High Court will review 2nd Circuit’s ERISA Preemption Decision

Seemingly lost in the flurry of activity at the Supreme Court over the last few days was news that the Court granted certiorari on Monday to Gobeille v. Liberty Mut. Ins. Co., a Second Circuit case that had ruled that a Vermont law requiring self-funded health plans to report claims information was preempted by ERISA.

The case started as a declaratory judgment action in the U.S. District Court for Vermont when the state of Vermont subpoenaed documents from the third-party administrator of a self-insured employee health plan operated by Liberty Mutual pursuant to a law requiring health insurers, including self-funded plans, to file reports with the state for the purpose of establishing a healthcare database, known as the Vermont Healthcare Claims Uniform Reporting and Evaluation System. Those reports included claims data and other information. Liberty Mutual sought a declaration that the reporting law was preempted by ERISA but the district court granted summary judgment to the state because it determined the statute was not preempted and Liberty Mutual appealed.

The Second Circuit, in Liberty Mut. Ins. Co. v. Donegan, 746 F.3d 497 (2d Cir. 2014), reversed the district court in part because it determined that although more recent precedent had begun construing ERISA preemption less broadly than earlier decisions, one of ERISA’s core principles was that the preemption clause is intended to “avoid a multiplicity of burdensome state requirements” for plan administration. Looking specifically at the Vermont scheme it stated “the reporting mandated by the Vermont statute and regulation is burdensome, time-consuming and risky” and “considered as one of several or a score of uncoordinated state reporting regimes, it is obviously intolerable.”

Plan administrators and TPAs will want to watch this case closely to see if the Court continues this recent trend constricting ERISA preemption or whether it grants preemption in cases regarding these types of “reporting” requirements that seem to have little or nothing to do with self-funded plan administration.


The importance of including all material terms of an ERISA plan in the summary plan description (“SPD”) was once again highlighted in a recent 6th Circuit decision that held that when there is a material difference between the language in the plan documents and the SPD, the plan participant is entitled to pursue an equitable remedy under ERISA section 502(a)(3), even if the claim for benefits under 502(a)(1) is not available. In Pearce v. Chrysler Group L.L.C. Pension Plan, No. 13-2374, 2015 WL 3797385 (6th Cir. June 18, 2015), Pearce was a 33-year Chrysler employee who, in October 2008, was offered a buyout package of $50,000 plus a $25,000 car voucher, which would have been in addition to his normal pension plan and 30-and-out benefits. He was encouraged to consult the SPD for more details. He declined the offer in November 2008 and was terminated on the same day for alleged improper use of a company vehicle. The next day he applied for the pension benefits, but was denied the buyout package because he had been terminated.

The SPD, which was allegedly the only plan document provided to Pearce, stated that in order to be eligible for the supplemental benefits, in this case the buyout package, he did not have to be actively employed at retirement but did have to retire and begin receiving pension benefits within five years of the last day of work for Chrysler. As such, it appeared to him that he was eligible for the buyout package. The pension plan language though had an exception that prevented “vested terminated employees” from receiving the buyout. After being denied benefits, he filed a lawsuit, which was eventually removed to federal court in Michigan, seeking plan benefits under ERISA section 502(a)(1) and equitable relief under section 502(a)(3). The district court granted summary judgment to the plan on both claims.

While the appeals court affirmed summary judgment on the section 502(a)(1) benefits claim based on its belief that CIGNA Corp. v. Amara, — U.S. –, 131 S.Ct. 1866, 179 L. Ed. 2d 843 (2011) requires that any conflict between the SPD and the pension plan language be resolved in favor of the plan language, it remanded the 502(a)(3) claim because it determined that Amara also “strongly suggest[s], if not hold[s], that conflicts between an SPD and the Pension Plan can be addressed under ERISA § 502(a)(3).” It went on to state that while an SPD does not have to include every detail of the pension plan, material limitations on a participant’s eligibility, which in this case was that being a “vested terminated employee” made one ineligible for supplemental benefits, are required to be included in the SPD and that a reasonable person in Pearce’s position would have read the SPD and believed he was eligible for the buyout package.

Based on this case and others in the ever-evolving post-Amara world, plans should be diligent in including all the pertinent benefit eligibility requirements and exceptions in their SPDs.