Compliance August 26, 2005

California Woman Loses LTD Benefits Challenge

August 26, 2005 (PLANSPONSOR.com) - A federal appeals court has upheld a lower court ruling that the Employee Retirement Income Security Act (ERISA) offers no legal remedy to a California woman contesting a benefits determination.
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The US 9 th Circuit Court of Appeals ruled that despite the fiduciary breach by Hispanic Business Inc.,(HBI)   a Santa Barbara, California magazine publisher, no remedy was available because the breach was a procedural violation of ERISA’s rules for which there was no remedy unless a plaintiff can prove bad faith, active concealment, or fraud.

The appellate court ruling came in a case involving plaintiff Carmen Peralta, a special events manager at HBI, who was seriously injured in a car accident in October 2000. Peralta claimed she didn’t purchase outside insurance and applied for long-term disability (LTD) benefits because she wasn’t aware that the company had previously canceled the LTD coverage. According to the appellate opinion, a previous HR manager had ended the policy without telling employees.

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Peralta’s LTD claim came after the policy cancellation, but before a successor HR manager notified employees that the LTD policy was no longer in effect.

After Peralta’s LTD benefits request was denied, she sued HBI over allegations that it had violated ERISA by not properly informing employees of the policy cancellation.  

However, US District Judge Cormac Carney of the United States District Court for the Central District of California ruled that ERISA offered Peralta no form of equitable relief.

In the appellate opinion written by Judge Jane Restani, Chief Judge of the United States Court of International Trade, who was on the 9 th Circuit panel by special appointment, the appellate judges agreed with Carney, despite having found that HBI’s cancellation notice to employees was not timely.

The 9th Circuit ruling is  here .

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Benefits August 25, 2005

Report: Greater Employee Participation in Employer-Paid Benefits

August 25, 2005 (PLANSPONSOR.com) - In its National Compensation Survey on Employee Benefits in Private Industry in the US as of March 2005, the DoL's Bureau of Labor Statistics (BLS) points out that participation rates are higher for benefits that are paid for by the employer.
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The BLS survey found that nearly all employees with access to defined benefit pension plans, life insurance plans, and disability benefit plans participated in these employer-paid benefit plans. While 70% of workers had access to medical plans, only 53% participated. Fifty three percent of workers surveyed had access to a defined contribution plan, but only 42% participated.

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The BLS also found that participation in non-employer-paid benefits varied according to the employees’ earnings. Seventy six percent of white collar workers with access to medical benefit plans participated in those plans, while 61% of service workers participated in medical plans offered them. Similarly, 85% of workers earning $15 an hour or more participated in a defined contribution plan and 70% of those earning under $15 an hour participated in their defined contribution plan.

Other key findings in the BLS survey include:

  • 21% of employees participated in defined benefit retirement plans and 42% participated in defined contribution retirement plans.
  • Paid leave was the most commonly provided employee benefit in the private sector – 77% of employees were offered paid holidays and vacations, 69% were offered paid jury duty leave, and 48% were offered paid military leave.
  • 63% of private firms offered health insurance benefits and about 50% offered at least one type of retirement plan.
  • Employee contributions toward medical coverage averaged $273.03 per month for family plans and $68.96 per month for single coverage.
  • 52% of employees had access to life insurance plans and 49% participated.
  • Short-term and long-term disability benefits were offered to 40% and 30% of employees, respectively, and nearly all participated.

The complete report of survey results can be found here .

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