Top Ten List Of Things From 2015 That Are Somehow Related To ERISA And My Practice

Posted By Stephen D. Rosenberg In Class Actions , ERISA Seminars and other Resources , Equitable Relief , Fiduciaries , Interviews , People are Talking . . . , Summary Plan Descriptions
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Like many, I took some time off over the holidays. Unlike many, who used the time to do fun things like go skiing, I used the time to sit down with three fingers of my favorite small batch craft brewery bourbon and write a top ten list for my blog. Here, without further ado, is my top ten list of things from 2015 that are somehow related to ERISA and my practice:

1. Favorite 2015 movie about ERISA and employee benefits: Concussion. Although not really about employee benefits and ERISA, its genesis is: see my series of blog posts on the NFL’s effort to avoid granting disability benefits to the great Steelers center, Mike Webster (here, here and here). The real story behind the NFL’s attempt to avoid responsibility for CTE and head injuries harkens back to the courage of Webster’s family and the talent of their lawyers, who took on the NFL and its constant stonewalling on the issue, and won.

2. Most enjoyable city I had never been to on a business trip before: I had an absolutely fascinating two day trip to Richmond for a deposition; what a great city. From the international cycling championship it was hosting while I was there, to the history of alligators in the lobby of the Jefferson Hotel, to the hip downtown neighborhoods with cobblestone streets, to the great meal I had at Lemaire, more was packed into a 30 hour stay than I could have imagined. As a civil war and colonial history buff, being able to squeeze in a walk around the Thomas Jefferson designed capitol (with great commentary from a park ranger I chatted with) and seeing the Jeb Stuart and Robert E. Lee monuments (on the advice of a helpful hotel concierge), the whole trip was a blast. Provoking the other side’s expert into answering a question at his deposition with the one word reply “Duh” just made the whole trip even more fun.

3. Best business meal (excluding meals with clients, so I don’t leave anyone out): Dinner at BLT Prime in New York, with two of my fellow speakers on a panel on fiduciary governance, Al Otto of Shepherd Kaplan and Peter Kelly, the Deputy General Counsel and Chief Employee Benefits Counsel of the Blue Cross Blue Shield Association. Great food and high level conversation that would only appeal, I have to admit, to an ERISA geek.

4. Most satisfying judicial decision (personal case load division): After approximately five years of litigation, including a week long jury trial, convincing the Pennsylvania Superior Court (for those of you not familiar with that state’s court system, the Superior Court is its intermediate appellate court) to not just reverse a $1.4 million verdict against my client, but to also enter judgment in favor of my client. Its one thing to win an appeal, but, as all trial and appellate lawyers know, its hard enough to flip a jury verdict on appeal, but to actually get a jury verdict reversed outright (in favor of entry of a JNOV) is a rare event indeed.

5. Most unsatisfying judicial decision (non-personal case load division): Tibble v. Edison, by the Supreme Court this past summer. As I discussed here, it rendered the whole appellate history of the case much ado about nothing from a jurisprudential perspective.

6. Most interesting ERISA decision that flew under the radar: Osberg v. Foot Locker, Inc., 2015 WL 5786523 (S.D.N.Y. Oct. 5, 2015), which attracted comparatively little discussion, given the depth of the Court’s analysis and that it was issued by one of the country’s most respected courts. What I liked most about it was that it emphasized the fact that plan communications are, contrary to what many believe, a central part of fiduciary responsibility. To quote the Court, “[t]he most important way in which the fiduciary complies with its duty of care is to provide accurate and complete written explanations of the benefits available to plan participants and beneficiaries.”

7. Best presentation I attended: A tie between two panels of magistrate judges, each discussing issues involving ERISA, discovery, spoliation and the amendments to the federal rules; the first was at ACI’s Chicago installment of its ERISA litigation conference in April 2015, and the second at ACI’s New York ERISA litigation conference in October 2015. At the former, I had asked the panel a question which led to a conversation afterwards with a magistrate judge from out west on the subject of spoliation and exactly the effect he believed the changes to federal rules would have on that issue. At the latter, a diverse group of judges held court (pun intended) on topics ranging from when discovery in benefit claims should be allowed to whether – and if so to what extent - the changes to the federal rules, despite all the effort put into them, would actually alter day to day discovery practice and litigation.

