Articles Posted in US Court of Appeals for the Third Circuit

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Plaintiffs sought to represent a proposed class of 20,000 current and former Penn employees who participated in Penn's Retirement Plan since August 2010. The Plan is a defined contribution plan under 29 U.S.C. 1002(34), tax-qualified under 26 U.S.C. 403(b), offering mutual funds and annuities. The University matches employees’ contributions up to 5% of compensation. As of December 2014, the Plan offered 48 Vanguard mutual funds, and 30 TIAA-CREF mutual funds, fixed and variable annuities, and an insurance company separate account. In 2012, Penn organized its investment fund lineup into four tiers, ranging from lifecycle or target-date funds for the “Do-it-for-me” investor to the option of a brokerage account window for the “self-directed” investor looking for additional options. Plan participants could select a combination of funds from the investment tiers. TIAA-CREF and Vanguard charge investment and administrative fees. The district court dismissed plaintiffs’ suit for breach of fiduciary duty, prohibited transactions, and failure to monitor fiduciaries under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001-1461, which alleged that defendants failed to use prudent and loyal decision-making processes regarding investments and administration, overpaid certain fees by up to 600%, and failed to remove underperforming options from the Plan’s offerings. The Third Circuit reversed and remanded the dismissal of the breach of fiduciary duty claims. While the complaint may not have directly alleged how Penn mismanaged the Plan, there was substantial circumstantial evidence from which the court could “reasonably infer” that a breach had occurred. View "Sweda v. University of Pennsylvania" on Justia Law

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Dr. McCann, a radiologist certified in the specialty of interventional radiology, purchased a supplemental long-term disability insurance policy from Provident. After initially issuing payments under the policy, Provident terminated Dr. McCann’s disability benefits based on a determination that Dr. McCann was primarily practicing as a diagnostic radiologist—rather than as an interventional radiologist—at the time he became disabled. The Third Circuit remanded for a determination of whether to consider whether Dr. McCann’s medical conditions prevent him from being able to perform his “substantial and material duties” as an interventional radiologist, as required by the terms of the policy. The court concluded that the claim was governed by the Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001. The Department of Labor has promulgated a safe harbor regulation exempting certain plans from the definition of an “employee welfare benefit plan” but McCann’s then-employer sufficiently endorsed the plan under which his policy was purchased to render the safe harbor inapplicable. Provident incorrectly defined Dr. McCann’s occupation in administering his disability claim; the claim must be evaluated in the context of his specialty—interventional radiology. View "McCann v. Unum Provident" on Justia Law

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Sports Medicine performed shoulder surgery on “Joshua,” who was covered by a health insurance plan, and charged Joshua for the procedure. Because it did not participate in the insurers’ network, Sports Medicine was not limited to the insurer’s fee schedule and charged Joshua $58,400, submitting a claim in that amount to the insurers on Joshua’s behalf. The claim form indicated that Joshua had “authorize[d] payment of medical benefits.” The insurer processed Joshua’s claim according to its out-of-network cap of $2,633, applying his deductible of $2,000 and his 50% coinsurance of $316, issuing him a reimbursement check for the remaining $316, and informing him that he would still owe Sports Medicine the remaining $58,083. Sports Medicine appealed through the insurers’ internal administrative process and had Joshua sign an “Assignment of Benefits & Ltd. Power of Attorney.” Sports Medicine later sued for violations of the Employee Retirement Income Security Act (ERISA), and breach of contract, citing public policy. The district court dismissed for lack of standing because Joshua’s insurance plan included an anti-assignment clause. The Third Circuit affirmed, holding that the anti-assignment clause is not inconsistent with ERISA and is enforceable. View "American Orthopedic & Sports Medicine v. Independence Blue Cross Blue Shield" on Justia Law

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St. Peter’s, a non-profit healthcare entity, runs a hospital, employing over 2,800 people, with ties to a New Jersey Roman Catholic Diocese. The Bishop appoints most Board of Governors members and retains veto authority over Board actions. The hospital has daily Mass and Catholic devotional pictures throughout the building. In 1974, St. Peter’s established a non-contributory defined benefit retirement plan; operated the plan subject to the Employee Retirement Income Security Act (ERISA); and represented that it was complying with ERISA. In 2006 St. Peter’s sought a church plan exemption from ERISA, 26 U.S.C. 414(e); 29 U.S.C. 1002(33), continuing to pay ERISA-mandated insurance premiums while the application was pending. In 2013, Kaplan, who worked for St. Peter’s until 1999, filed a putative class action alleging that St. Peter’s did not provide ERISA-compliant summary plan descriptions or pension benefits statements, and that, as of 2011, the plan was underfunded by $70 million. While the lawsuit was pending, St. Peter’s received an IRS private letter ruling. affirming the plan’s status as an exempt church plan. The Third Circuit initially affirmed the denial of a motion to dismiss, concluding that St. Peter’s was not a church. The court reversed, following a June 5, 2017, order by the Supreme Court of the United States. View "Kaplan v. Saint Peter's Healthcare System" on Justia Law

