The Dangers of Reimbursing Employees for Individual Health Insurance Premiums — and the Limited Relief for Small Employers

Prior to the passage of the Affordable Care Act ("ACA") in 2010, employers were able to reimburse their employees for the premiums those employees paid for individual health insurance. This long-standing practice was changed beginning in 2014 with the issuance of new guidance from the Internal Revenue Service and Department of Labor. Under that guidance, such "employer payment plans" are deemed to be noncompliant with the market reforms implemented under the ACA. The penalties for failure to comply with the market reforms can be severe — as much as $100 per employee, per day. More ›

October 1 Deadline Approaching for Employers to Issue “Notice of Coverage Options” to Employees

The Affordable Care Act (ACA) imposes on employers various new obligations that are to take effect over the next several years. Employers received some measure of relief with the surprise announcement of a one-year delay in the enforcement of the employer mandate until January 1, 2015. Other requirements under the ACA, however, continue to move forward. More ›

Seventh Circuit Upholds Arbitrator’s Reduction of Withdrawal Liability

An arbitrator's decision to significantly reduce the amount of withdrawal liability assessed against an employer that had withdrawn from a multiemployer pension plan was affirmed in a recent opinion from the Seventh Circuit. More ›

Plan Fiduciaries Entitled to a Presumption of Reasonableness in Employer Stock Drop Cases

Continuing a long string of rulings in employer “stock drop” litigation, the U.S. Court of Appeals for the Second Circuit found that a fiduciary in an Employee Retirement Income Security Act (ERISA) retirement plan was entitled to a “presumption of reasonableness” in continuing to offer plan participants the option to invest in employer stock. Plaintiffs were a putative class of participants in a 401(k) plan sponsored by a large bank. The employer (which was also the plan sponsor for the 401(k) plan) maintained an administrative committee to operate the plan and an investment committee to choose which investments would be available to plan participants.One of the investment options offered to participants was a fund designed to invest in the common stock of the employer/plan sponsor. During the financial crisis of 2007-2009, the stock price of the employer dropped significantly. Plaintiffs sued, alleging that the plan sponsor and the committees administering the plan had breached their respective fiduciary duties by continuing to allow the stock fund to be an investment option. The Second Circuit, adopting the standard used in Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995), held that the plan’s fiduciaries were entitled to a presumption that offering the employer’s stock fund as an investment option under the plan was reasonable. The Moench standard presumes that a plan fiduciary’s investment decisions are prudent, a presumption that may be rebutted by showing that the fiduciary had abused its discretion. Absent evidence of such an abuse of discretion, a plaintiff’s claim of a fiduciary breach cannot survive a motion to dismiss. A companion case issued the same date reached a similar conclusion. Plan fiduciaries should regularly document their actions to protect against claims that they have acted imprudently.

In re Citigroup ERISA Litigation (Gray v. Citigroup Inc.), No. 09-3804 (2nd Cir. Oct. 19, 2011);

Gearren v. McGraw-Hill Cos., No. 10-792 (2nd Cir. Oct. 19, 2011)