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Common ERISA violations and criminal provisions

The purpose of ERISA is to protect employee benefit plan participants and designated beneficiaries in Washington, D.C., and other parts of the country. Even so, there are times when violations occur, some of which can have a serious impact on an employee's company-related benefits. Here's a closer look at common violations and related ERISA provisions.

The Employee Benefits Security Administration conducts regular investigations if there are suspected ERISA violations. Pension and welfare plans could be affected if, for example, a plan is not being operated specifically for the benefit of participants. Action may also be taken if a plan administrator, plan sponsor, or other party uses plan assets for their benefit. Violations could also involve not following the plan's terms, taking adverse actions against an individual simply for exercising their rights under the plan, failing to properly value the assets related to a plan at their current fair market value, and not properly selecting and monitoring service providers.

Are pension plans adequately funded?

Pension plans in the District of Columbia and around the country have to be funded in order to fulfill their purpose. However, the Archdiocese of Newark, New Jersey, failed to do so, according to a lawsuit filed by more than 100 former employees of Saint James Hospital. As a result of the Archdiocese's action, the plan ran out of funds in 2017, and no benefits have been paid out since.

The pension plan operated under the Employee Retirement Income Security Act (ERISA) until the Archdiocese stopped funding it in 1988. Around 1997, the Archdiocese had more than $20 million in excess funds that it could have used to plug a $2.7 million hole in the plan. However, the Archdiocese chose instead to transfer those funds to a non-guaranteed Transamerica account. Transamerica later notified the employees that the Archdiocese had stopped contributing to the plan and that funds were no longer sufficient to meet future obligations.

Multiple ERISA cases seek Supreme Court review

Many District of Columbia workers depend on private employer-sponsored retirement plans. The Employee Retirement Income Security Act of 1974 directs the operation of defined contribution plans, but some view the law as in need of a legislative overhaul. Until such a correction might be forthcoming, retirement plan disputes must be settled through private talks or litigation. Inconsistent decisions in lower courts, however, have inspired a deluge of petitions to the Supreme Court of the United States.

From January through April 2019, the Supreme Court received petitions every month involving ERISA disputes. The likelihood that the court might accept any of these petitions this year is low. The cases in question revolve around a number of issues, such as burden of proof for fiduciary breach claims, investment communications, and the standards that determine if a case should go to trial.

ERISA has narrow scope for employees of Indian tribal governments

Lawmakers in Washington D.C. created the Employee Retirement Income Security Act of 1974 to direct the design and operation of retirement plans for private-sector employees. ERISA does not apply to retirement plans operated for employees of government agencies, and workers at Indian tribal governments largely fall into the non-ERISA category. An amendment to the act in 2006 altered this landscape for plan sponsors at Indian tribal governments and granted ERISA protections to workers employed within tribal commercial enterprises.

A retirement plan for tribal workers would only be exempt from ERISA if the employees performed essential governmental functions, such as teachers. Tribal governments running retirement plans for employees at commercial venues, like hotels or casinos, would have to observe ERISA rules. The act requires plan sponsors to file annual reports, provide participants with a summary plan description, adhere to specific procedures for claims and appeals and meet fiduciary standards.

Health management company found liable for ERISA violations

One federal court decision could affect the way that health insurance benefits treat employee mental health claims in Washington, D.C., and across the country. In the case of Wit v. United Behavioral Health (UBH), a managed health care company was found responsible for denying tens of thousands of workers' insurance claims for mental health or substance abuse treatments. UBH oversees behavioral health services for a number of health insurance companies, including UnitedHealthcare.

Eleven plaintiffs filed suit against UBH on behalf of over 50,000 people whose claims were denied. They alleged, and the court agreed, that these denials were based on flawed criteria. In one case, a plaintiff made out-of-pocket payments of nearly $30,000 for health care treatment despite having valid health insurance throughout that time. The court said that UBH's guidelines were unreasonable and designed to restrict access to care, rather than making use of standard, evidence-based medical guidelines to determine the necessity of treatment. The case was filed as an ERISA benefits claim, making use of the protections of the Employee Retirement Income Security Act of 1974.

Fiduciaries lose class action suit

A federal court in California has sided with plaintiffs in a class action suit concerning payment for behavioral health costs. The court ruling and rationale for the decision should make ERISA plan trustees and administrators in Washington, D.C., a little more mindful of accepted methods for treatment.

The suit related to behavioral health claims submitted to a self-insured carrier over a seven-year period. The case fell under ERISA jurisdiction as the health benefits were employer-sponsored. Plaintiffs provided evidence in the form of expert testimony to identify generally accepted treatment methods for substance abuse and mental health cases. The standards originate from a large national organization of mental health professionals.

Eighth Circuit rules against cross-plan offsetting

A recent ruling in the Eighth Circuit might be interesting to employees and employers in the Washington, D.C. area as well as the rest of the country. While the ruling is only binding on courts in the Eighth Circuit, it might indicate how other circuits might likewise rule.

The decision involved a practice called cross-plan offsetting that is used by some ERISA plans to recover overpayments. In the practice, plan administrators reduce future payments to offset overpayments that they have made. The plan administrators may deny or reduce payments to specific providers in the future because of overpayments even if the subsequent claims were made by different plan participants.

Public workers face complex benefits system

Many District of Columbia residents have built their careers in the public sector. One thing that can make these jobs so appealing is the exceptional benefits they offer, often significantly superior to those available to workers in the private sector. Government and other public service employees often have strong insurance packages that include disability, retirement and health benefits. However, even people who believe they can rely on great benefits may be shocked by an unjust denial or a dismissed benefits claim.

When you are denied benefits as a federal or public employee, the process you go through is also different than that for employees of private companies. However, the costs can be massive, and many workers cannot afford to let a denial of a claim stand. People may find themselves unable to make ends meet or cover the costs for necessary health care. If you are nearing retirement age, it may be particularly important to protect your rights under your benefits plan.

Supreme Court petitioned on ERISA benefits issue

The nation's highest court may rule in Washington, D.C., on which party is responsible for proving loss causation when a dispute over the management of defined contribution benefit plans goes to court. One company currently involved in such a case appealed to the Supreme Court to settle the disparate approaches taken among federal appeals courts about who must prove losses when plan members file suit over fiduciary breaches of the Employment Retirement Income Security Act (ERISA), which protects employee benefits from misuse or fraud.

One company involved in an ERISA benefits dispute has requested that the Supreme Court rule on the issue to provide a definitive national framework for assessing loss causation. In six appellate courts, plaintiffs suing the fiduciaries of these plans have the burden of proof to show that losses were caused by fiduciary breaches of duty. On the other hand, four courts have ruled that the defendants must show that losses were not caused by any breaches of fiduciary duty. The petition noted that the high court is well-placed to resolve this fundamental divide that can mean similar cases are treated substantially differently, even under a uniform national law.

Actual knowledge in ERISA claims

When ERISA claims are filed in Washington, D.C., the plan fiduciaries commonly claim that the statute of limitations bars the claims. ERISA claims have a three-year statute of limitations, which means that claims must be filed within that period of time, or they will be time-barred.

The Employee Retirement Income Security Act is a federal law that sets standards for health and retirement plans that are voluntarily established by private companies. When people become aware that their plans' fiduciaries took actions that violated the provisions of ERISA, they may file lawsuits. In some cases, the workers may be unaware that they can file claims until the statute of limitations has run.


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