8. Best selfie (written version): Chris Carosa of Fiduciary News’ interview with me, which you can find here. Lot of fun, as Chris always has his finger on the pulse of the industry and thus both asks the important questions and elicits informative responses (and not just spin or marketing drivel).

9. (Probable) First line of my (professional) obituary: Named one of the nation’s top 15 ERISA lawyers in 2015 by the National Association of Plan Advisors.

10. Best Article I wish I had Written but That I am Not Funny Enough to Have Written: “Declarations: The Coverage Opinions Interview With The Grinch Who Stole Insurance - A Career Spent Denying Santa’s Claims.”

And with that, Happy New Year everyone.

My Exclusive Interview with Fiduciary News on ERISA Litigation

Posted By Stephen D. Rosenberg In 401(k) Plans , Benefit Litigation , Class Actions , ERISA Statutory Provisions , ESOP , Employee Benefit Plans , Fiduciaries , Pensions , People are Talking . . . , Retirement Benefits , Standard of Review , Summary Plan Descriptions
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The good people at Fiduciary News gave me a soapbox, and I was happy to climb up on it. They interviewed me as part of their series of monthly interviews on ERISA and related topics, and I discussed ERISA litigation and a wide range of related issues. You can find the “Exclusive Interview: ERISA Attorney Stephen Rosenberg Says Litigation’s Legacy is Improved Plan Design” here.  You will see I went on for a bit, as I am wont to do when anyone wants to talk about ERISA!

What Osberg v. Foot Locker Teaches About Equitable Remedies Under ERISA

Posted By Stephen D. Rosenberg In Class Actions , Equitable Relief , Fiduciaries , Pensions , Summary Plan Descriptions
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Is Osberg v. Foot Locker a tipping point? Only time will tell, but it has that feel about it.

I have written extensively in the past on the orphan-like status of equitable remedies in ERISA litigation related to plan communications: all agree that a range of traditional equitable remedies is now open to participants, but courts have been very reluctant to adopt them, both doctrinally and as a practical matter, where the dispute concerns a disjunct between what a plan provides and what plan communications state. As I have written before, when participants in ERISA governed plans seek equitable relief, circuit courts of appeal seem intent upon reading in stricter requirements for equitable claims than exist in other areas of the law, and on enforcing existing elements of traditional equitable remedies more strictly than they do in other types of cases. I have argued that, underlying this tendency of the courts, is an understandable concern about the risk of turning every ERISA case into a “he said, the plan administrator said” case; judges do not want to birth equitable approaches to ERISA cases that turn every dispute into an argument by a participant that he or she was told something different, perhaps by a low level HR contact or perhaps in a written plan communication, than is actually provided under the express terms of a plan itself, with the participant arguing that he or she is therefore entitled to what was said rather than what was written in the plan. One can easily see a broad view and application of equitable remedies in the ERISA context, particularly with claims of equitable estoppel, giving rise to such a circumstance.

I have also always thought, however, that the concerns underpinning this view are overstated. There are, in fact, many instances in which a participant has a serious, well-documented claim of being told in writing one thing, under authorized or required plan communications, and then being given something else under the plan. There is no reason why, when there is a sufficient evidentiary basis to support the claim that a participant was misled about plan benefits, that the participant should not be allowed to proceed with an equitable remedies claim in that context, and, if the participant can prove it, to then be awarded the benefits he was led to believe existed. In that scenario, this type of case simply becomes like every other claim for equitable remedies, in every other context of the law that I can think of: if you say the defendant misled you and you should recover more as a result, then prove it on the evidence. It doesn’t require doctrinal bars or judicial reluctance to recognize equitable claims to avoid excessive litigation in ERISA cases over these types of circumstances; all that is required is testing the evidence just as would occur in any other type of case.

