At one time, employers referred to an employee’s fringe benefits as their ‘ hidden paycheck.’ This meant that up to 32% of an employee’s compensation is paid out in the form of benefits. Healthcare coverage, retirement matching funds, as well as life and disability insurance are critical components of an employee’s financial security. Good employee benefit plans have three pillars of financial security: immediate, short-term, and long-term. These pillars all play a role in an employee’s present and future financial wellbeing.

 

The Pillars

 

Your Immediate Financial Security

The most important aspect of an employee’s immediate financial security is having a good healthcare plan. Since the passing of the Affordable Care Act, there are now “essential health benefits” that protect an employee and their dependents from any surprise charges. Under this act, health plans provide pre-existing condition coverage. Without proper healthcare coverage, expensive medical treatments can cause real financial harm, sometimes even bankruptcy. Having the right health plan is crucial for a family’s quality of life. 

 

Your Short-Term Financial Security

A good employee benefits plan should have a disability and life insurance plan with reputable insurance companies. The financial protection of your income and assets is critically important especially if you have dependents. If something unexpected happens, the ability to earn an income could be lost, and there should be a disability contract to help replace that income. If there is an untimely death, then an employee’s family should be protected by having adequate levels of life insurance coverage. Having a good disability and life insurance can help when the unexpected occurs.

 

Your Long-Term Financial Security

This is the third pillar of a benefit plan that should help you plan for the future when you no longer want to work (or not work full-time). A good benefit plan makes it easy for you to save for retirement through a 401(k) plan or other savings vehicle, by building up your net worth paycheck after paycheck. A good plan should have solid investment offerings, low fees, and be properly managed.

 

Because the cost of employee benefits does not typically show up in an employee’s W-2, it is easy to forget that they are a significant part of the overall compensation package. They should be taken seriously when an employee looks at his or her overall compensation.

 

Every good benefits plan should consist of these three pillars. These pillars should provide for immediate, short-term, and long-term financial security. If your benefit plan is not performing in one of these key aspects, there is likely a problem. If you have concerns or are denied benefits for which you are entitled, call us, we are here to help

 

Occasionally, someone will ask, ”why is there a mountaintop in your logo,” or “where did the trademark ‘Conquer Tomorrow’ come from?” The spirit behind our brand comes from a desire to help our clients conquer their legal challenges. In helping our clients reach their goals, we take some inspiration from the mountains.  

 

Looking to the mountains for inspiration

The mountains provide a kind of wisdom that comes through reflecting upon the unarguable laws of nature. For years, I have been fortunate enough to escape to the mountains for a little perspective and reflection. When you climb in the mountains, you spend a lot of time thinking. You think of how to navigate and overcome obstacles. Mountain climbing is sometimes called a ‘thinking person’s sport’ because it involves such intense concentration.

 

So many lessons of the mountains are transferable to a litigation setting.  A successful summit requires plenty of advanced training, just as a case requires significant preparation. Our clients and firm share a common goal, to be successful in litigation, which when you look at it, is similar to obstacles you overcome when you summit a mountain. as in the mountains, in litigation, nothing ever goes exactly the way you hope. Obstacles will appear, some you expect, and some you do not. Yet, you have to keep climbing if you want to reach the top. The same is true in litigation, you just have to keep pressing forward. 

 

Called to climb

My first trip to the summit was in East Africa to the top of Mount Kilimanjaro. ‘Kili’ is called the ‘Roof of Africa’ because it is the highest mountain on the continent and the highest freestanding mountain in the world. It was a great introduction to the sport. I enjoyed being around the local guides and learned a great deal from them about professionalism. Mountain guides refer to visiting climbers as “clients” and treat them with the utmost care. In addition to other lessons from mountain climbing, I learned just as much by watching how professional mountain guides care for their climbers. I try to emulate that same level of care when it comes to working with my clients. 

 

Mountain climbing takes people to places around the world and brings them together with many cultures. Years ago, I had the privilege of traveling to Nepal to climb in the Khumbu region, home to Mount Everest. Like so many, I went to Nepal to see its many mountains, but I returned home mostly remembering all the wonderful people I met along the way. I spent a lot of time with my Sherpa guides where I was invited into their homes and met their families. When an opportunity to join a charity climb to raise funds to support Nepali schools presented itself, I wanted our law firm to be a part of this effort. 

