Mr. Pundit Goes to Washington (and Testifies before the Dept of Labor)

Pundit Newswire: The ERISA Pundit testified on August 28, 2012 before the Department of Labor’s ERISA Advisory Council. Although the Pundit’s oral testimony is not publicly available, the Department of Labor has released the Pundit’s written statement here. The mood in Washington is exemplified by this cartoon, and the Pundit’s written statement is excerpted below:

Testimony

Written Statement to the Dept of Labor ERISA Advisory Council
by
The ERISA Pundit (sub nomine Warren von Schleicher)

The Employee Retirement Income Security Act represents a balancing of diverse interests. The desire to provide comprehensive welfare benefit plans to employees, including a system for fair and prompt enforcement of rights, must be balanced with the need to encourage employers to provide these voluntary benefit plans. Encouraging employers to provide long-term disability benefit plans is particularly important at this time.

Employers have limited budgets for welfare benefit programs, and a significant portion of those budgets must be allocated to mandatory health care coverage. In the current economy, employers may not need to provide disability plans in order to attract and retain good workers.

Only 30% of employers provide long-term disability plans to their employees. Unfortunately that number may erode as employers incur increased financial responsibility for employee health care. Disability programs must vie with many other important welfare benefit programs, including life, dental, senior care, and eye care, for any remaining portion of the employer’s limited budget.

In addition to the impediment of limited employer budgets, disability benefit plans face the impediment of inaccurate disability risk perception among employees in general. Employees, in prioritizing the type of benefit programs they desire for their families, may assign lower priority to long-term disability coverage, which insures an impalpable risk that statistically may not occur, and higher priority to (for example) dental coverage, which provides tangible financial returns for all employees and their families every year. Approximately 12% of American workers will become “disabled” for five or more years during their careers, according to criteria and data reported by the Social Security Administration. But most American workers believe they have only a 2% or less chance of becoming disabled during their careers. The actual risk of disability, therefore, is significantly higher than employees’ perceived risk of disability.

Most employers who desire to provide disability benefit plans to their employees, and are financially able to do so, lack the infrastructure and expertise to self-fund and administer their plans. For most employers, therefore, insurer funded and administered disability benefit plans are the only viable option.

Disability insurers spend significant time and resources educating employers and employees about the risk of disability occurrence and the financial impact of disability on employees and their families. Disability insurers also provide significant flexibility in disability program design, in order to provide affordable coverage options for employers and their employees. And some insurers take the additional step of providing claims representatives on-site at the employer’s workplace to facilitate education, enrollment, and the filing of disability claims.

The paramount social concern is for the Department of Labor to permit incentives to exist that encourage employers to offer voluntary disability plans to their employees. Overregulation risks higher administrative costs and employer retraction, which reduces the number of employees who have coverage, and places greater strain on state and federal social programs. Employers are not required to provide disability coverage as an incentive to retain workers, particularly in the current employment environment. Insurers must be able to provide cost effective coverage to encourage employers to provide these programs, under a flexible set of regulations that provide for a full and fair review of claims without complexities that unduly discourage plan formation.

Full and Fair Review

The core requirements of a “full and fair” review include knowing the reasons for the administrator’s benefit decision, having an opportunity to appeal, and obtaining a timely final decision that considers the relevant evidence. See 29 U.S.C. §1133. Providing adequate notice of an initial adverse decision permits participants to address any issues in the evidence and to provide additional information in support of their disability claims. The administrative appeal provides a “reasonable opportunity … for a full and fair review by the appropriate named fiduciary of the decision denying the claim.” 29 U.S.C. §1133(2).

In addition, ERISA’s disability regulations establish procedures for the review of adverse claim determinations, including:

Provid[ing] for a review that takes into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination; and

Provid[ing] that, in deciding an appeal of any adverse benefit determination that is based in whole or in part on a medical judgment, … the appropriate named fiduciary shall consult with a health care professional who has appropriate training and experience in the field of medicine involved in the medical judgment.

29 C.F.R. §2560.503-1(h)(2)(iv); 29 C.F.R. §2560.503-1(h)(3)(iii).

Under ERISA’s current regulatory framework, the vast majority of disability claims are approved during the administrative review process. While statistics may vary, generally more than 80%-85% of disability claims are approved and resolved administratively. By contrast, only 35% of Social Security disability claims are initially approved. (See Social Security Admin., 2011 Disabled Worker Beneficiary Statistics, at www.ssa.gov). Only a fraction of unapproved ERISA disability claims result in litigation, and in many instances the administrator’s decision is judicially upheld.

