Employers who provide health benefits to their union workforce through a multiemployer group health plan must satisfy all the Affordable Care Act (ACA) reporting requirements regarding their union employees… More

Since its passage late in 1980, the Multiemployer Pension Plan Amendments Act (MPPAA) has proven to be a hindrance to the profitable operations of employers that contribute to multiemployer pension funds by imposing a surprise, and often expensive, obligation (the “withdrawal liability”) on employers across many industries. However, the construction industry is one of a few industries in which the impact of withdrawal liability upon employers has been eliminated… More

The Bipartisan Budget Act of 2018 and the Tax Cuts and Jobs Act of 2017 liberalized the hardship distribution rules applicable to 401(k) and 403(b) plans. On September 23, 2019, the IRS issued final regulations — which we discussed in a previous blog — implementing the new hardship distribution rules. While some of the new rules were discretionary, there are several mandatory provisions that will take effect on January 1, 2020, including:

• Plans are prohibited from suspending employee deferral contributions following hardship distributions that occur on or after January 1, 2020; and

• Employees must represent in writing (including electronic representations) that they have insufficient cash or other liquid assets reasonably available to satisfy the need giving rise to hardship distribution requests that are made on or after January 1, 2020.

On December 12, 2019, the IRS issued Rev. Proc. 2020-9, clarifying when 401(k) plans must be amended to comply with the elimination of deferral suspension and written representation rules described above: December 31, 2021 for both individually designed and pre-approved 401(k) plans, which aligns with the deadline the IRS established for non-governmental 403(b) plans in Rev. Proc. 2019-39.

Key Takeaway: Although plan documents do not need to be amended immediately, plan sponsors should ensure that they are in operational compliance with all mandatory hardship distribution rules that become effective on January 1, 2020.

For years, steep arbitration fees have made many employers think twice about contesting a questionable withdrawal liability determination. The Pension Benefit Guaranty Corporation’s (PBGC) approval of a lower fee schedule may ease that hurdle.

ERISA, as amended by the Multiemployer Pension Plan Amendment Act of 1980 (MPPAA), requires all disputes between an employer and a multiemployer pension plan concerning a withdrawal liability determination to be resolved by arbitration. Arbitration is conducted under arbitration procedures approved by the PBGC or, absent such procedures, under regulations promulgated by the PBGC.

In 1981, the American Arbitration Association (AAA) promulgated rules known as the Multiemployer Pension Plan Arbitration Rules for Withdrawal Liability Disputes. These rules were approved by the PBGC in 1985 and subsequently amended (and approved by PBGC) in 1986. The AAA then amended its fee schedule in 2013 and applied to PBGC for approval of the 2013 AAA rules. On December 9, 2019, the PBGC approved a modified version of the AAA’s application.

The 2013 AAA Rules significantly increased the fees charged to an employer wishing to contest a withdrawal liability determination. For example, fees charged by the AAA (these do not include the arbitrator’s fees) in disputes involving amounts between $1 million and $5 million typically exceeded $10,000 and often hit the $14,400 maximum. Under the new AAA fee schedule approved by PBGC, these disputes will carry a maximum AAA fee of $3,750. Similarly, AAA fees for disputes involving amounts over $5 million (not atypical in today’s climate) are reduced from a maximum of $77,500 to $5,000 under the new rules. (There are relatively de minimis fees for hearing rescheduling and for matters held in abeyance for over one year under the new rules.) The new rules also clarify that AAA fees, while paid by the party initiating arbitration (e.g., the employer) are to be shared equally (subject to the arbitrator’s discretion).

The new rules (which become effective January 1, 2020) also change the default rules for designating an arbitrator where the parties cannot agree on one. Under the AAA’s previous rules, the AAA had the authority to designate an arbitrator absent mutual consent by the parties. The new rules adopt the rule from the PBGC’s arbitration procedures, whereby either party may seek the designation and appointment of an arbitrator in federal court.