 

Becoming part of our mission

In August of this year, I participated in a charity climb to the top of Mount Baker in Washington state. Our law firm was a sponsor of the Alpine Ascents Foundation’s Third Annual Nepali Charity Climb. The climb to the top of Mount Baker in the Northern Cascades was led by an all-Sherpa guide team headed by Lakpa Rita Sherpa. He is an acclaimed veteran of Mount Everest. He summited 15 times, along with two other accomplished Sherpa climbers, Dawa Yangzum Sherpa and Jangbu Sherpa, each having summitted Mount Everest several times.

 

The charity climb raised tens of thousands of dollars to fund the education of Nepalese school children, where the law does not require attendance in public education. The entire group reached the summit after a 12-hour climbing day under challenging weather conditions. The opportunity to climb with an elite team of Sherpa guides was a remarkable experience. More importantly, reflecting on the educational needs of a country that has given us so much was even more remarkable.

 

At J.J. Conway Law, we continue to incorporate the wisdom we gain from mountain climbing into the work we do for our clients. Whether it be unexpected challenges or taking time to reflect, the lessons we learn are applicable.

 

J.J. Conway has been named a 2019 SuperLawyer by Thomson Reuters.  J.J. has been listed as SuperLawyer or SuperLawyer Rising Star on twelve prior occasions. SuperLawyers is a “rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer-recognition and professional achievement.” The selection process “includes independent research, peer nominations, and peer evaluations.” www.superlawyers.com.

For more information and to view J.J.’s Superlawyer profile, please visit: J.J. Conway’s SuperLawyer Profile.

J.J. Conway Law is an employee benefits law firm representing clients in the matters involving ERISA, pension, long-term disability insurance, healthcare, life insurance, as well as other benefit matters. Based on Royal Oak, Michigan, the firm represents clients throughout the United States in ERISA and employee benefits matters, including complex benefit class action cases.

J.J. Conway has been named a 2018 SuperLawyer by Thomson Reuters.  J.J. has been listed as SuperLawyer or SuperLawyer Rising Star on eleven occasions. SuperLawyers is a “rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer-recognition and professional achievement.” The selection process “includes independent research, peer nominations, and peer evaluations.” www.superlawyers.com.

For more information and to view J.J.’s Superlawyer profile, please visit:
J.J. Conway’s SuperLawyer Profile.

J.J. Conway Law is an employee benefits law firm representing clients in the matters involving ERISA, pension, long-term disability insurance, healthcare, life insurance, as well as other benefit matters. Based on Royal Oak, Michigan, the firm represents clients throughout the United States in ERISA and employee benefits matters, including complex benefit class action cases.

The standard of review in ERISA cases can have a considerable impact on the outcome of a long-term disability claim. As the Supreme Court observed in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989), “the validity of a claim to benefits under an ERISA plan is likely to turn on the interpretation of terms in the plan at issue.”[1]

ERISA lawyers are familiar with the use of review standards and how an application of those standards can make it easier for a plan to deny a claim and have that claim upheld upon judicial review. Legal terms such as “arbitrary and capricious,” “de novo,” and “abuse of discretion” are regularly cited as standards in deciding ERISA benefit claims.

Many states have used their regulatory authority to ban the use of discretionary clauses.[2]  These bans have been upheld as applied against ERISA fully-insured long-term disability plans. That is, when the benefits are underwritten by an insurance company, the bans apply through a state’s power to regulate insurers.

Sometimes overlooked, however, is whether discretionary authority was properly delegated in the first place.  It is the classic “cart before the horse” argument.  In Miller v. PNC Financial Services Group, Inc., No. 1:16-CV-25142-KMM, 2017 WL 4404469 (S.D. Fla. Oct. 2, 2017), the district court held that an employee benefit plan failed to properly delegate fiduciary review authority to a third-party, thereby eliminating discretionary review.

In Miller, the issue was whether the plan sponsor (PNC) had appropriately delegated discretionary authority to an insurer (Liberty Mutual) to determine eligibility and deny claims under a self-funded ERISA disability benefit plan.  The disability contract at issue stated that the “‘claims administrator determines whether [a participant’s] disability meets’ the definition of an LTD.”[3]  The contract also provided that “[i]f a decision may by the Plan is challenged in court, the court’s review… shall be limited to a determination of whether the decision was arbitrary and capricious.”[4]

Despite the presence of these clauses, the court held:

It is unclear whether Liberty has the full discretion PNC reserved for itself; in particular it is unclear whether Liberty’s determinations are final, or whether Liberty’s authority extends to making such determinations during an administrative appeal.[5]

The court also held that the Administrative Services Agreement (“ASA”) was not a plan document that was capable of conferring discretion and, even if it were, the ASA between the plan and the insurer also failed to delegate discretion:

