EMPLOYEE BENEFITS LAW: POLICY AND PRACTICE
INSTRUCTOR’S NOTE TO
STUDENT SUPPLEMENTAL MATERIALS
These Student Supplemental Materials contain:
? updated material to reflect changes made by the Patient Protection and Affordable Care
Act, as amended by the Health Care and Education Reconciliation Act of 2010, with Questions (Chapters Two, Four and Six);
? a summary of new Department of Labor regulations concerning disclosure of fees received by pension plan service providers (Chapter Two);
? a summary of the Worker, Retiree, and Employer Recovery Act of 2008, which changed the employer funding requirements for defined benefit pension plans and suspended required minimum distributions from qualified retirement plans and IRAs for 2009 (Chapter Three);
? a summary of the Supreme Court‟s decision in Kennedy v. Plan Administrator for
DuPont Savings and Investment Plan concerning waivers of pension benefits (Chapter
? a summary of the temporary COBRA premium assistance program enacted by the
American Recovery and Reinvestment Act of 2009 and extended in 2010 (Chapter Four);
? a summary of the Genetic Information Nondiscrimination Act of 2008, the Mental Health Parity and Addiction Equity Act of 2008, and Michelle‟s Law (Chapter Four);
? a summary of the Supreme Court‟s decisions in Hardt v. Reliance Standard Life
Insurance Co. concerning attorney‟s fees awards and Conkright v. Frommert concerning
the degree of judicial deference given to a plan administrator who makes a mistake in interpreting the terms of the plan (Chapter Six);
? the Supreme Court‟s decision in Metropolitan Life Insurance Co. v. Glenn concerning
how the district court should weigh a conflict of interest by the plan administrator when reviewing a benefit denial claim under ? 502(a)(1)(B), with Notes and Questions (Chapter Six);
? the Supreme Court‟s decision in LaRue v. DeWolff, Boberg & Associates, Inc. on
breach of fiduciary duty claims brought under ? 502(a)(2), with Notes and Questions (Chapter Six);
? the Fifth Circuit‟s decision in Amschwand v. Spherion Corp. concerning the nature of
equitable relief available under ? 502(a)(3) for a breach of fiduciary duty claim, with Notes
and Questions (Chapter Six);
? the Fourth Circuit‟s decision in RILA v. Fielder, holding that ERISA preempts
Maryland‟s Fair Share Health Care Fund Act, and the Ninth Circuit‟s decision in Golden
Gate Restaurant Association v. City of San Francisco, holding that ERISA does not
preempt San Francisco‟s Health Care Security Ordinance, with Notes and Questions on
Fielder and Golden Gate (Chapter Seven);
? inflation adjusted dollar amounts in effect for 2010 (Appendix E); and
? a timeline summary of the major reforms applicable to group health care plans
The Student Supplemental Materials may be copied for distribution in the classroom (free of charge). The materials also can be downloaded from the casebook web site and customized by the instructor. Any instructor who has adopted the casebook may obtain a login and password from West to access the Teacher’s Manual materials on the web site
The web site also contains updates to the Teacher’s Manual, including the new Notes
and Questions for the cases in these Student Supplemental Materials, as well as current developments that can be incorporated into classroom discussion at the instructor’s discretion.
As always, please direct your comments and questions directly to me at firstname.lastname@example.org
or (402) 472-1206.
Colleen E. Medill
Warren R. Wise Professor of Law
University of Nebraska College of Law
EMPLOYEE BENEFITS LAW: POLICY AND PRACTICE
STUDENT SUPPLEMENTAL MATERIALS
Table of Contents
Chapter Casebook Page(s) Supplement Page
Reporting and Disclosure Requirements Insert at p. 69 6 Unique to Health Care Plans
Fee Disclosure Requirements for Insert at p. 69 9 Pension Plans
Update on Accumulated Retirement Savings Insert at p. 119, n. 2 10 and Savings Habits
Worker, Retiree and Employer Recovery Insert at p. 203, 10 Act of 2008 n. 2 on p. 207, p. 212,
and p. 216
Summary of Kennedy v. Plan Administrator for Insert at p. 238 11
DuPont Savings and Investment Plan
Historic National Health Care Reform Insert at p. 280 12
Changes to Cafeteria Plans Insert at p. 287 16
Nondiscrimination Testing for Insured Insert at p. 288 17 Health Care Plans
Temporary COBRA Assistance Program Insert at p. 333 17
HIPAA and National Health Care Reform Insert at p. 341 18
Overview of the GINA Insert at p. 349 19
Overview of the MHPAEA Insert at p. 349 20
Overview of Michelle‟s Law Insert at p. 349 21
Overview of the PPACA Insert at p. 349 21
Notes and Questions on the PPACA 32
Update on Retiree Health Plans Insert at p. 373 33
Update on Attorney‟s Fees . Insert at p. 513 35
Update on Claims Procedures Insert at p. 518 35
Metropolitan Life Insurance Co. v. Glenn Insert at p. 532 36
Notes and Questions on Glenn 51
LaRue v. DeWolff, Boberg & Associates, Inc. Insert at p. 557 54
Notes and Questions on LaRue 61
Amschwand v. Spherion Corp. Insert at p. 639 62
Notes and Questions on Amschwand 68
Update on External Review Programs Insert at p. 736, n. 3 70
RILA v. Fielder Insert at p. 765 71
Golden Gate Restaurant Ass‟n v. City of
San Francisco Insert after Fielder 88
Notes and Questions on Fielder and 109
Appendix E (2010) Insert at p. 807 110
Appendix G (Major Reforms Applicable New Material 113
to Group Health Plans)
EMPLOYEE BENEFITS LAW: POLICY AND PRACTICE
STUDENT SUPPLEMENTAL MATERIALS
Insert at p. 69
REPORTING AND DISCLOSURE REQUIRMENTS UNIQUE TO HEALTH CARE
The Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010) (PPACA), enacted into law on March 23, 2010, created additional reporting and disclosure requirements that are unique to group health plans. These requirements supplement ERISA‟s general reporting and disclosure requirements. In part because the PPACA requirements also apply to governmental and church plans that are not subject to Title I of ERISA, Congress enacted these requirements as amendments to the Public Health Services Act, 42 U.S.C. ?300gg et seq. (PHSA), and incorporated these requirements by reference into ERISA and the Code.