In fact, any concern that openly adopting and enforcing equitable claims in the context of ERISA will give rise to endless numbers of meritless claims is unwarranted. Preventing this “parade of horribles” requires nothing more than a strict interpretation and forceful application of Iqbal and Twombley – if the plaintiff cannot show the elements of an estoppel claim, for instance, based on significant factual support in pleading the claim, then the plaintiff’s claim can and should be tossed out on a motion to dismiss. Wasn’t this the original point of those two decisions, and the extent to which they raised pleading requirements? To bar the courthouse door to claims where the plaintiff cannot actually plead a factual basis for all of the elements of a claim? Courts can successfully bar the courthouse door to unfounded equitable relief claims under ERISA simply by strictly enforcing the pleading requirements of Iqbal and Twombley, and thereby dismissing estoppel and other equitable relief claims that do not have a substantial factual basis.

Nonetheless, there has been ample skepticism in the case law over the past few years towards equitable relief claims brought under ERISA. A couple of weeks ago, however, in Osberg v. Foot Locker, the Southern District of New York gave broad equitable relief to participants based on a reformation theory. In a well-reasoned 83 page opinion, the Court explained that there was more than sufficient evidence to demonstrate that the participants were actively misled about the extent of their retirement benefits. As one excellent summary explained:

U.S. District Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York found that the plan’s summary plan description (SPD) as well as other communications to participants failed to inform them that their benefits would be in a period of “wear-away” during which new accruals would not increase the benefit to which a participant was already entitled. . . . “Here, there is no doubt that Foot Locker committed equitable fraud,” Forrest wrote. “It sought and obtained cost savings by altering the Participants’ Plan, but not disclosing the full extent or impact of those changes.”

The Court ordered that “the plan must be reformed to actually provide the benefit that the misrepresentations caused participants to reasonably expect.”

Importantly, the Court’s opinion was based on substantial and extensive evidence proffered to show misleading statements about the benefits, the effect of those statements on participants, and the manner in which they differed from the actual plan terms. Enforcing equitable remedies under ERISA by focusing on whether the evidence supports the charge, as Osberg shows, is all that is necessary to separate the wheat from the chaff when participants come to court challenging plan decisions based on equitable remedies.

So is Osberg a tipping point that may lead the way to a less grudging view by the courts of equitable relief claims under ERISA where allegedly misleading plan communications are at issue? Time will tell, but it has all the indicia that past tipping points in other areas of ERISA litigation, such as excessive fee disputes, have had: a well-reasoned decision by a well-respected court, well-founded in the evidence. If the Second Circuit eventually affirms it, I think we can all expect that, yes, in fact, a tipping point on these types of claims has in fact been reached.

Why Amara's Expansion of Remedies Matters Now, But Not So Much in the Long Term

Posted By Stephen D. Rosenberg In ERISA Seminars and other Resources , ERISA Statutory Provisions , Employee Benefit Plans , Equitable Relief , Summary Plan Descriptions
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My small group of dedicated twitter followers know I was live tweeting last week from ACI’s ERISA Litigation conference in New York, at least for the first day of the conference. Tweeting allowed me to pass along ideas from the speakers and my own thoughts on their points in real time, which was, frankly, a lot of fun for me (if you haven’t tried live tweeting from an event, you should; it turns being an attendee watching others speak on a topic into a much more interactive and engaged experience). At the same time, though, its fair to say that many of the topics discussed by the panelists, and many of my own thoughts on those topics, don’t neatly fit within 140 characters, so I thought I would post some more detailed take aways from the conference, starting today.

One of the things that jumped out at me at the conference was the fact that the ERISA defense bar has clearly coalesced around the idea that Amara is a bad thing and that the expansion of equitable remedies set into motion by that opinion is objectionable. Even though I am, at least 80% of the time, a member of that defense bar, I think that’s a bit harsh and an overreaction. It does not strike me that the consensus defense bar view articulates a particularly substantial argument for why the Court was wrong to expand that remedy. At the end of the day, most of that remedial expansion – in the forms of reformation, estoppel and surcharge – is directed at only one phenomenon, which is the circumstance in which there is a disjunct between what a plan actually says and what is communicated to plan participants through summary plan descriptions, human resources employees, or other sources (though I have no illusions that participants and their lawyers won’t find ways to try to extend those remedies to other types of circumstances as well). To the extent that employees can show actual harm to them from that error (and by this I do not mean just being deprived of some legal right under ERISA or some hypothetical opportunity to act in response to learning the correct information, but rather some showing of actual concrete out of pocket loss to them), there is no reason they should be without a remedy, and the expansion of remedies in Amara prevents that otherwise all too common outcome.

