Section 404(c):

  • In Bidwell v. University Med. Ctr. Inc., No. 11 CV 5493, 2012 WL 2477588 (6th Cir. June 8, 2012), the Sixth Circuit Court of Appeals affirmed the district court’s ruling that a plan administrator who transferred assets of a 403(B) plan from a stable value fund to a Qualified Default Investment Alternative (QDIA) did not breach his fiduciary duty and was insulated by ERISA’s 404(c) safe harbor provision. Plaintiffs were participants in the 403(B) plan who directed one hundred percent of their contributions to a stable value fund. In an effort to comply with Department of Labor regulations, the plan administrator transferred the assets invested in the stable value fund to a QDIA and notified the plan participants that if they desired to have their investments remain in the stable value fund, they must notify the plan. Plaintiffs alleged that they never received the notices from the plan and that since they suffered investment losses as a result of the transfer of their investments, the plan administrator breached his fiduciary duty under ERISA. The Court ruled that the plan fiduciary was protected from liability by ERISA’s safe harbor provision, reasoning that whenever a participant has an opportunity to direct investment, the fiduciary is insulated from liability. In this case, where the plan administrator asked participants who previously elected an investment vehicle “to confirm their investment election or to have their investment transferred to a new investment mechanism in the interest of aligning the administration of the fund with new federal regulations,” there was an instance where the participants had an opportunity to “direct investments.” Accordingly, ERISA’s safe harbor provision applied. Also, in response to plaintiffs’ claim that they never received the notice of the change in investment vehicles, the Court noted that by mailing the notices to participants by first class mail, the plan took actions that were “reasonably calculated to ensure actual receipt” of the notice, and thus, complied with the notice requirement for the Safe Harbor provision to apply.

Section 510 Claims:

  • In Cameron v. Idearc Media Corp., --- F.3d ---, 2012 WL 2866099 (1st Cir. July 13, 2012), the First Circuit affirmed the district court’s decision dismissing plaintiffs’ Section 510 interference claims and claims of unlawful retaliation and held that Idearc lawfully terminated several of its sales personnel under an objective and negotiated merits-based plan without the specific intent required to support Section 510 or unlawful retaliation claims. Plaintiffs were part of a bargaining unit covered by a 2002 collective bargaining agreement (the “2002 CBA”), which included a Minimum Standards Plan (“MSP”). The MSP authorized termination of employees who fell below certain sales performance goals set forth in the 2002 CBA. Idearc and the union amended the CBA in 2007 (the “2007 CBA”) to broaden the class of employees who could be terminated under the MSP. After the revised MSP became effective, Idearc terminated the plaintiffs in July 2007. At the time, two of the plaintiffs were only two years from qualifying for service pensions; two other plaintiffs were four years and seven years, respectively, from qualifying for service pensions. Citing their proximity to vesting, plaintiffs asserted that they were fired to prevent these pension rights from accruing, in violation of ERISA Section 510. Plaintiffs also complained that the company unlawfully retaliated by refusing to reinstate them, as it had with other employees who successfully appealed their terminations, even though the plaintiffs did not appeal their terminations. Plaintiffs predicated their retaliation claims primarily on their contention that Idearc concealed a letter attached to the 2007 CBA, which purported to exempt employees from underperformance during certain time periods, and then failed to reinstate them. The Union rejected the letter, which would have mandated a performance improvement plan prior to termination. The district court dismissed both claims, noting that the MSP afforded a legitimate basis for plaintiffs’ terminations. The First Circuit agreed, noting that an employer’s “desire to keep the stronger and discharge the weaker performing members of a group is not the purposeful age discrimination condemned by the ADEA or interference with pension rights under ERISA.” The court also rejected the retaliation claim, noting that all parties to the 2007 CBA agreed that the letter, on which plaintiffs based their retaliation claims, was a “moot document” that never became effective as part of the 2007 CBA.