Disclosures to Plan Participants
Beginning in 2012, plan administrators for all group health plans must notify participants no later than 60 days before any material modification in the terms or coverage of the plan. PPACA ? 1001 (adding PHSA ?2715(d)(4)). This requirement supplements ERISA Section 104(b)(1), which requires that a summary of material modifications must be provided to the participants in a group health plan within 60 days after the modification is implemented. See
ERISA ? 104(b)(1); DOL Reg. ?2520.104b-3(d).
In addition to the general SPD requirements of ERISA Section 104, beginning in 2012 participants in all group health plans must receive a second, more concise summary of plan benefits and coverage in accordance with regulations issued by the Department of Health and Human Services (HHS). The HHS summary of benefits and coverage must contain:
? Uniform definitions of insurance and medical terms;
? A description of the scope of coverage and any participant cost sharing requirements
for each category of essential health benefits or other benefits provided under the plan;
? Exceptions, reductions and limitations in coverage;
? Provisions describing the terms and conditions for renewability and continuation of
? Illustrations of coverage under common benefits scenarios;
? A statement concerning whether the plan meets the federal standards for mandatory
individual coverage that become effective in 2014 under the Patient Protection and
Affordable Care Act, as amended;
? A warning that the HHS summary is only an outline and that the participant should
consult the actual plan or policy language;
? A web site address where the actual plan or policy language may be found; and
? A contact number that participants in the plan may call for additional information.
See PPACA ?1001 (adding PHSA ?2715).
The HHS summary of benefits and coverage cannot exceed four pages in length or be written in print that is smaller than 12 point font. The summary must be “presented in a culturally and linguistically appropriate manner” and utilize “terminology understandable by the
average plan enrollee.” PPACA ?1001; PHSA ?2715(b) (1)-(2)). The penalty for a willful
failure to provide the HHS summary of benefits and coverage in accordance with HHS regulations is up to $1,000 per enrollee in the plan. PPACA ?1001; PHSA ? 2715(f)).
Reporting Requirements to Federal Agencies
Many of the provisions of the Patient Protection and Affordable Care Act distinguish between grandfathered plans and nongrandfathered plans. A grandfathered plan is a plan that
was in existence on March 23, 2010, and that subsequently has not been changed in a way that causes the plan to lose its grandfathered status. A nongrandfathered plan is either a new plan that
is established after March 23, 2010, or a preexisting plan that has lost its grandfathered status due to disqualifying changes made to the plan after March 23, 2010. The distinctions between grandfathered and nongrandfathered plans are described in more detail later in the Student Supplemental Materials for Chapter Four under the section entitled “Overview of the PPACA.”
For purposes of reporting and disclosure, beginning in 2012 nongrandfathered group health plans must provide an annual report to HHS that provides information on the quality of care provided by the plan. The annual HHS quality of care report must include information
concerning whether the plan:
? Improved health outcomes through activities such as quality reporting, case
management, care coordination, and chronic disease management;
? Implemented activities to prevent hospital readmission, improve patient safety, and
reduce medical services; and
? Implemented wellness and health promotion activities.
See PPACA ?1001 (adding PHSA ?2717). The plan administrator must provide participants with a copy of the HHS quality of care report.
Nongrandfathered group health plans also must report to the HHS and make available to the public additional information, including:
? Claims payment policies and practices;
? Periodic financial disclosures;
? Enrollment and disenrollment data;
? Data on the number of denied claims;
? Data on rating practices; and
? Information on participant cost sharing and payments made to out-of-network
See PPACA ?1001 (adding PHSA ?2715A).