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A “top-hat” plan “which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees,” 29 U.S.C. 1101(a)(1), 1051(2), 1081(a)(3), need not comply with many of the substantive provisions of the Employee Retirement Income Security Act of 1974 (ERISA). Sikora sought to recover pension benefits under ERISA through the University of Pittsburgh Medical Center and its Health System and Affiliates Non-Qualified Supplemental Benefit Plan. The district court held, and the Third Circuit affirmed, that he was not entitled to obtain such relief because he sought benefits under a top-hat plan. The courts rejected Sikora’s argument that the defendants were required to prove that plan participants had bargaining power before a court could conclude that he participated in a top-hat plan. Plan participant bargaining power is not a substantive element of a top-hat plan. View "Paul Sikora v. University of Pittsburgh Medical Center" on Justia Law

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Union Pacific employee Dowling became totally disabled by multiple sclerosis in 1997. His disability benefits ended in 2012 when he reached age 65 and began to draw a pension. Instead of calculating Dowling’s pension based on Dowling’s last 10 years of actual work—ending in 1997—the administrator operated as if Dowling had worked and been paid his final base salary— $208,000 per year— for his credited years of service, until his retirement in 2012, even though Dowling had not actually worked during that period. Dowling is covered by a 277-page retirement plan composed of introductory material, 19 articles of content, and various appendices—none of which explicitly address Dowling’s precise situation. The administrator’s interpretation provides Dowling with a lower monthly payment than he expected. Dowling challenged the administrator’s decision as contradicting the plan’s plain language. In Dowling’s suit under ERISA, 29 U.S.C. 1132(a)(1)(B), the district court found the plan ambiguous and the administrator’s interpretation reasonable. The Third Circuit affirmed. The plan’s terminology, silence, and structure render it ambiguous, so the plan accords the plan administrator discretion to interpret ambiguous plan terms. The mere existence of a conflict of interest is alone insufficient to raise skepticism of the plan administrator’s decision. View "Dowling v. Pension Plan for Salaried Employees of Union Pacific Co." on Justia Law

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Union Pacific employee Dowling became totally disabled by multiple sclerosis in 1997. His disability benefits ended in 2012 when he reached age 65 and began to draw a pension. Instead of calculating Dowling’s pension based on Dowling’s last 10 years of actual work—ending in 1997—the administrator operated as if Dowling had worked and been paid his final base salary— $208,000 per year— for his credited years of service, until his retirement in 2012, even though Dowling had not actually worked during that period. Dowling is covered by a 277-page retirement plan composed of introductory material, 19 articles of content, and various appendices—none of which explicitly address Dowling’s precise situation. The administrator’s interpretation provides Dowling with a lower monthly payment than he expected. Dowling challenged the administrator’s decision as contradicting the plan’s plain language. In Dowling’s suit under ERISA, 29 U.S.C. 1132(a)(1)(B), the district court found the plan ambiguous and the administrator’s interpretation reasonable. The Third Circuit affirmed. The plan’s terminology, silence, and structure render it ambiguous, so the plan accords the plan administrator discretion to interpret ambiguous plan terms. The mere existence of a conflict of interest is alone insufficient to raise skepticism of the plan administrator’s decision. View "Dowling v. Pension Plan for Salaried Employees of Union Pacific Co." on Justia Law

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St. Peter’s, a non-profit healthcare entity, runs a hospital. It is not a church, but has ties to a New Jersey Roman Catholic Diocese. The Bishop appoints most members of its Board of Governors and retains veto authority over Board actions. The hospital has daily Mass and Catholic devotional pictures and statues throughout the building. In 1974, St. Peter’s established a non-contributory defined benefit retirement plan; operated the plan subject to the Employee Retirement Income Security Act (ERISA); and represented that it was complying with ERISA. In 2006 St. Peter’s filed an IRS application, seeking a church plan exemption from ERISA, 26 U.S.C. 414(e); 29 U.S.C. 1002(33). In 2013, Kaplan, who worked for St. Peter’s until 1999, filed a putative class action alleging that St. Peter’s did not provide ERISA-compliant summary plan descriptions or pension benefits statements, and that, as of 2011, the plan was underfunded by more than $70 million. While the lawsuit was pending, St. Peter’s received an IRS private letter ruling. affirming the plan’s status as an exempt church plan for tax purposes. The Third Circuit initially affirmed denial of a motion to dismiss, concluding that St. Peter’s could not establish an exempt church plan because it is not a church. Following consideration by the U.S. Supreme Court in 2017, the Third Circuit vacated and reversed. View "Kaplan v. Saint Peter's Healthcare System" on Justia Law