  •  In ACS Recovery Servs. Inc. v. Griffin, 676 F.3d 512 (5th Cir Apr. 2, 2012), reh’g granted, --- F.3d ---, 2012 WL 2874243 (5th Cir. July 13, 2012), the Fifth Circuit granted rehearing en banc to a heath plan fiduciary seeking to recoup medical benefits paid to a participant who received a settlement payment from a third-party tortfeasor. After suffering serious injury in a car accident, the participant (Griffin) received approximately $295,000 in a personal-injury settlement. Griffin’s attorney, seeking to avoid any equitable lien, structured the settlement so the driver’s insurer would purchase an annuity making monthly payments into a trust established on Griffin’s behalf. Griffin’s employer, the Plan fiduciary (FKI Industries (FKI)), and its collection firm (ACS) sued Griffin, the trustee and the trust seeking reimbursement for medical benefits paid by the Plan on Griffin’s behalf. The court concluded that ERISA’s provision authorizing “equitable relief” would permit a restitutionary recovery or relief under a constructive trust or equitable lien theory, but did not authorize personal liability for breach of contract. Applying these principles, the court rejected the recoupment claims, reasoning that Griffin never possessed the settlement funds because they were placed directly into a special-needs trust. In doing so, the Fifth Circuit observed the possession requirement was evaluated at the time equitable relief is sought. On application for rehearing, FKI and ACS argued that, under Supreme Court jurisprudence interpreting ERISA’s equitable remedies, the Plan’s reimbursement provision created an “equitable lien by agreement,” which in turn supported a claim for restitution. FKI and ACS further argued this claim should be enforceable as to funds in the possession of non-participant defendants, such as the trust and the trustee, notwithstanding dissipation or commingling of those funds.


  • In McCorkle v. Bank of Am. Corp., No. 11-1668, 2012 U.S. App. LEXIS 15346 (4th Cir. July 25, 2012), the Fourth Circuit affirmed the district court’s judgment that the normal retirement age employed by the pension plan was valid under ERISA’s anti-backloading provisions. Under the terms of the plan, a participant attained normal retirement age after five years of vesting service, or upon turning age 65 for participants who left the plan before five years or joined the plan after age sixty, whichever occurred first. Plaintiffs conceded before the district court that the plan’s normal retirement age was “definitionally” valid under ERISA Section 1002(24), but nevertheless argued that the normal retirement age was invalid under ERISA’s backloading rules. The court found plaintiffs’ argument lacked merit, both because of plaintiffs’ concession, and because ERISA’s backloading rules only restrict benefit accrual calculations prior to normal retirement age. The court accordingly concluded that, plaintiffs could not plausibly claim that a benefit calculation after normal retirement age runs afoul of ERISA’s backloading provisions. The court also disagreed with plaintiffs’ argument that the SPD affirmatively misled participants by describing a normal retirement age different from that actually utilized by the plan, finding: (i) plaintiffs failed to show that the SPD’s language differed from the terms of the plan; the SPD clearly set forth the Plan’s vesting and benefit eligibility standards; and (iii) there was no authority requiring the SPD to use terms of art, such as “normal retirement age,” in describing benefit accrual. Noteworthy, the court did not address plaintiffs’ argument that after CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), plaintiffs are not required to plead reliance or prejudice in support of their disclosure claim.

Class Certification:

  • In Matz v. Household Int’l Tax Reduction Inv. Plan, No. 12–8010, --- F.3d ---, 2012 WL 2930183 (7th Cir. July 19, 2012), the Seventh Circuit denied the parties’ cross-petitions for leave to appeal an order partially decertifying the class. In the underlying suit, plaintiffs claimed that the 401(k) plan was partially terminated, and that they were entitled to additional matching contributions, when the company was reorganized. Following the Supreme Court’s decision in Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011), the district court re-examined its initial class certification and modified the class definition, eliminating 57% to 71% of the class members. Defendants argued that plaintiff’s appeal should be denied because modification of an order certifying a class is not appealable under Rule 23. The Seventh Circuit disagreed, ruling that the language in Fed. R. Civ. P. 23, “permit[ting] an appeal from an order granting or denying class-action certification," provided jurisdiction for any "order materially altering a previous order granting or denying class certification . . . even if it doesn’t alter the previous order to the extent of changing a grant into a denial or a denial into a grant." Nevertheless, the court ruled, without explanation, that plaintiffs’ challenge to the class modification order did not satisfy Rule 23(f)’s criteria for interlocutory appeal. The court also denied the defendants’ appeal as untimely.