[E]ven if the ASA were a plan document, the ASA does not confer the type of discretion required for this Court to accord an abuse of discretion review… [invocation of that standard requires] reservation of ‘full and exclusive authority to determine all questions of coverage and eligibility’ along with ‘full power to construe the [ambiguous] provision[s]’ of the plan…[6]

The Court also found notable a provision in the ASA which provided that PNC, as the Sponsor, retained authority to determine “that liberty has misinterpreted the Plan… [and] all claims reported after delivery of such writing will be processed and paid in accordance with the Sponsor’s interpretation as set forth in such writing.”[7]

The case serves as a reminder that all plan documents should be reviewed to determine whether there was proper delegation of discretionary authority to render a decision during all phases of an ERISA claim, or merely just to determine initial eligibility, and also whether that delegation is revocable by the plan sponsor. Without a proper delegation, the plan may not be able to assert the applicability of deferential review.

 

[1] The Supreme Court has noted that discretionary clauses are “highly prized” by insurers.  Rush Prudential HMI, Inc. v. Moran, 536 U.S. 355 (2002).

[2] See, among others, Am. Council of Life Insurers v. Ross, 558 F.3d 600 (6th Cir. 2009); Standard Ins. Co. v. Morrison, 584 F.3d 837 (9th Cir. 2009).

[3] Miller v. PNC Financial Services Group, Inc., No. 1:16-CV-25142-KMM, 2017 WL 4404469 at *2 (S.D. Fla. Oct. 2, 2017).

[4] Id. at *14.

[5] Id. at *15.

[6] Id. at *16 (quoting Cagle v. Bruner, 112 F.3d 1510, 1517 (11th Cir. 1997)).

[7] Id. at *16.

On December 6, 2017, U.S. News & World Report published “What to Wear to Work,” a discussion of workplace rules and dress codes.  The article explored the legal permissibility of dress codes and instances where neutral dress code and appearance policies can run afoul of state and federal law.  The article featured J.J. Conway, Esq.  as a legal analyst for the national publication. The online version article may be found here,  https://money.usnews.com/money/careers/company-culture/articles/what-to-wear-to-work.

No one should ever be subject to sexual harassment in the workplace. That is both state and federal law.  It is also a matter of basic morality.

With the explosion of sexual harassment revelations that have occurred during the past year – what some are now calling “Hurricane Harvey” – employers and employees are, again, confronting one of the most challenging problems in the workplace.

Sexual harassment usually stems from a bizarre psychology.  The complaints that have become public are not only offensive, but many of the allegations are strange.  The allegations against Harvey Weinstein, for example, make one wonder if, had he not been a powerful executive at a major production company, would he have been a playground flasher or peeping tom?  These are the actions of disordered persons.  The only difference is one seeks out victims in public places.  Weinstein, by contrast, apparently performed his stunts in a $5,000 a night hotel room at the Peninsula Hotel in Beverly Hills.

Similarly, Bill O’Reilly must have confronted real, hard evidence (not mere allegations) that would have proven he did something unspeakable or so damaging to his brand that it was better to pay $32 million to secure a confidentiality agreement than to have the evidence made public.  Previously, O’Reilly had been tape recorded using graphic and vulgar language during phone calls. No one pays $32 million to settle a “frivolous” lawsuit.  Plenty of lawyers would be willing to “vigorously” contest the allegations for fees of 1/100th that amount.

In the sexual harassment cases our firm has handled, it has been remarkable how many times the case was resolved when we moved to have the harasser examined by a forensic psychologist. Sexual harassment is not always what it seems. Clearly, there are cases where persons in management or coworkers use the workplace to try to secure dates or romantic adventures, but in many cases there is no actual sexual attraction to the victim. It is often about bullying a person whose vulnerability is somehow revealed in the workplace. The victims tend to have certain identifiable vulnerabilities that bring out the inner bully in certain management types or coworkers.

For example, the workplace harassment is visited upon a single mother who is trying to date again, or an employee is struggling with weight and body image issues, or, perhaps most unsettlingly, a person who has been subject to bullying and putdowns all their life.

The cruelty of bullies doesn’t disappear when a person gets a promotion or makes a lot of money.

It is one of the reasons that the number of complaints against a harasser is important.  Again, to be clear, all sexual harassment, even a single situation, is unlawful. The reason that the number of complaints matter is that it is evidence of a pattern and practice.  It is also suggestive of evidence proving the occurrence of the conduct is more likely than not to have occurred.

