Recent Noteworthy Court Decisions
Three recent court decisions, one by the U.S. Court of Appeals for the Ninth Circuit, and two by the U.S. Supreme Court, bear some contemplation.
Electronic Communications: Be Aware
TheGertjejansenv . Kemper Ins. Companies, Inc., 2008 WL 1787484 (9th Cir. 2008) decision underscores the importance of proper plan communication, specifically when electronic means are used. The Department of Labor allows certain kinds of plan notices, including summary plan descriptions, to be distributed electronically. However, it is critical that the procedures for electronic distribution be satisfied; most important of which, is ensuring that the document is actually disseminated. Simply posting a document or SPD on an employer’s intranet or internet website will not, as underscored by this Court decision, satisfy the distribution requirement.
The DOL regulations (29 CFR 2520.104b-1(c)) set out procedures for proper electronic distribution (also see Disclosure through Electronic Media on page 131 of the For Your Benefit book for a summary of these rules). The preamble to the Regulations indicate that e-mail, attachments to e-mail, internet posting, or CD, are examples of electronic media that can be used, but only as long as diligence is used to ensure actual receipt. For example, if an internet posting is to be used, an e-mail with a link to the posting, together with a receipt request, might be appropriate. Given this recent Court decision, a more conservative approach might be to actually attach the electronic document to the e-mail message.
It is now more important than ever that diligence be used to ensure that these procedures are scrupulously followed if the electronic method of distribution is used.
Claims Determination/Payment: A Dichotomy
The U.S. Supreme Court in Metropolitan Life Ins. Co. v. Glenn, No. 06-923 (U.S. 2008) addressed the conflict that can arise when a single entity, whether the employer or insurer, is both the payor, as well as the claims and appeals administrator. This case underscores the conflict of interest that can arise when one entity plays both roles.
The claims administrator, for example, might be inclined to decline payment of a claim in order to save itself money. Generally, Courts will give deferential consideration to a conflict of interest determination when a plan has reserved discretionary authority over plan determinations. This decision opens the door to Courts to scrutinize more carefully the abuse of discretion that could arise.
While this matter is sure to evolve over time, as Courts interpret this Opinion, it is important for employers who self-administer claims, and for insurers, who are both claim determiners and payors, to ensure that their processes are squeaky-clean. For example, it might be appropriate for firewalls be built between the claims determination process, and the funding process.
Age Issues in Benefit Plans
InKentucky Retirement Systems v. EEOC, No. 06-1037 (June 19, 2008), the U.S. Supreme Court determined that it is not a violation of the Age Discrimination in Employment Act for a retirement plan to accelerate plan eligibility for younger disabled workers. This decision highlights the fact that matters of age discrimination continue to be litigated as they relate to benefit plans. In designing a benefit plan, it is certainly important to take age matters into consideration.
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