special provisions for in vitro testing.  If enacted as written, a group health plan and a health insurance issuer offering group or individual health insurance coverage (including a grandfathered health plan (as defined in the Affordable Care Act)) would be required to provide coverage (without regard to any deductibles, copayments, or coinsurance) for approved in vitro diagnostic products for the detection of COVID–19.   Coverage would also be required for certain items and services furnished to an individual during health care provider office visits, urgent care center visits, and emergency room visits that relate to administration of an in vitro diagnostic product for the detection of COVID–19.  More…  

Employer Action Required

  • Plan Amendment:  A plan amendment is likely required to reflect any changes in coverage.  However, given the urgency of the current situation, it is likely allowable to offer expanded coverage before adopting a plan amendment.  Employee communications will be essential to keep your employee population up to date regarding available coverage.
  • Privacy Law Requirements: Employers should remember that even during the current pandemic, HIPAA privacy rules still apply to “covered entities” such as medical providers or employer-sponsored group health plans regarding individually identifiable health information.  While employers who receive information outside of the context of their group health plan are not subject to HIPAA’s restrictions regarding such information, health information should generally be treated as confidential as a range of employment law issues, including under the Americans with Disabilities Act, the Genetic Information Nondiscrimination Act, the National Labor Relations Act, and other federal and state laws might apply.  More…  

Additional Ways to Help Employees

  • Leave Donation Programs: Employers can provide leave-sharing arrangements that permit employees to donate PTO, leave, or vacation time in an employer-sponsored leave bank for use by other employees adversely affected by an event declared a major disaster or emergency by the President.  More…
  • Cash Payments to Affected Employees: Section 139 of the Internal Revenue Code provides that a tax-free disaster relief payment can be made in cash to any individual if the payment is a “qualified disaster relief payment.”  More…

This is a dynamic situation, and the laws are changing quickly.  Check for legal updates regularly, and contact Natalie Nathanson or your local Jackson Lewis attorney for more information.

Using Leave Sharing Plans with COVID-19

The IRS has issued specific guidance for the tax treatment of a leave-sharing arrangement that permits employees to donate PTO/ leave/vacation time in an employer-sponsored leave bank for use by other employees adversely affected by an event declared a major disaster or emergency by the President.  See IRS Notice 2006-59.


General Tax Rule

Generally, the employee who donates PTO/leave/vacation time will be treated as having W-2 compensation for the donated time (based on his or her rate of pay at the time of the donation).  This rule is based on the long-standing “assignment of income” tax law doctrine.

IRS Exceptions

The IRS has created several limited exceptions to the general rule:

  1. Medical leave-sharing plans.  See IRS Revenue Ruling 90-29.
  2. Major disaster leave-sharing plans.  See IRS Notice 2006-59.
  3. Leave-based donations of cash to charitable organizations in the case of qualified disasters, including:

Exception for Major Disaster Leave-Sharing Arrangement [IRS Notice 2006-59]

If an employer sponsors a “major disaster leave-sharing plan” that meets the requirements listed below:

  • Employees who donate leave will NOT be taxed on the donated leave time.
  • Employees who use donated leave will be taxed on the donated leave time used — e.g., the donated leave time used is treated as W-2 wages for all income and employment tax withholding purposes.

Major Disaster Leave-Sharing Plan” Requirements

A “major disaster leave-sharing plan” is a written plan that meets these requirements:

  • The plan allows a leave donor to donate accrued leave to an employer-sponsored leave bank for use by other employees adversely affected by a major disaster or emergency (as declared by the President).  An employee is considered “adversely affected” by a major disaster if it has caused severe hardship to the employee or a family member of the employee that requires the employee to be absent from work.
  • The plan does not allow a leave donor to donate leave to a specific leave recipient.
  • The amount of leave that a leave donor may donate in any year generally may not exceed the maximum amount of leave that he or she normally accrues during the year.
  • A leave recipient may receive paid leave (at his or her normal rate of compensation) from the donated leave bank.  Each leave recipient must use this leave for purposes related to the major disaster.
  • The plan adopts a reasonable limit, based on the severity of the disaster, on the period of time after the major disaster occurs during which a leave donor may donate, and a leave recipient must use, the donated leave.
  • A leave recipient may not convert leave received under the plan into cash in lieu of using the leave.