In an area where the law favors the fund in nearly every instance, the new rules may level the playing field by providing less of a financial disincentive for employers faced with a questionable withdrawal liability determination to contest the determination in arbitration.

If you have questions about withdrawal liability matters, please contact the author or the Jackson Lewis attorney with whom you work.

In a white paper and technical explanations, Republican Senators Charles E. Grassley (Chairman of the Senate Committee on Finance) and Lamar Alexander (Chairman of the Senate Committee on Health, Education, Labor and Pensions) have proposed reforms to the multiemployer pension plan system.

If implemented, the proposed reforms (not yet introduced as a bill) would represent dramatic and far-reaching changes to the multiemployer pension plan system. The white paper describes the current system as “in crisis” and warns that failure to act now will leave over 1.3 million multiemployer pension plan participants without the pension benefits they have been promised and earned.

The proposed reforms would attempt to finance improvements and strengthen the Pension Benefit Guaranty Corporation (PBGC) (the federal agency that guarantees certain pension benefits) by creating a new premium structure, including increasing the annual per-participant premium from $29 to $80 and imposing a copayment on active employees and most retirees.

Among other things, the proposed reforms would:

  • Expand PBGC’s authority to partition plans to carve out liabilities attributable to employers who have exited a plan without paying their full share of liabilities;
  • Increase the level of benefits guaranteed by PBGC from $12,870 a year to approximately $20,000 a year;
  • Require plans to use more conservative interest rate assumptions to value liabilities for funding, capped at six percent;
  • Require plans to use these funding assumptions for withdrawal liability determinations;
  • Increase the annual withdrawal liability payment amount (essentially, by using a 20-year lookback);
  • Replace the 20-year cap with a sliding scale based on funding status, but in no event over 25 years of payments; and
  • Eliminate mass withdrawal liability.

The proposed reforms would drastically affect the withdrawal liability of most contributing employers. While many believe it unlikely these proposed reforms will be enacted, some of the proposed reforms could become part of the Rehabilitation for Multiemployer Pensions Act (also called the Butch Lewis Act) that was passed by the House of Representatives on July 24, 2019, and introduced to the Senate.

We will continue to monitor this and other reform efforts in Congress. Please contact the author or any other Jackson Lewis attorney with questions.

Last week, the IRS issued it updated Form 1094-C and 1095-C instructions for 2019. Employers that employ New Jersey residents, however, may have more reading to do. New Jersey responded to the federal repeal of the Affordable Care Act’s (ACA) individual mandate, by enacting a mandate of its own. The New Jersey Health Insurance Market Preservation Act (Act), which became effective on January 1, 2019, imposes a penalty on New Jersey taxpayers who do not have minimum essential coverage during each month of the year. But, the Act also imposes some obligations for employers.

Requirements for individuals

Beginning January 1, 2019, Garden State residents who fail to maintain coverage will be subject to a Shared Responsibility Payment (SRP) due with their 2019 New Jersey Income Tax return. The amount of the SRP is generally based on income and family size and is capped at the statewide average annual premium for Bronze Health Plans in New Jersey. For individual taxpayers, the penalty could be as little as $695 or as much as $3012, and it goes up from there for families. Find out more here.

Requirements for employers

In order to administer the penalty, New Jersey needs third parties to verify health coverage information supplied by individual taxpayers. Accordingly, the state is looking to employers (including out-of-state employers) and all other providers of minimum essential coverage to New Jersey residents to send health-care coverage returns to the state for the 2019 tax year. In short, this means that for 2019, employers that employed New Jersey residents may have to make a filing with the state. Employers will transmit these returns through New Jersey’s system for processing W-2 forms.

One question some employers have is whether they have a reporting requirement to New Jersey, even if they do not have Form 1094/1094 reporting requirements under the ACA to the IRS – such as if the employer is not an “applicable large employer” under the ACA and offers only fully-insured coverage. The Act generally provides that every employer sponsoring an employment-based health plan that provides minimum essential coverage to a New Jersey resident must file a return with the state concerning that resident’s coverage. In the absence of additional guidance from the state, employers with New Jersey residents should seek appropriate counsel concerning their reporting obligations.