The women who have come forward against Weinstein, O’Reilly, and recently Matt Lauer have rightly been called “courageous” and “brave” because most employees understand that human resources departments are totally useless in sexual harassment cases.  Generally, H.R. doesn’t like problems, and a complaint of sexual harassment certainly qualifies as one. Given H.R.’s ineffectiveness, this also highlights why the large number of complaints is revealing.   First, if H.R. were on the ball, this likely would not have happened (think of the now dead Roger Ailes at Fox, where he was the H.R. department).

The large number of complaints is also reflective of basic human nature. Human nature suggests that repeat patterns of behavior are associated with desired results. For all the complainants who have come forward there are likely many, many more who fell victim, submitted to the advances, and carry with them feelings of guilt and shame.  This fact has remained largely unspoken during these public cases, but it is safe to assume that if ten complaints are made public, there are likely many more which no one will ever know about.

Charlie Rose likely didn’t invite women to his house in the evening and put a robe on in one solitary occasion. Based on the allegations, we know that Harvey Weinstein didn’t conduct a meeting in a hotel room with a robe on and a shower running just one time.  Bill O’Reilly didn’t book hotel rooms where company events were being held on just one occasion.  Matt Lauer went so far as to have a button installed on his desk to lock his office door remotely when women were present.  It is unlikely that Lauer pushed that button only one time.  Likely, these acts were part of a pattern that had worked before, and these men thought it would work again.

What is truly troubling, beyond all the numbers of victims, is just how premediated it all seems.  Perhaps, this has been the greatest revelation of all.  Harassers think through the harassment.  It also seems that many employers knew about the premediated harassment and did little to stop it. This is now the new challenge in the workplace.  Employers must not simply work to make the workplace free of sexual harassment, but seek to identify and break down the patterns which enable it in the first place.

One of the more notable observations of the responsibility of plan administrators to provide full and fair reviews consistent with 29 U.S.C. § 1133 appeared two decades ago in Univ. Hosps. of Cleveland v. Emerson Elec. Co., 202 F.3d 839, 848 n. 7 (6th Cir. 2000).  There, Judge Gerald Rosen, former chief U.S. district judge for the Eastern District of Michigan, sitting by designation, resolved a provider-plan dispute under ERISA, holding:

[I]t strikes us as problematic to, on one hand, recognize an administrator’s discretion to interpret a plan by applying a deferential “arbitrary and capricious” standard of review, yet, on the other hand, allow the administrator to “shore up” a decision after-the-fact by testifying as to the “true” basis for the decision after the matter is in litigation, possible deficiencies in the decision are identified, and an attorney is consulted to defend the decision by developing creative post hoc arguments that can survive deferential review. The concerns inherent in this scenario are even more pronounced where, as here, the administrator has a financial incentive to deny benefits.  Id.

Seventeen years later, the Sixth Circuit reaffirmed this notion in Corey v. Sedgwick Claims Mgt. Services, Inc., 858 F.3d 1024, 1028 (6th Cir. 2017).  The Court held:

The Administrator’s response leans heavily on the plan’s grant of interpretive discretion. But the record leaves us guessing as to how the Administrator interpreted the plan’s objective-findings definition. The Administrator’s denial letters simply quote the plan language and then conclude Corey’s evidence fails to suffice. Although the Administrator enjoys interpretive latitude, we defer only to its actual interpretations—it can’t issue a conclusory denial and then rely on an attorney to craft a post-hoc explanation. Id. (citing Univ. Hosps. of Cleveland v. Emerson Elec. Co., 202 F.3d 839, 848 n.7 (6th Cir. 2000)).

These cases advance the notion that although ERISA cases still function as adversarial proceedings, claims under the statute are required to be evaluated differently than most other disputes.  The plan’s administrators are fiduciaries, tasked with fiduciary standards of conduct, not partisan advocates.  These rulings do not mean that a claimant seeking benefits must win, far from it.  They do require, however, that ERISA participants must, by law, be given a fair shot at presenting their claims.  Evaluation of their claims must not be outcome-determinative or results-oriented. Courts continue to frown upon denials which are the product of lawyerly arguments rather than the type of independent decision-making ERISA requires.

Insurance companies administering ERISA long-term disability claims may be facing new rules.  In 2012 the U.S. Department of Labor’s ERISA Advisory Council undertook a study on issues relating to managing disability claims in the ERISA administrative review context. The Advisory Council recommended that the USDOL review the current claims regulation and recommend specific updates and modifications.

After taking comments, the final rule was published on December 19, 2016, and is set to take effect January 1, 2018.[1]  One of the main aims of the final rule is to “alleviate the financial and emotional hardship suffered by many individuals when they are unable to work after becoming disabled and their claims are denied.”[2]

The main “Claims Regulation” under which ERISA disability claims have been administered and adjudicated since 2002 – 29 C.F.R. § 2560.503-1 – will be revised and updated to include the following:

1. Conflicts of Interest are to be Avoided.

Claims and appeals are to be adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the benefit determination. Decisions regarding hiring, compensation, termination, promotion, or other similar matters are not be based upon the likelihood that the individual will support the denial of benefits.