Benefit Claims:

  • In Shappie v. Minster Machine Co. Restated Non-Bargaining Employees’ Retirement Plan, 11 CV 3405, 2012 WL 2819280 (6th Cir. July 11, 2012), the Sixth Circuit affirmed a district court ruling granting summary judgment in favor of a plan on the grounds that the plan’s decision not to take into account a participant’s housing allowance in the participant’s benefit calculation was not arbitrary and capricious. The terms of the plan stated that a participant’s monthly earnings were to be included when calculating the participant’s retirement benefit. The plan defined “monthly earnings,” in part, as “the Participant’s regular monthly rate of earnings as reported for Form W-2 purposes divided by the applicable number of months in the calendar year.” Plaintiff argued that his housing allowance was included on his W-2 as a taxable fringe benefit, and thus, should be taken into account when calculating his retirement benefit as provided for by the unambiguous terms of the plan. The Sixth Circuit held that the terms of the plan were not “unambiguous,” and, as such, deferred to the plan to interpret the definition of “monthly earnings.” The court also found that a conflict of interest existed because the members of the plan committee making the benefit determination were also the company executives, but determined that the conflict did not result in the plan’s decision being arbitrary and capricious.
  • In Walker v. Fed. Exp. Corp., No. 11–5201, 2012 WL 285580 (6th Cir. July 11, 2012), the court determined that plaintiff’s claim for life insurance benefits was not viable under ERISA § 502(a)(2) because plaintiff sought individualized relief, and not relief relating to the plan as a whole. When plaintiff’s husband, Mr. Walker, worked for FedEx, the company paid his life insurance premiums. After suffering a stroke, Mr. Walker took a leave of absence, and began remitting premiums on his own behalf. Mr. Walker was terminated because his illness prevented him from returning to work. Upon termination, he had the right to convert to an individual life insurance policy. Plaintiff alleged that Mr. Walker did not receive the conversion notices, and sued for breach of fiduciary duty after the window to convert the policy expired. The court unequivocally rejected plaintiff’s claims that the Supreme Court’s ruling in LaRue v. Dewolff, Boberg and Assoc., Inc., 552 U.S. 248 (2008), allowed recovery, holding that LaRue is limited by its facts to permit individualized relief under Section 502(a)(2) only for fiduciary breach claims relating to defined contribution plans. Because plaintiff’s claims did not concern a 401(k) plan, and were individualized in nature, the court ruled that recovery was not available under Section 502(a)(2). The court also affirmed the lower court’s conclusion that ADP was not a fiduciary within the meaning of ERISA because (i) the terms of the service provider agreement did not grant discretionary authority to ADP over the management of the plan, and (ii) ADP did not perform a fiduciary function with respect to any aspect of its involvement with the plan. Finally, the court affirmed the district court’s finding that ERISA does not contain any provision that requires a plan administrator to provide notice to plan participants other than a summary plan description and information of the benefits plan as set forth in 29 U.S.C. §§ 1021(a)(1) and 1022, and therefore rejected plaintiff’s argument that ERISA required defendants to notify individuals of their life insurance conversion rights.
  • In Killian v. Concert Health Plan, No. 11-1112 (7th Cir. July 12, 2012), the Seventh Circuit granted rehearing en banc to revisit whether plan representatives have a fiduciary duty to affirmatively disclose information on the plan’s out-of-network providers to a plan participant (Killian). In its April 2012 decision, the panel affirmed summary judgment in favor of the plan, concluding that a denial of benefits for out-of-network treatment could not be an abuse of discretion, even though the plan’s customer-service representatives failed to inform the participant that the provider at issue was out-of-network. The court distinguished an earlier decision in a similar case, reasoning that Killian had offered no evidence that he had inquired as to the provider’s status, or that an affirmative duty to disclose was otherwise triggered. In requesting rehearing, plaintiff maintained the panel’s April ruling creates an intra-circuit conflict, noting the dissent’s emphasis on evidence suggesting the plan’s representatives should have known the participant’s inquiries related to the provider’s in-network status. A more detailed description of the April panel opinion in Killian is in the May 2012 edition of the Newsletter.