As one of the prominent in-house attorneys speaking at the conference noted, the nature of ERISA is that the bar for proper performance by plan sponsors and administrators keeps rising, and that is as it should be: one panelist made the point that what is a best practice today in running a plan, will simply be the standard practice that must be lived up to tomorrow. This is all that Amara’s targeting of communication errors by imposing equitable remedies for them will really do in the end: make accurate participant communications a crucially important part of running a plan. As plan administrators raise their game in this regard (making what is today a best practice the standard in this regard in the future), these remedies and the Amara decision itself will become relatively unimportant, and people will come to wonder why there was so much defense bar hue and cry over Amara in the first place.

My Journal of Pension Benefits Article on Operational Competence after Amara

Posted By Stephen D. Rosenberg In 401(k) Plans , Benefit Litigation , ERISA Statutory Provisions , Employee Benefit Plans , Equitable Relief , Fiduciaries , Summary Plan Descriptions
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For years, in speeches and articles, I have preached the gospel of what I have come to call “defensive plan building,” which is the process of systemically building out plan documents, procedures and operations in manners that will limit the likelihood of a plan sponsor or fiduciary being sued while increasing the likelihood that, if sued, they will win the case in the end. Over the past couple of years, doctrinal shifts related to remedies available to participants under ERISA have made defensive plan building even more important, for at least two reasons. First, these shifts have expanded the range of potential liabilities and exposure in offering, and running, a benefit plan. Second, these developments have, to a significant degree, given rise to an increased focus in ERISA litigation on the actual facts concerning the plan’s activities, as the lynchpin of the liability determination. The combination of expanding liability risks with an increased focus on plan actions makes it more important than ever to focus on the steps of defensive plan building, including by focusing on operational competence in running a benefit plan.

I discussed this concept in much greater detail in my recent article in the Journal of Pension Benefits, “Looking Closely at Operational Competence: ERISA Litigation Moves Away from Doctrine and Towards a Careful Review of Plan Performance.” The article discusses how the last several years of ERISA litigation, including in particular the Supreme Court’s recent activism in this realm, has created this phenomenon. You can find a much more fully realized presentation of these points in the article.

Notes on The John Marshall Law Review's Special Edition on "The Past, Present, and Future of Supreme Court Jurisprudence on ERISA"

Posted By Stephen D. Rosenberg In ERISA Seminars and other Resources , ERISA Statutory Provisions , ESOP , Fiduciaries , Preemption , Summary Plan Descriptions
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Here’s a neat special edition of the John Marshall Law Review, covering Supreme Court Jurisprudence in advance of an employee benefits symposium at the law school. Several of the articles in particular jump out at me as a practitioner as being right on point with key issues playing out in the courtroom; I think it is notable in this regard, and possibly causally related, that several of the authors are practicing lawyers who focus on ERISA litigation.

One article addresses fiduciary obligations with regards to holding employer stock in a plan, or what the rest of us commonly refer to, by shorthand, as the Moench presumption. As I discussed in this post, the courts are in the process of working out the application of these obligations and the presumption under the real time circumstances of actual cases. Another focuses on the development and application of equitable remedies after Amara, and one other speaks to the role of SPDs after Amara. The two are linked, in that the communications contained in SPDs are central to the prosecution of the types of equitable relief claims opened up by Amara. And finally, one other article addresses the restricted scope of remedies available to plan participants as a result of the Supreme Court’s historically narrow reading of ERISA remedies in conjunction with its historically broad reading of ERISA preemption. Interestingly, and as I have written elsewhere, the expansion of equitable remedies by means of surcharge and other types of relief recognized by the Court in Amara is likely to serve as a curative to that problem, by creating an avenue to use the equitable relief prong of ERISA to provide relief to participants in circumstances in which, previously, the combination of ERISA’s limited list of remedies with its broad preemptive effect would have precluded relief being granted to the participant.