However, a leave recipient may use leave received under the plan to eliminate a negative leave balance that arose from leave advanced to the leave recipient because of the effects of the major disaster.  A leave recipient also may substitute leave received under the plan for leave without pay used because of the major disaster.

  • The employer must make a reasonable determination, based on need, as to how much leave each approved leave recipient may receive under the plan.
  • Leave donated due to one major disaster may be used only for employees affected by that disaster.

Except for an amount so small as to make accounting for it unreasonable or administratively impracticable, any leave donated under a major disaster leave-sharing plan not used by leave recipients by the end of the period specified in the plan must be returned within a reasonable period of time to the leave donors (or, at the employer’s option, to those leave donors still employed by the employer) so the donor can use the leave.

  • The leave returned to each leave donor must be in the same proportion as (1) the leave donated by each leave donor bears to (2) the total leave donated because of that major disaster.

If a leave-sharing arrangement does not meet these specific requirements, then the donating employee MUST be treated as having W-2 compensation for the donated time (based on his or her rate of pay at the time of the donation).  See, IRS Letter Ruling 200720017.


Any payments received by an employee using donated PTO/leave/vacation time under the program must be treated as W-2 wages for all income and employment tax withholding purposes.


  • In order to use either of the two tax exceptions described above, the employer must have a formal written leave-sharing program.
  • The IRS does NOT require an employer to obtain any pre-approval of a leave-sharing program nor does the IRS require an employer to file any subsequent reports about the program.  Also, since a leave-sharing plan is NOT subject to ERISA, there are no filings or other actions required by the DOL   In short, the only employer reporting obligation is to properly report W-2 wages and withhold taxes.


Note that separate from a major disaster leave-sharing program, Section 139 of the Internal Revenue Code provides that a tax-free disaster relief payment can be made in cash to any individual if the payment is a “qualified disaster relief payment.”  Both the Congressional report for Section 139 and the IRS have made clear that the requirements for making tax-free disaster relief payments are very simple and easy to meet.

The Congressional report and Section 139 specifically provide that qualified disaster relief payments are excluded from gross income and from wages and compensation for employment taxes.  As a result, an employer can make tax-free disaster relief payments to its employees.

  • Section 139 applies only to the federal tax treatment of the payments.  State tax laws may or may not be the same.

Note that an employee who donates cash to another employee can make the donation only out of after-tax income.

Jackson Lewis can help you with your leave sharing/donation plan.

The IRS Addresses Expenses Related to COVID-19

Like many other areas, employers are grappling with issues in response to the pandemic growth of the 2019 Novel Coronavirus (aka, “COVID-19”) in the workplace.  One newer topic has been related to the desire to ensure employees and their families are proactively being diagnosed once symptoms present, to ensure proper care management for the employee but also to assist in preventing the spread of the virus.

The immediate concern is that employees are less likely to seek early diagnosis and treatment when enrolled in a high deductible health plan (HDHP) because they are personally responsible for the full cost of claims and expenses for treatment if they have not yet met their annual deductible.  One approach suggested by the insurance carrier and consulting community, which is also supported by the Trump Administration, is to amend the plan to allow the costs of being tested and treated for COVID-19 to be covered without being subject to deductibles and other cost-sharing arrangements.  The challenge has been that existing IRS guidance was unclear whether such cost-sharing arrangements could be deemed preventive care which would exempt tests and treatment of COVID-19 claims from the standard definition of a “high deductible health plan” under Internal Revenue Code Section 223(c)(2)(A), but not jeopardize contribution eligibility for any amounts contributed to a health savings account (HSA) by the employee and/or employer for such “first dollar coverage” under the plan.