If reporting is required, the state will permit employers to send the same Forms 1094/1095 that they transmit to the IRS to satisfy the Act’s requirements. However, the state encourages companies to send data pertaining only to New Jersey full-year and part-year residents as providing information on non-residents of New Jersey may raise privacy and other issues. Coverage returns must be filed with New Jersey no later than March 31, 2020.

Employers with New Jersey employees also may want to encourage their employees who receive Form 1094/1095 from them to provide those forms to the employees’ dependents for completion of their own NJ state tax returns, if applicable.

For more information about these requirements in New Jersey, check out the information site set up by the state.

 

A withdrawing employer must make withdrawal liability installment payments during the pendency of an arbitration proceeding contesting the existence of withdrawal liability, a federal court has affirmed, rejecting the employer’s attempt to recognize an equitable exception to the general “pay now, dispute later” requirement. Boilermaker-Blacksmith National Pension Trust v. PSF Industries, No. 18-2467-JWL (D. Kan. Nov. 27, 2019).

Under the Multiemployer Pension Plan Amendments Act (MPPAA), an employer that withdraws from a multiemployer pension plan must make withdrawal liability installment payments in an amount determined under the statute. Under MPPAA, disputes between a fund and an employer must be resolved by arbitration. It also requires the employer to continue to make payments until an arbitrator has finally resolved the dispute. This last requirement is referred to as MPPAA’s “pay now, dispute later” provision.

In this case, the employer permanently ceased making contributions in 2017. The fund demanded withdrawal liability in excess of $16 million. The employer disputed the existence and amount of withdrawal liability by demanding arbitration. While arbitration is still pending, the employer made one installment payment and then failed to make subsequent payments.

When the fund sued to collect the delinquent payments, the employer’s sole defense was that the court should recognize an equitable exception to the pay now, dispute later provision. The employer claimed that entitlement to this exception should be based on its likelihood of success in the underlying arbitration (which was ongoing) and the irreparable harm that would result from having to make these payments.

The court reviewed other Circuit court precedent on point, citing with approval the Sixth Circuit’s holding in Findlay Truck Line, Inc. v. Central States, Southeast and Southwest Areas Pension Fund, 726 F.3d 738 (6th Cir. 2013) in holding that the employer must make the installment payments.

The court noted that the plain language of the statute (“withdrawal liability shall be payable … notwithstanding any request for review or appeal”) requires employers to make withdrawal liability payments without exception. It also found that its holding comported with the Congressional intent in protecting funds from “undercapitalized or financially precarious employers.”

The court then looked to other Circuit courts that had recognized an equitable exception, finding that those courts (the Fifth and Seventh Circuits) had conditioned the exception on an affirmative showing by the employer “that the pension fund lacks a colorable claim” for withdrawal liability. Absent any allegation that the fund’s claim was frivolous, the court denied the employer’s request for an equitable exception to the pay now, dispute later requirement.

MPPAA is a highly detailed and complex statute, and counsel experienced with the statute is essential to the defense of any claim for withdrawal liability. PSF Industries is another example of the statute’s inherent pro-fund bias and the reluctance of most courts to diverge from these parameters. Please contact the author or any other Jackson Lewis attorney with whom you work regarding this case or any withdrawal liability issues.

A court in Florida has declined to expand the remedies available under a claim for benefits due under 29 U.S.C. § 1132(a)(1)(B) of ERISA. Keys v. Bell, 2019 U.S. Dist. LEXIS 195505 (M.D. Fla. 2019). The court dismissed the plaintiff’s claim for “equitable estoppel by silence” under that provision of ERISA’s civil remedies.

