The U.S. Supreme Court recently struck down a Vermont statute requiring "all payers"—i.e., healthcare providers, insurers, and facilities—to report healthcare information to the State of Vermont on the ground that the statute was preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"). In this article, we review the Court's decision and also provide some perspective on the potential implications of the decision for plan sponsors and fiduciaries. BackgroundMany states have developed and implemented all-payer claims databases to address their need for comprehensive healthcare information, including costs, quality, utilization patterns, and access and barriers to care. One purpose behind these initiatives is to provide consumers and purchasers of healthcare services the ability to compare prices and quality as they make healthcare decisions.There has been no question about the ability of states to acquire such information from insured plans. Although ERISA … [Read more...] about ERISA Preemption after Gobeille v. Liberty Mutual Ins. Co
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Recently, we reported on Gobeille v. Liberty Mutual, in which the Supreme Court invalidated the Vermont all-payer claims data base law. Applying what appeared to us as a straight-forward application of existing ERISA preemption jurisprudence, the Court determined that the Vermont law constituted plan administration and was thus preempted. Gobeille’s holding is significant. The decision materially shifts the Federal/state balance of regulatory power, at the expense of the states, in instances where the states seek to regulate ERISA-covered employee benefit plans. This post examines an alternative approach raised in Gobeille, but not pursued, under which states might seek to regulate service providers of plans rather than the plans themselves to avoid ERISA preemption. An Alternative ArgumentAs Gobeille wound its way to the Supreme Court, the State of Vermont made an argument that got little attention. The essence of the argument is that the Vermont law applied to, and imposed … [Read more...] about Gobeille v. Liberty Mutual: Dog That Didn’t Bark, and Next Front in Preemption War
Today, the U.S. Supreme Court decided (6-2, with Kennedy writing for the majority and Ginsburg and Sotomayor dissenting) the case of Gobeille v. Liberty Mutual Insurance Co. The matter before the Court involved Vermont law requiring certain entities, including health insurers, to report payments relating to health care claims and other information relating to health care services to a state agency for compilation in an all-inclusive health care database. In an important victory for pre-emption advocates, the Court held that this law was pre-empted by The Employee Retirement Income Security Act of 1974 (ERISA) which expressly pre-empts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” And that includes any state law that has an impermissible “connection with” ERISA plans, i.e., a law that governs, or interferes with the uniformity of, plan administration. In the context of this … [Read more...] about U.S. Supreme Court Rules in Favor of Liberty Mutual
The Supreme Court holds that ERISA’s limitations period does not bar an alleged breach for failure to monitor a plan’s investments.BackgroundOn May 18, the Supreme Court issued a unanimous decision in Tibble v. Edison International, holding that an ERISA fiduciary has an ongoing duty to monitor plan investments and that allegations of a breach of this duty may give rise to a timely claim even when a challenge to the fiduciary’s initial selection of that same investment would be barred by ERISA’s six-year statute of repose.In reaching this decision, the Supreme Court made clear that before finding a claim for breach of fiduciary duty untimely, courts must first “consider the contours of the alleged breach,” which often means turning to the law of trusts. Doing so here, the Court held that ERISA, like trust law, imposes upon a plan fiduciary a “continuing duty to monitor trust investments and remove imprudent ones,” … [Read more...] about Tibble v. Edison International Decision Finds Ongoing Duty to Monitor Investments in 401(k) Plans
Retirement plan revenue sharing has a bad reputation. Numerous lawsuits have been filed during the past year against employers that sponsor 401(k) plans alleging breach of fiduciary duty under the Employee Retirement Income Security Act of 1974 (“ERISA”) with respect to revenue sharing generated by the plans’ investments. The Securities and Exchange Commission has pursued high-profile investigations of investment providers regarding their revenue sharing practices in retirement plans and otherwise. And the Department of Labor has devoted significant attention to retirement plan revenue sharing arrangements over the past several years to enforce ERISA’s strict fiduciary duties of loyalty and prudence.All that said, ERISA does not prohibit retirement plan revenue sharing or even the retention of revenue sharing payments by retirement plan service providers. So, what’s the concern? What do 401(k) plan fiduciaries need to know about revenue sharing? … [Read more...] about ERISA Fiduciary Issues for Plan Sponsors: What Do 401(k) Plan Fiduciaries Need to Know About Revenue Sharing?