Fortunately, the Internal Revenue Service (“IRS”) just issued Notice 2020-15 to confirm that until further guidance is issued, an HDHP plan still complies with HSA contribution guidelines if it provides health benefits associated with testing for and treatment of COVID-19 without a participant first satisfying the deductible.  The payment for such tests and treatment of COVID-19 under the HDHP can be considered “preventive care.”

By allowing this assistance without jeopardizing the status of an HDHP, individuals who participate in an HDHP are still eligible to contribute to their tax-favored HSA while also allowing the Plan to provide additional financial assistance to offset at least a portion of the cost of claims related to COVID-19.  This is welcomed news, but still more questions remain.  For example, what costs can actually be considered a “treatment” of COVID-19?  If an individual goes to urgent care, a primary care doctor, or even consults with a telehealth medical professional and then the individual tests negative for COVID-19 but positive for influenza A or B, does that individual have to pay the applicable cost of that medical treatment even though they may have been symptomatic to COVID-19 initially?

Today’s guidance possibly opens more questions than answers on those topics, particularly since this latest guidance makes no other modification to prior guidance on HDHP compliance issues; vaccines and other preventive care under the Safe Harbor in §223(c)(2)(C) remain unchanged.  Employers with fully insured health plans will have some of these issues resolved by their insurance carrier, who will be separately announcing changes to existing insurance policies and coverages offered in order to be in compliance with state and federal laws.  However, other questions will remain about HSA compliance issues.  Likewise, employers with self-insured plans have more discretion, and more scrutiny, over the changes made to the health plan in response to COVID-19.

Please contact your Jackson Lewis attorney for additional assistance or if you have other questions.

California Joins the Fray

As the confirmed cases of Coronavirus (COVID-19) rises in the U.S., more states are issuing directives regarding employee cost-sharing for screening and testing for the virus. Testing for COVID-19 is free if performed by the Centers for Disease Control and Prevention, however, the testing is expected to be offered more broadly by commercial labs.   Read the California Workplace Law Blog here.

March 31st Deadline for 403(b) Plan Sponsors

March 31st Deadline for 403(b) Plan Sponsors

If your organization sponsors a 403(b) plan for employees and has not adopted an up-to-date written plan document that complies with the applicable regulations, you have until March 31, 2020 to do so.  Failure to do could cause substantial negative tax consequences for employees (and the organization) or cause the organization to incur substantial penalties to avoid those consequences.

Under regulations and subsequent guidance issued over a decade ago, 403(b) plan sponsors were required to adopt written plan documents that complied with the regulation’s form requirements by January 1, 2010.  Among other things, the plan document had to contain all of the material terms and conditions for eligibility, benefits, limitations, available annuity and/or custodial contracts, distributions, and other permitted features the plan sponsor provides under the plan.

Plan sponsors that adopted written plan documents after the final regulations were issued generally did their best to ensure compliance with the form requirements, but the only government-provided model language was for schools.  Finally, in 2017, the Internal Revenue Service started issuing approval letters for pre-approved 403(b) plan documents.  This gave plan sponsors who already had adopted individually-designed 403(b) plan documents an opportunity to restate their plans using documents that have the IRS’ blessing as to form compliance.

For plan sponsors that still are using individually-designed plan documents (not blessed by the IRS) which may contain one or more form defects (and plan sponsors that have not timely adopted amendments to reflect changes in the law or regulations), the IRS has provided a rather lengthy remedial amendment period within which to cure such defects.  Generally, March 31, 2020 marks the end of that remedial amendment period.  Until then, your plan still can be amended or restated on an up-to-date pre-approved plan document to correct any form defect retroactively to January 1, 2010 (or the plan’s original effective date, if later).

For form defects arising after March 31, 2020 (like a failure to timely amend the plan document to reflect new changes in the law or regulations), there will be other remedial amendment periods, as described in IRS guidance issued in September last year.  That guidance also provides for a limited extension of the March 31st deadline for defects related to discretionary amendments arising before March 31st.  In its guidance, the IRS also promised that it would issue annual required amendments lists to reflect 403(b) plan changes in the law and regulations for each year.