This supports the trend in other courts following the U.S. Supreme Court’s 2011 decision in CIGNA Corp. v. Amara, which marked firm boundaries for litigation of claims under § 1132(a)(1)(B) versus under § 1132(a)(3) of ERISA. Amara strongly signaled that claims under § 1132(a)(1)(B) rise and fall on the terms of the plan and are to be litigated under principles of the law of contracts. Equitable principles (such as estoppel, reformation, and surcharge) are available to provide relief under § 1132(a)(3), but only where the plaintiff can demonstrate a claim under § 1132(a)(1)(B) would provide inadequate relief because of the inequitable conduct of the defendant.

Plaintiff Tyrone Keys was an NFL defensive lineman from 1983 until 1989, when he retired because of football-related injuries. Keys participated in the Bert Bell/Pete Rozelle NFL Player Retirement Plan, which originally offered three types of disability benefits: (1) Line of Duty (LOD) Benefits available to NFL players demonstrating “substantial disablement” because of injuries incurred while playing for the NFL but who are not otherwise totally disabled; (2) Football Degenerative Total and Permanent (Football T&P) benefits, available to former players demonstrating total disability because of injuries incurred while playing for the NFL; (3) Inactive T&P benefits, available to former NFL players demonstrating total and permanent disability because of circumstances unconnected to playing for the NFL. The Plan’s Retirement Board is the ultimate decisionmaker for disputed claims.

Keys submitted, and was approved for, a claim for LOD benefits in 1991. Keys received LOD benefits for the full five-year period available under the Plan. His request that his claim be converted to one for Football T&P benefits was denied in 1997. A car accident in 2002 aggravated Keys’ football injuries. In 2003, Keys again applied for Football T&P Benefits. The Board at first approved Keys for Inactive T&P benefits, but, after an appeal, the Board granted Keys’ claim for Football T&P benefits retroactively to January 2004. Keys continued to receive benefits over the next 13 years, although there were several denials and appeals during that period.

In 2011, the Plan’s benefit structure was reorganized. Football Degenerative T&P benefits were thereafter designated as “Inactive A T&P benefits.” Inactive T&P benefits were re-designated as “Inactive B T&P benefits.” Keys received benefits under both the A and B classifications for a time.

In August 2017, the Board determined Keys was never entitled to Inactive A T&P benefits, because it had concluded the 2002 accident, which the Board said it did not know of until its recent review of Keys’ records for his Social Security Disability benefits, was the proximate cause of disability after the accident. The Board concluded Keys had been overpaid by $831,488.28 and that all of Keys’ Inactive B T&P benefits would be retained until the overpayment was recovered, leaving Keys with no benefit payment at all. The plaintiff’s appeal was denied and Keys filed suit.

Keys asserted under 29 U.S.C. § 1132(a)(1)(B) of ERISA: (1) a claim for a declaration of rights under the Plan; (2) a claim for benefits due under the plan; and (3) a claim for equitable estoppel based on silence. The latter was on the theory the Board knew, or should have known, about the accident long before bringing it up to deny Keys’ claims in 2017, and so the Board should be estopped from ending Keys’ Inactive A T&P benefits and from recouping the alleged overpayment against his Inactive B T&P benefits.

In considering the Plan’s motion to dismiss the estoppel claim, the court noted the Eleventh Circuit’s adoption, in 1994, of “a very narrow common law doctrine” of equitable estoppel under §1132(a)(1)(B) claims, “where the plaintiff can show that (1) the relevant provisions of the plan at issue are ambiguous, and (2) the plan provider or administrator has made representations to the plaintiff that constitute an informal interpretation of the ambiguity.” (The Eleventh Circuit’s limited estoppel remedy appears to be a holdover from pre-Amara days and may well be overruled on that basis soon.) Keys agreed his theory of “estoppel by silence” did not fit within that narrow exception but insisted such a claim should be adopted because it was needed to ensure participants can obtain relief for plan administrators’ unfair, bad faith conduct.