2. The Disclosure Requirements are Expanded.

Under the final rule, benefit denial notices must contain a complete discussion of why the plan denied the claim and the standards applied in reaching the decision.  This includes the basis for disagreeing with the views of the claimant’s health care professionals, vocational professionals or with disability determinations made by the Social Security Administration.

Plans can no longer disagree with a treating health care professional “merely by stating that the plan or a reviewing physician disagrees with the treating physician….”[3]  The final rule requires that the adverse benefit determination include a discussion of the basis for disagreeing with the health care professional’s views.

The same standard also applies to a denial which disagrees with a Social Security Administration finding of disability. Disagreement with the determination must be accompanied by “more detailed justification….”[4]  The final rule also requires an administrator to notify a claimant of an alleged deficiency in the record and provide an opportunity to supplement the record, particularly if the administrator is not in possession of an applicable Social Security Administration ruling.

3. Timely Disclosure of New Evidence and Rationale Supporting a Denial Must Be Produced

Under the final rule, claimants must be given timely notice of their right to access their entire claim file, as well as other relevant documents, and be guaranteed the right to present evidence and testimony in support of their claim during the review process.  The Department took the position that claimants

have a right to review and respond to new evidence or rationales developed by the plan during the pendency of the appeal and to fully and fairly present their case at the administrative appeal level, as opposed to merely having a right to review such information on request only after the claim has already been denied on appeal.[5]

Any evidence or rationale provided must be turned over as soon as possible, and sufficiently in advance of the date on which the notice of adverse benefit determination on review is required to be provided, to allow the claimant a reasonable opportunity to respond to the new evidence.  Rather than viewing this as a ‘new’ requirement, the DOL took the position that it simply hones the prior requirements under 29 C.F.R. § 2560.503-1 to clarify exactly what, and when, information should be provided to claimants.

4. Deemed Exhaustion of Claims and Appeals Processes

Under the final rule, plans cannot prohibit a claimant from seeking judicial review of a claim denial based on a failure to exhaust administrative remedies under the plan if the plan failed to comply with the claims procedure requirements.  A “minor error” is the only exception to this new provision, although the DOL noted that this standard is “stricter than a mere ‘substantial compliance’ requirement.”[6]

5. Amending the Definition of “Adverse Benefit Determination”

Under the final rule, certain rescissions of coverage are to be treated as “adverse benefit determinations” triggering the plan’s appeals procedures. For plans providing disability benefits, a rescission of coverage that has a retroactive effect now constitutes an adverse benefit determination.  Under the USDOL’s analysis, if a plan provides for the payment of disability benefits for a pre-determined, fixed period, the termination of benefits at the end of the specified period would not constitute an adverse benefit determination under the regulation, but rather a new claim.

6. The Applicable Statute of Limitations Must Be Disclosed

Under the final rule, the USDOL specified that it:

does not believe that a claims procedure would satisfy the statutory requirement if the plan included a contractual limitations period that expired before the review was concluded… A limitations period that expires before the conclusion of the plan’s internal appeals process on its face violates ERISA section 503’s requirement of a full and fair review process.  A process that effectively requires the claimant to forego the right to judicial review and thereby insulates the administrator from impartial judicial review falls far short of the statutory fairness standard and undermines the claims administrator’s incentives to decide claims correctly.[7]

The USDOL seems to suggest that any limitation time-period shorter than a year after the final claims decision does not allow a reasonable period after the conclusion of the appeal in which to bring a lawsuit and is accordingly unenforceable.  Additionally, “in addition to such traditional remedies, plans that offer appeals or dispute resolution beyond what is contemplated in the claims procedure regulations must agree to toll the limitations provision during that time.”[8]

 

[1] See Claims Procedure for Plans Providing Disability Benefits, 81 Fed. Reg. 92316 (December 19, 2016).

[2] Id. at 92317.

[3] Id. at 92321.

[4] Id. at 92322.

[5] Id. at 92324.

[6] Failure to comply constitutes a “minor error” if the violation was (1) de minimis, (2) non-prejudicial, (3) attributable to good cause or matters beyond the plan’s control, (4) in the context of an ongoing good-faith exchange of information, or (5) not reflective of a pattern or practice of non-compliance.  Id. at 92327.

[7] Id. at 92330.

[8] Id. at 92331.