Adam and John on the Obligations of Reasonableness and the Problems with SPDs, Respectively

Posted By Stephen D. Rosenberg In Fiduciaries , Summary Plan Descriptions
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Well, geez, I am embarrassed by the awkward silence in this space over the past couple of weeks. I was out of the country on business for a bit, and digging out ever since. Not that I ever lost sight of the ball, though, as I kept jotting down stories and developments that I wanted to pass along in a blog post. I am going to do that right now, clearing my desk of two of them.

In the first one, I had wanted to pass along this excellent and thought provoking post from Adam Pozek’s Pozek on Pensions, in which he discusses the regulatory changes being developed by the Department of Labor related to who is a fiduciary and what information has to be disclosed to and by fiduciaries. Adam makes the point that what should not be lost in these developments, and in the controversies the changes engender – see here, for instance – is that they do not change the actual obligations of plan fiduciaries to act reasonably and conduct appropriate investigation; those obligations have always been there and continue to be there. The only thing that is changing is what information is available as part of that obligation and how it may impact a fiduciary’s compliance with that obligation. I have discussed before that the disclosure of further information through this regulatory structure will almost certainly shift the nature of fiduciary liability and litigation, and affect how such claims are structured and how they are defended. They don’t, however, change the fundamental, underlying legal obligation of fiduciaries, a point Adam drives home in his post and which, perhaps implicitly, he is reminding us of as we get lost in the details of these regulatory changes.

The second item I had wanted to highlight was this blog, by John Lowell of Cassidy Retirement Group, titled – in a walking, talking exemplar of transparency - Benefits and Compensation with John Lowell. John’s experience shines through in his posts, which are detailed, thought provoking and frankly, compared to much of what one finds on blogs, highly original. For my purposes, and for any of the rest of us waiting for the Supreme Court to rule in Amara, I particularly liked his real world discussion of the problem of misleading and inaccurate summary plan descriptions, which you can find here.

Misleading Summary Plan Descriptions and the Supreme Court

Posted By Stephen D. Rosenberg In Summary Plan Descriptions
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I have been keeping my eye out for an article on the CIGNA Corp. v. Amara case before the Supreme Court - argued a little over a week ago - that focuses more on the practical realities of the case for plan sponsors and participants, rather than on the “inside baseball” analysis of the lawyers and their arguments, which were all the rage in the immediate aftermath of the argument before the high court. I think I finally found it here, in this piece from I have to say that my view of the case, the arguments, and the analysis about it floating around out there have me perpetually in an “on the one hand, on the other hand” mindset about the case, which of course - as someone paid by people to give them definitive advice on which they can actually act - makes me think of Harry Truman’s famous line that he wanted a one-armed economic advisor, because when asked for his opinion he wouldn’t be able to tell the president on the one hand this, and on the other hand that.

As the CFO article points out, the central practical question here is the impact of potentially misleading or, more innocuously, simply incorrect summary plan descriptions, ones that do not accurately state the terms of a plan itself. As the CFO article points out, allowing the SPD to govern or at least alter the benefits by operation of its variance from the actual plan terms - something which in this instance could cost the plan sponsor $70 million or so - can result in a large, unfunded expense and a benefit plan of a scale a company never intended to offer. That really isn’t and was never the point of ERISA, which was to encourage companies to offer benefit plans; whacking them for mistakes, particularly if innocent, isn’t really consistent with that, nor is it likely to encourage companies to offer benefit plans. On the other hand, just off the top of my head, I have at least two or three cases sitting on my desk right now that revolve around inaccurate or misleading SPDs or other information provided to plan participants, ones that simply did not conform with the governing plan documents themselves. It seems to me that, particularly with plan terms as significant as the ones at issue in Cigna, there really is no reason why an emphasis should not have been put in the first place on making sure that the relevant plan term was communicated accurately and succinctly in the SPD. And that of course brings us all the way around again to one of the obsessive focuses of this blog - that the best way to avoid liability, lawsuits and litigation costs is an obsessive focus on compliance and operational competency in the day to day running of a plan. More - in my experience - than in any other area of the law, when it comes to ERISA governed benefit plans, an ounce of prevention is worth a pound of cure.