The court, however, was not persuaded that Keys would be barred from relief if he could not assert a claim for estoppel by silence under § 1132(a)(1)(B). It observed that Keys’ estoppel by silence claim “closely resembles a claim for breach of fiduciary duty, a sometimes-permissible alternative claim under § 1132(a)(3)(B).” Granting the motion to dismiss, the court concluded, “The fact that Keys, who is the master of his complaint, chose not to bring a claim that might have provided other ‘appropriate equitable relief’ under § 1132(a)(3)(B) does not require the Court to strain to adopt a new theory of law, particularly when that theory appears at odds with prior precedent.”

When is the last time one of your employees asked how much an in-network physician’s visit would cost?  How much does a blood test cost at the hospital to which your doctor referred you, compared to the same blood test at another facility you could use?  Why haven’t consumers who spend hours shopping for the best deal online for a pair of shoes been shopping that way for their health care?  Some might say it’s because (1) very few of us second-guess the diagnosis or treatment referrals of personal physician and (2) perhaps more important, apathy, since someone else pays for most of the cost of our health care (an insurer, the government, an employer’s group health plan).

Many have no idea how much the physician’s visit will cost before going to the appointment, much less how much the blood test or MRI the doctor orders will cost.  If we pay a flat copayment for prescription drugs, most of us have no clue about the actual cost of the drug (which might actually be lower than the copayment – surprise!).  The truth is, we’ve been paying for our ignorance by paying more every year for health coverage – either by paying more in health insurance premiums or self-insured employer group health plan cost contributions.

The current condition of pervasive health care cost ignorance may change in the next couple years, if the Trump administration has its way.  Last week, to further President Trump’s Executive Order 13877 (June 24, 2019, calling for up front health cost transparency), the Departments of Health and Human Services (HHS), Labor (DOL), and Treasury (IRS) issued a “Transparency in Coverage” proposed regulation that would require most employer-based group health plans and health insurance issuers to disclose price and cost-sharing information to enrollees up front.  (For a quick read, see the fact sheet.)  The Transparency in Coverage rule proposes to impose two new disclosure requirements on employer-sponsored group health plans and health insurers in the group and individual markets.  First, group health plans and health insurers must provide enrollees with cost-sharing information for a covered item or service from particular providers using a self-service tool provided by the plan or insurer on an internet website.  The required disclosures must include estimates of participants’ cost-sharing liability for covered items or services furnished by specific health providers.  Second, plans and insurers also must disclose (using machine-readable files) the negotiated rates for in-network health providers and amounts the plan or insurer has allowed for items or services furnished by out-of-network providers.  Comments are due on the proposed Transparency in Coverage rule by January 14, 2020.

On the same day the agencies issued the Transparency in Coverage proposed rule for public comment, the HHS issued its “Hospital Cost Transparency” final rule requiring hospitals to provide clear, accessible information about their standard charges for the items and services they provide beginning in 2021.  (For the cliff’s notes version of this one, check out the fact sheet.)  This includes the amount the hospital will accept in cash from a patient for an item or service, and the minimum and maximum negotiated charges for 300 common “shoppable” services.  Shoppable services are services that patients can schedule in advance like x-rays, outpatient visits, imaging and laboratory tests, or bundled services like a cesarean delivery, including pre- and post-delivery care.  The Hospital Cost Transparency rule includes some enforcement teeth too:  civil monetary penalties of $300 per day among other enforcement tools.

Pray tell, if health care providers, health insurers and group health plan third-party administrators can pay claims and issue explanations of benefits after we’ve incurred health care expenses, why couldn’t they disclose those costs and covered benefit amounts before we incur the health care expenses?  Assuming the Hospital Cost Transparency rules survive the inevitable legal challenges and the Transparency in Coverage rule is finalized, will more information about the cost of health care result in better personal health decision-making?  We’re taught from a very young age to brush and floss and not eat too much sugar; to get fresh air and exercise and not be sedentary; that smoking causes lung cancer, too much alcohol causes liver damage, and too much fat causes heart disease.  Still, many among us choose to eat, drink, and otherwise live in ways that reflect astonishingly counter-intuitive personal health decisions.  More information may not necessarily result in the decision-making changes the Trump administration expects … but there’s always room for healthy optimism.