Benefits Counselor – April 2024 – Health & Safety

RETIREMENT PLAN UPDATES

Plan Fiduciaries Face Lawsuits Over Pension Risk
Transfers with Athene

In March 2024, three class action lawsuits were filed by former
plan participants against plan fiduciaries in connection with
pension risk transfers to Athene Holding Ltd. (Athene) The lawsuits
allege that the plan fiduciaries violated their fiduciary duties
under the Employee Retirement Income Security Act of 1974 (ERISA)
in the selection of Athene as the annuity provider and engaged in
prohibited transactions. AT&T Inc. and AT&T Services, Inc.
(AT&T) and State Street Global Advisors Trust Company were hit
with two lawsuits relating to a pension risk transfer in 2023.
Former participants in Lockheed Martin Corporation’s two
pension plans filed a similar lawsuit relating to transfers to
Athene that occurred in 2021 and 2022. These three lawsuits signal
a potential new wave of ERISA litigation. Look for our alert for an
additional discussion of these cases.

Seventh Circuit Reverses Decision on Withdrawal
Liability

On March 22, 2024, the U.S. Court of Appeals for the Seventh
Circuit reversed a district court’s decision upholding an
arbitration award of approximately $2 million in withdrawal
liability in Bulk Transport Corp. v. Teamsters Union No. 142
Pension Fund, No. 23-1563 (7th Cir. Mar. 22, 2024). The Seventh
Circuit held that under the National Labor Relations Act (NLRA) and
ERISA, the terms of pension contributions to multiemployer plans
must be in writing and “cannot be changed orally.” In
this case, there was not a written collective bargaining agreement
requiring contributions to the plan. However, the plan asserted
that the employer had adopted the applicable agreement by its
conduct. The Seventh Circuit held that the precise terms of pension
contributions to the plan must be in writing and that any such
written agreement controls over the parties’ conduct. The court
remanded the case to the district court and ordered the plan to
return the withdrawal liability it had collected, with
interest.

HEALTH AND WELFARE PLAN UPDATES

IRS Issues Reminder that Personal Expenses for General
Health and Wellness are not Medical Expenses

The Internal Revenue Service (IRS) issued a news release on
March 6, 2024, to remind taxpayers and administrators that health
spending arrangements, such as flexible spending accounts (FSAs),
health reimbursement arrangements (HRAs) and health savings
accounts (HSAs), and personal expenses for general health and
wellness are not considered medical expenses and, therefore, cannot
be deducted or reimbursed under these health spending arrangements.
The IRS issued this alert amid concerns that companies are
misrepresenting the circumstances under which food and wellness
expenses can be paid or reimbursed by health spending arrangements.
For example, the IRS noted that some companies are offering to
provide a doctor’s note for a fee, cautioning that a
doctor’s note based on self-reported health information cannot
convert personal expenses into medical expenses.

HHS Announces Investigation and Reminds HIPAA Covered
Entities of Obligations Following Change Healthcare
Cyberattack

Following the unprecedented February 2024 ransomware cyberattack
on Change Healthcare, a technology unit of United Healthcare Group
(UHG), the U.S. Department of Health and Human Services (HHS)
Office for Civil Rights (OCR) announced in a letter that it would
investigate whether a breach occurred as well as Change
Healthcare’s and UHG’s compliance with the privacy,
security and breach notification requirements under the Health
Insurance Portability and Accountability Act of 1996 (HIPAA).
According to the letter, OCR is not prioritizing investigations of
health plans, health care providers and business associates that
were affected by the attack; however, such entities should ensure
that business associate agreements are in place and that they
provide timely breach notifications to affected individuals and
HHS. The letter identifies several resources that HIPAA-covered
entities and business associates may consult to prevent
cyberattacks and comply with HIPAA.

HHS Updates Guidance Addressing Use of Tracking
Technologies

On March 18, 2024, HHS issued a bulletin updating its December
2022 Bulletin regarding the obligations of HIPAA-covered entities
and business associates (together, regulated entities) when using
online tracking technologies. Tracking technologies are used to
collect information about how users interact with regulated
entities’ websites or mobile applications (“apps”).
HHS reminded regulated entities that HIPAA prohibits the use of
tracking technologies in a manner that would result in
impermissible disclosures of protected health information to
tracking technology vendors or result in any other violations of
the HIPAA privacy, security or breach notification rules.

Claim Alleging Discriminatory Coverage in Fertility
Treatment Survives Motion to Dismiss

A district court concluded that a health plan participant
plausibly alleged that the plan’s coverage standards for
fertility treatments were discriminatory in violation of section
1557 of the Affordable Care Act (ACA). Berton v. Aetna Inc., 2024
WL 869651 (N.D. Cal. 2024). After being denied coverage for her
fertility treatment by her ERISA-covered health plan, a participant
filed a class action lawsuit against Aetna (the plan’s
third-party administrator) alleging that the plan impermissibly
discriminated against participants based on their sexual
orientation. The plan required a determination of infertility as a
condition for receiving coverage for fertility treatments. The
participant alleged the plan imposed different and more onerous
prerequisites for fertility treatment access on LGBTQ participants
than those applicable to heterosexual couples. Aetna filed a motion
to dismiss. The court denied the motion, concluding that the
complaint pled sufficient facts to state a claim of
discrimination.

GENERAL/PUBLIC PLAN/INVESTMENT UPDATES

ERISA Advisory Council Report on Recordkeeping in the
Electronic Age

The ERISA Advisory Council recently issued a report to the U.S.
Department of Labor (DOL) regarding the implications of the shift
to electronic recordkeeping. Among other items, the ERISA Advisory
Council explored: (1) the reliability, accuracy and completeness of
electronic records; (2) the long-term availability and retention of
plan and participant records; and (3) the transfer of records
during plan-level transactions and duties of service providers
during these transactions. The report identified various topics
regarding which the DOL should provide guidance and education. For
example, the report makes several recommendations related to
guidance that clarifies the documents that must be retained under
ERISA sections 107 and 209 and the retention periods for such
documents. The report also discusses the importance of controls
over electronic records and encourages the DOL to provide education
in this regard. According to the report, future guidance needs to
be flexible enough to accommodate rapidly evolving
technologies.

COMPLIANCE DEADLINES AND REMINDERS

Retirement Plan Deadlines

Annual Funding Notice: Administrators of calendar-year defined
benefit plans consisting of more than 100 participants must provide
the Annual Funding Notice no later than April 29, 2024.

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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.