You Say Potato, I Say Potahto: When Plan Documents and SPDs Speak Inconsistently

Posted By Stephen D. Rosenberg In Summary Plan Descriptions
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Bravo. In the context of discussing the Supreme Court’s grant of cert to a case presenting the question of how to resolve conflicts between plan terms and summary plan descriptions, the authors of this client alert, Lisa Brogan and Joseph LaFramboise at Baker & McKenzie, provide, in only four pages, a succinct yet comprehensive overview of the standards applied across the country to this issue. Conflict between plan terms and the terms as described in summary plan descriptions is one of the more frequent issues that arise in benefit litigation under ERISA, raising questions about the level of talent and effort being committed to plan compliance by many companies, since the best defense to cases involving conflicts of this nature is to avoid them in the first place by ensuring that the description in both documents of the substantive benefit terms match up. That said though, as the case of the billion dollar scrivener’s error suggests, some issues are going to arise no matter how much time, effort and compliance dollars are lavished on a plan’s documentation and operations. Either way, though, this client advisory nicely sums up exactly where we are in each circuit right now when it comes to adjudicating these types of conflicts.

Some More Thoughts on the Primacy of the ERISA Plan Document

Posted By Stephen D. Rosenberg In Benefit Litigation , Employee Benefit Plans , Summary Plan Descriptions
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Judge Gertner of the United States District Court for the District of Massachusetts has an interesting, if brief, ruling that is just out granting a motion to dismiss a severance pay claim under an ERISA governed plan. What caught my eye about it relates back to this post I wrote a few weeks ago, in which I pointed out the need, in litigation planning and counseling concerning ERISA plans, to resist putting undue emphasis on representations that are inconsistent with the actual terms of a plan, because the courts are likely to ignore such statements and to instead simply enforce what is written in the plan documents. The court’s opinion is another example of the trend in the case law in this direction. Although the court was not delving too deeply into this particular issue, the court noted that “in more recent cases, the First Circuit has held that courts should not look beyond the express terms of an ERISA-regulated plan unless the disputed term is ambiguous,” and that “[i]n ERISA cases . . . the central issue must always be what the plan promised . . . and whether the plan delivered." As I said before, any litigation strategy for an ERISA benefits case has to start with the terms of the plan, and not with extrinsic statements or evidence related to the plan’s terms or interpretation. The case is Walsh v. Bank of America Corporate Severance Program.

Promises, Promises . . .

Posted By Stephen D. Rosenberg In Benefit Litigation , Employee Benefit Plans , Summary Plan Descriptions
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Rob Hoskins over at the always interesting ERISABoard has an interesting story about a Second Circuit decision that essentially says “too bad” to a plan participant’s waiver/estoppel theory seeking benefits. The story is consistent with what seems to be a trend in which courts frequently fall back to the terms of the actual plan to decide a dispute, and seem unwilling to allow extrinsic, often but not always verbal, representations to participants to vary or even trump the written terms of the plan documents themselves. My own practice when it comes to participants who have been told one thing by a company representative and want to litigate the benefits they are entitled to as a result is to generally say that, yes, we can make that argument, but we will be a lot better off relying on the plan terms themselves and not on any sort of representation that might be to the contrary. It’s a platitude, to a certain extent, I know, but if you start from that premise, you will more often than not get the right strategy when mapping out litigation in cases in which representations were made that may have been contrary to the plan terms. To paraphrase that old handyman saw of “measure twice, cut once,” the way to think about these types of problems is plan terms first, estoppel claims second.

Summary Plan Descriptions and Discovery in ERISA Cases: the Latest from the First Circuit

Posted By Stephen D. Rosenberg In Benefit Litigation , ERISA Statutory Provisions , Employee Benefit Plans , Long Term Disability Benefits , Summary Plan Descriptions
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The First Circuit issued an opinion in the case of Morales-Alejandro v. Medical Card System on Wednesday. The case, which involved a challenge to a denial of long term disability benefits, is noteworthy for two aspects. The first is that the case reaffirms this circuit’s reluctance to allow discovery beyond production of the administrative record in denial of benefits cases prosecuted under ERISA. The court pointed out that, in this circuit anyway, “ERISA cases are generally decided on the administrative record without discovery, and some very good reason is needed to overcome the presumption that the record on review is limited to the record before the administrator."