Beginning in 2014, every person must have minimum essential coverage of health care
services. This individual coverage mandate is accompanied by a complex system of tax-subsidized premium credits and employer-provided premium vouchers. Congress intended this system of premium credits and vouchers to make the cost of an individual health insurance policy more affordable for lower income individuals who do not have coverage under a federal or state program or under an employer-sponsored group health plan. Tax penalties for noncompliance are assessed by the Internal Revenue Service on both individuals who fail to obtain minimum essential coverage and on employers with 50 or more full-time employees who fail to provide minimum essential coverage to their workers at an affordable premium price. These requirements are explained in more detail later in the Student Supplemental Materials for Chapter Four under the section entitled “Overview of the PPACA.”
To assist the Internal Revenue Service in administering and enforcing the individual coverage mandate, beginning in 2014 all employers who sponsor group health plans for their workers that meet federal standards for minimum essential coverage must report information concerning the employees who are covered under the plan and the premiums charged by the plan. In addition, employers with 50 or more full-time employees must report the length of any waiting periods for benefits to begin, the total number of employees covered by the plan, and the months that each full-time employee was covered under the employer‟s plan. Once the individual
coverage mandate becomes effective in 2014, the Internal Revenue Service is authorized to disclose individual income tax information to the Department of Health and Human Services and state-sponsored health insurance programs to verify an individual‟s income eligibility for assistance in obtaining minimum essential coverage.
As a first step toward implementing an enforcement system, employers who sponsor group health plans must report the cost of plan coverage for each employee on Form W-2. The cost of plan coverage is based on the premium amount that would be charged for plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). See PPACA ?9002 (amending Code ?6051(a)). COBRA continuation coverage is discussed in Chapter Four of the casebook. This reporting requirement is effective for plan coverage during the 2011 calendar year. Although the cost of plan coverage must be reported on Form W-2 along with the employee‟s wages, the employer contribution amount toward plan coverage continues to be excluded from the gross income of the employee and is not subject to federal or state income taxation.
Insert at p. 69
FEE DISCLOSURE REQUIREMENTS FOR PENSION PLANS
On July 16, 2010, the Department of Labor issued long-awaited regulations governing the disclosure of the direct and indirect compensation that plan service providers receive as a result of plan investments, investment advisory services, recordkeeping services and brokerage services. The fee disclosure regulations apply only for pension plans. Disclosure is required if the plan service provider expects to receive direct or indirect compensation of at least $1,000. See generally Interim Final Regulation Relating to Improved Fee Disclosure for Pension Plans, 75 Fed. Reg. 41,600 (July 16, 2010).
The new fee disclosure requirements enable plan fiduciaries to their contracts or arrangements with plan service providers are prudent and whether the total compensation paid to plan service providers is reasonable. The new fee disclosure requirements also permit plan fiduciaries to determine if whether a potential conflict of interest may affect the quality of the services performed by the plan service provider under the contract or arrangement. See id. at 41,609.
Insert at p. 119, n. 2
Update on Accumulated Retirement Savings and Savings Habits
The economic recession and the decline of the stock market in 2008 and early 2009 dramatically changed the spending habits of consumers. Beginning in the second quarter of 2008, the national personal savings rate increased sharply to approximately 3.5% and remained in that range for subsequent quarters through 2010.
Once every three years, the Board of Governors of the Federal Reserve System collects data on household assets and liabilities through the Survey of Consumer Finances (SCF). The
most recent SCF, which was conducted in 2007, found that the median retirement savings for households headed by persons aged 55 to 64 was only $100,000. Given that the majority of assets held in retirements savings accounts are invested in the stock market, the results from the 2007 SCF do not reflect the impact of the decline of the stock market in 2008 and early 2009.
Insert at p. 203, n. 2 on p. 207, p. 212, and p. 216.
WORKER, RETIREE AND EMPLOYER RECOVERY ACT OF 2008
Congress addressed two concerns in the Worker, Retiree, and Employer Recovery Act of 2008, Pub. L. No. 110-458 (Recovery Act). First, Congress was concerned about large projected funding deficits for defined benefit plans in 2009 due to the dramatic deterioration of the stock market in the fall of 2008. Second, Congress was concerned about the financial hardship that would be imposed on retirees age 70 ? and older if they were required to take required minimum distributions from their qualified plans and IRAs in 2009 at a time when their retirement savings had been depleted by the stock market crash.
The Recovery Act provided relief to defined benefit plans in several ways. Compliance with the more rigorous transitional funding targets enacted by the Pension Protection Act of 2006 was eased. Employers may compute the value of their pension plan assets over a 24 month period for funding purposes. Defined benefit plans may use the prior plan year to determine whether participant benefit accruals must be restricted due to inadequate funding. Multiemployer plans in endangered or critical funding status were given additional time to satisfy the funding requirements of the Pension Protection Act. To provide relief for retirees, the Recovery Act waived the penalty for failure to take a required minimum distribution in 2009.