Reminder: Gag Clause Attestations Due by Year-End

The Consolidated Appropriations Act of 2021 generally requires group health plans and health insurance issuers to submit a Gag Clause Prohibition Compliance Attestation (Attestation) each year to demonstrate compliance with the prohibition on including gag clauses in certain agreements.  The Departments of Labor, Health and Human Services, and the Treasury (the Departments) issued FAQs last February requiring affected plans and issuers to submit their first Attestations no later than December 31, 2023, covering the period beginning December 27, 2020 through the attestation date, with subsequent Attestations due annually thereafter.

Prohibition on Gag Clauses

Group health plans and health insurance issuers offering group health insurance coverage are prohibited by ERISA and the Internal Revenue Code from entering into an agreement with a health care provider, network or association of providers, third-party administrator (TPA), or other service provider offering access to a network of providers that would directly or indirectly restrict a plan or issuer from (i) disclosing provider-specific cost or quality-of-care information to referring providers, plan sponsors, enrollees or eligible individuals; (ii) electronically accessing de-identified claims and encounter information or data for plan participants, beneficiaries, or enrollees, and (iii) sharing such information or data with business associates, consistent with applicable privacy regulations. A similar prohibition applies to health insurers offering individual health insurance coverage under the Public Health Service Act.  These prohibited restrictions are referred to as “gag clauses.”

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ERISA Moments: What Will be in the New DOL Fiduciary Proposal: Our Thoughts

Take a quick dive into the exciting world of ERISA with Faegre Drinker benefits and executive compensation attorneys Fred Reish and Brad Campbell. In this quick-hit series of updates, Fred and Brad offer a high-level view of current trends and recent ERISA developments. See the newest episode, ERISA Moments: What Will be in the New DOL Fiduciary Proposal: Our Thoughts, below.

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ERISA Moments: The DOL’s New Fiduciary Proposal is at the OMB: What’s Next?

Take a quick dive into the exciting world of ERISA with Faegre Drinker benefits and executive compensation attorneys Fred Reish and Brad Campbell. In this quick-hit series of updates, Fred and Brad offer a high-level view of current trends and recent ERISA developments. See the newest episode, The DOL’s New Fiduciary Proposal is at the OMB: What’s Next?, below.

Introducing ERISA Moments: Bite-Size Vodcasts on the Latest ERISA Developments

Take a quick dive into the exciting world of ERISA with Faegre Drinker benefits and executive compensation attorneys Fred Reish and Brad Campbell. In this quick-hit series of updates, Fred and Brad offer a high-level view of current trends and recent ERISA developments. See the first episode, A Federal Court Decides on the DOL’s ESG Regulation, below.

Or Watch the Video here

Another 401(k) Plan Fiduciary Defeats Breach of Fiduciary Duty Claims at Trial

Following a bench trial in a Pennsylvania federal district court in Nunez v. B. Braun Medical, Inc., 401(k) plan fiduciaries defeated a lawsuit alleging that the fiduciaries imprudently managed and paid excessive recordkeeping and investment management fees. The B. Braun Medical fiduciaries’ win follows on the heels of a jury trial win by fiduciaries of Yale University’s 403(b) plan. The court opinions in both of these cases serve as a good reminder that offense is the best defense, and ERISA plan fiduciaries best protect themselves against ERISA breach of duty of prudence claims by proactively implementing strong fiduciary governance practices, such as keeping thorough committee meeting minutes. Consistently creating and maintaining detailed records regarding the initial selection and ongoing monitoring of vendors and investment options will help the committee defend those decisions later.

In Nunez, the court found that both the processes and the outcomes with respect to the plan’s recordkeeping and investments were objectively prudent—the opposite of which the plaintiffs would be required to prove to win their case.

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Plan Fiduciaries Continue to Defeat BlackRock Target Date Fund Class Actions

A series of cases against fiduciaries of 401(k) plans that offer BlackRock Target Date Funds (TDFs) have been dismissed by district courts in recent months. In three recent cases, the district courts held that plaintiffs failed to allege any facts about the plan fiduciaries’ process for selecting and monitoring the BlackRock TDFs and that plaintiffs’ reliance on the BlackRock TDFs’ alleged underperformance alone was insufficient to state a claim for breach of fiduciary duty.

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ERISA Litigation Roundup: Seventh Circuit Sets Forth Pleading Standard in ERISA Duty of Prudence Claims in Hughes v. Northwestern University

The Seventh Circuit revived two previously dismissed ERISA breach of fiduciary duty claims in its latest decision in Hughes v. Northwestern, which had been remanded from the Supreme Court. In doing so, the Seventh Circuit issued its own pleading standard for deciding ERISA duty of prudence claims alleging mismanagement of defined contribution plans. The standard does not affect how plan fiduciaries review, choose, and monitor investment choices and recordkeeping fees, but makes it easier to second-guess those decisions without fully understanding the “circumstances prevailing” at the time the fiduciary acts.

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ERISA Litigation Roundup: Judge Permits Partial Jury Trial in Eversource Energy 401(k) Dispute

In an unusual decision, a federal judge last month refused to strike a plaintiff class’ demand for a jury trial in an ERISA 401(k) class action.

In Garthwait v. Eversource Energy Co., a class of former and current participants in the Eversource 401(k) Plan (the Plan) filed an action against Eversource Energy Company and Plan fiduciaries seeking to recover plan losses caused by alleged breaches of fiduciary duty and requesting other equitable or remedial relief.

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ERISA Litigation Roundup: Legislation Update — House Passes ERISA Bill to End Arbitration and Firestone

Earlier this year we reported on the “Employee and Retiree Access to Justice Act,” which sought to render arbitration and class action waiver provisions, and discretionary authority for plan administrators, in ERISA plans unenforceable. On September 29, 2022, the U.S. House of Representatives passed the Mental Health Matters Act (the Act) — which encompasses the Employee and Retiree Access to Justice Act.

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ERISA Litigation Roundup: Damned if You Do, Damned if You Don’t

A string of ERISA lawsuits has emerged in recent weeks against companies who offer BlackRock Target-Date Funds (“TDFs”) as 401k investment options to their employees. The lawsuits allege the companies, in their capacities as plan sponsors, breached their fiduciary duty by choosing the low fee investment options offered by BlackRock Inc., despite their funds’ underperformance. This new litigation sparks concern amongst 401k plan sponsors who may now have to worry about lawsuits involving investment fees from all sides-for choosing the high fee options and for choosing the low fee options.

The lawsuits focus on the LifePath Index Funds of BlackRock, a suite of 10 target-date funds.  TDFs have increased in popularity over the past couple of years because they offer participants a lower fee but managed investment option based on target retirement years. Although BlackRock isn’t a party to the litigation, these lawsuits shine a spotlight on the performance of these funds.

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