The second issue of note is that the court addressed the role of summary plan descriptions in ERISA plans and related litigation, and described the role they should play in a litigated dispute over benefits. In particular, the court declared:  

ERISA imposes an important requirement on plan administrators and insurers to communicate accurately with plan participants and beneficiaries. See Bard, 471 F.3d at 244-45. Part of the communication requirement is that the SPD provide certain information "written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan." 29 U.S.C. § 1022(a). Section 1022(b) specifies the information to be included in the summary. When the terms, language, or provisions of the SPD conflict with the plan, the language that the claimant reasonably relied on in making and proving his claim will govern the claim process. Bard, 471 F.3d at 245. The burden is on the claimant to show reasonable reliance and resulting prejudice. Id.


Health Savings Accounts, Summary Plan Descriptions and Other Things

Posted By Stephen D. Rosenberg In Employee Benefit Plans , Fiduciaries , Retirement Benefits , Summary Plan Descriptions
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A few short notes of interest from a weekend of reading:

• Jerry Kalish has nice things to say about (and agrees with) my recent post concerning the Second Circuit’s decision - correct in my view - precluding summary plan descriptions from trumping the actual plan terms.

• I don’t know quite what to say about this article from yesterday’s Boston Globe about town retirement boards and their travel expenses, other than to note that if you don’t want to face exposure as a fiduciary, this type of conduct probably isn’t the way to go about it.

• And finally, WorkPlace Prof collected this information about whether health savings accounts constitute employee benefit plans governed by ERISA. He cites a report to the effect that they do not. Of particular interest, the post points out that employer contributions to the accounts will not necessarily transform them into ERISA governed plans, because employer contributions alone do not in and of themselves render a plan an ERISA governed plan. I have discussed before the totality of factual circumstances that are to be considered in the First Circuit to determine whether a benefit is an ERISA governed plan, and the fact that the source of funding alone is not determinative.

Summary Plan Descriptions and Grants of Discretion

Posted By Stephen D. Rosenberg In ERISA Statutory Provisions , Standard of Review , Summary Plan Descriptions
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Here is an interesting post concerning a recent decision from the Second Circuit on the impact - there is apparently none in that circuit, given this post and the Second Circuit decision, Tocker v. Phillip Morris Companies, discussed in the post - of an administrator reserving discretion in determining claims for benefits only in the plan documents and not in the summary plan description itself.

Now I don’t necessarily agree with the writer of the post, who feels that if a participant cannot locate in the summary plan description the magical Firestone language that reserves discretion to the administrator, then de novo and not arbitrary and capricious review should apply. The writer’s view is that the summary exists to educate the participant, and the participant ought to be able to rely on it and find the reservation of discretion there, or else not have it applied against him or her. Personally, I favor a more realpolitik view of the world when it comes to establishing litigation rules, based on how we can expect people in the real world to act. Most participants, frankly, unless they have been educated about Firestone, discretionary language and standard of reviews by some other source, will have no idea what the Firestone language means or its effect, even if they find it in the summary plan description; for those who have been or choose to educate themselves sufficiently to understand that issue under the employee benefit plans provided by their employers, they will likewise understand that there are other sources of documents that they need to examine that govern the plan. The Second Circuit ruling in Tocker seems to fit that understanding of the real world quite well.

And some of this goes back to a fundamental issue, of whether participants really understand - or even read - the summary plan description, or whether it is instead simply something that gets pulled out by a participant’s lawyer after a claim for benefits has been denied. The summaries exist because we need to mandate disclosure, and certainly the more the better - but I don’t think it is realistic to structure a legal rule and indeed an entire regime around the myth that participants actually do read them, rely on them and understand them. When we do that, we move into simply creating traps that make the administration of plans more difficult and create loopholes to be exploited in litigation; while this may be good for lawyers’ wallets, I think we are all better served by legal rules that fit comfortably with how non-lawyers actually conduct themselves in their day to day lives.

On a more practical and technical level, the Tocker opinion provides an excellent overview of the law governing summary plan descriptions, and the role of those documents in the ERISA regime, for those of you interested in more information on those subjects.