Once the applicable remedial amendment period ends, generally, the only way to correct form defects will be through the IRS’ voluntary correction program which requires payment of a fee and formal submission to the IRS.  Remember that, generally, operational failures cannot be corrected by adopting an amendment or restatement, even during a remedial amendment period.  Instead, failing to operate a plan in conformance with its terms must be corrected using the IRS’ voluntary correction program.

If you have questions about your 403(b) plan’s compliance or want to adopt a pre-approved plan, Jackson Lewis can help.

The Supreme Court Defines Actual Knowledge

In a closely watched decision, Intel Corporation Investment Policy Committee v. Sulyma, Slip Op. No. 18-1116 (U.S. S. Ct., Feb. 26, 2020), construing ERISA’s three-year statute of limitations, see ERISA § 413(2), 29 U.S.C. § 1113(2), the Supreme Court held unanimously (J. Alito) that “actual knowledge” means “. . . when a plaintiff actually is aware of the relevant facts, not when he should be.”

ERISA contains a two-part statute of limitations provision for breach of fiduciary duty claims.  There is a six-year statute of repose, ERISA § 413(1), 29 U.S.C. § 1113(1); also, a matter is time-barred: “three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation.”  ERISA § 413(2) (emphasis added).  The meaning of “actual knowledge” was the point of this case.

Like most plan sponsors, Intel distributed e-mails describing the Intel 401(k) Plan’s investment options.  These e-mails directed plaintiff to “fund fact sheets” describing the characteristics (risk, fees, etc.) of plan investment options.  The Summary Plan Description explained that plan funds included alternative options and directed plaintiff to the fund fact sheets that explained these assets included hedge funds, private equity, and commodities investments.  Annual disclosures identified all fund investments, respective asset performance, and relevant fees.

Plaintiff sued over three years, but less than six years after receiving plan disclosure information.  Plaintiff alleged that the plan’s alternative investments – hedge funds, private equity, and commodities investments – were imprudent because they performed below market and carried higher fees.  In motion practice, Defendants urged that plaintiff’s claims were time-barred because he filed over three years after receiving disclosures about asset performance and fees.  Defendant’s motion was converted to one for summary judgment, and limited discovery occurred.  While discovery showed that plaintiff visited the in-house benefits intranet site, he testified that he was unaware that plan monies were invested in hedge funds or private equity.

The district court granted Intel’s motion for summary judgment holding it was improper for plaintiff’s claims to survive merely because he did not look into the disclosures available to him.  The Ninth Circuit reversed and held that “actual knowledge” means knowledge that is actual, not merely a possible inference from ambiguous circumstances.

Agreeing with the Ninth Circuit, the Supreme Court held that “actual knowledge” means knowledge that is actual.  To have “actual knowledge” of a piece of information, plaintiff must in fact be aware of it.  The Court distinguished between “actual knowledge” versus hypothetical knowledge a reasonably diligent plaintiff would know from reading the plan sponsor’s disclosures.  The Court held that “actual knowledge” requires more than disclosing all relevant information to plaintiff; plaintiff must in fact have become aware of that information.

The Court did caution that the opinion did not foreclose defendants from contending that evidence of willful blindness supports a finding of “actual knowledge.”  The Court suggested that evidence of disclosure remains relevant to showing “actual knowledge,” as would a showing that Plaintiff viewed electronic records and took action in response to such information.


The plaintiff bar will hail this decision as a victory, but the result is more subtle with a major impact in class certification.  First, defendants will conduct discovery as to “actual knowledge.”  What did each class member actually know from the routine distributions sent by plan sponsors?  Second, the Court’s invocation of the willful blindness standard is significant.  In other cases, the Court has held that willful blindness includes scenarios where a plaintiff purposely closes his eyes to avoid what is taking place around him.  See Global-Tech Appliances, Inc. v. SEB S.A., 563 U. S. 754, 769 (2011).  Discovery as to whether class members purposely close their eyes to information contained in plan disclosures will demonstrate individualized conduct inconsistent among all class members.  Discovery as to these aspects of the three-year statute of limitations defense should trigger disparities among class members, a significant weapon in opposing class certification.