Plaintiffs’ lawyers may highlight their personal litigation losses and deem ERISA a broken, unfair system, and ardently advocate ways to tilt the balance to favor more litigation victories and more awards of attorneys’ fees. They call for jury trials, which is incompatible with ERISA’s foundation in trust law. They call for punitive damage awards, which is inconsistent with the remedies provided by Congress in 29 U.S.C. §1132(a), increases the cost of incorrect decisions at the expense of the vast majority of correct decisions, and discourages employers from voluntarily offering disability benefit plans. And they call for a national ban on discretionary clauses, which impedes national uniformity as the Supreme Court recently addressed in the context of pension plans in Conkright v. Frommert, – U.S. -, 130 S.Ct. 1640 (2010) (warning of the potentially disastrous consequences if discretionary clauses were not judicially enforced, leading to a patchwork system of inconsistent judicial results that vary from state to state).

One cannot evaluate ERISA’s regulatory efficacy by myopically focusing on claims in litigation, which is the smallest percentage of disability claims. Claims in litigation are not representative of the much broader universe of disability claims, the vast majority of which are approved through adherence to ERISA’s current statutory and regulatory requirements for a full and fair review.

Administrators strive to provide participants with a full and fair review of the evidence and reach decisions that are fully informed, impartial, well-reasoned, and correct. Viewed from the perspective of all disability claims, most of which are approved, very few claims will lead to a judicial finding that the participant was deprived of a full and fair review. For employers and insurers charged with designing and implementing disability plans under ERISA’s regulatory framework, the statistics demonstrate that ERISA’s goal of providing a financial safety net for millions of disabled American workers largely has been achieved.

The objective of the Department of Labor at this time should not be to tilt the balance to favor plaintiffs and their attorneys in litigation. Rather, the goal should be to create incentives that encourage the remaining 70% of employers who do not offer disability benefit plans to do so, under a system that facilitates the cost-effect creation of insurer-funded disability plans and administrative flexibility.

Providing participants with a full and fair review of their disability claims is not without challenges. In litigation, plaintiffs have argued that during an administrative appeal, they should receive pre-decision access to documents generated during the appeal and an opportunity to provide rebuttal. But that circular procedure would create an endless cycle. The participant’s rebuttal would require review, which would generate additional pre-decision documents, and require another opportunity for rebuttal.

Disability determinations are complex and multidisciplinary, often requiring vocational evaluation, financial analysis, and medical consultation. The medical component alone frequently encompasses numerous medical specialties. It is difficult enough to decide disability appeals within the curtailed 45-day time regulatory period (even with one 45-day extension). Adding additional layers of rebuttals within appeals would thwart the ability to make timely final decisions and ultimately risk affecting the quality and accuracy of final decisions.

Rejecting such a never-ending cycle of rebuttals, the Tenth Circuit stated: “Permitting a claimant to receive and rebut medical opinion reports generated in the course of an administrative appeal—even when those reports contain no new factual information and deny benefits on the same basis as the initial decision—would set up an unnecessary cycle of submission, review, re-submission, and re-review. This would undoubtedly prolong the appeal process, which, under the regulations, should normally be completed within 45 days. Moreover, such repeating cycles of review within a single appeal would unnecessarily increase cost of appeals.” Metzger v. Unum Life Ins. Co. of Am., 476 F.3d 1161, 1166-1167 (10th Cir. 2007) (internal citations omitted).

ERISA disability decisions are already complex, come in many permutations, and require multidisciplinary analysis. Adding an additional rebuttal round onto the review procedures would add further complexity to the already short 45-day review period, without any indicia whatsoever that the outcome would be more accurate, timely claim decisions.

Currently, disability claims administrators generally apply a flexible approach when reviewing claims on appeal. In fact specific circumstances, a physician or other expert consultant may contact the participant’s treating physician to discuss medical issues and obtain additional information, or the administrator may contact the participant or her attorney to discuss evidence obtained during the appeal. In other fact specific circumstances, the record contains sufficient information to reach an informed and independent benefit eligibility decision. This flexibility allows the review process to adapt to the unique circumstances of each claim, and best serves ERISA’s goals, including the interest of participants in obtaining a timely final decision.

Financial Integration with Social Security Disability Income

The ERISA Advisory Council has received written testimony on the integration of Social Security disability income (“SSDI”) with ERISA-governed disability plans, including testimony from the American Council of Life Insurers. The financial integration of SSDI with disability plans, in the form of offsets, reflects a careful balance between providing a sufficient level of disability benefits and preventing the creation of perverse financial inducements that reduce the incentives to return to work.

Many, but not all, disability benefit plans provide that monthly disability benefits are to be reduced by the base amount of Social Security disability benefits a participant receives. Typically SSDI offsets do not include annual SSDI cost of living increases. The inclusion of SSDI offsets is an issue of employer choice, which is fundamentally driven by budgetary constraints. Without integrating SSDI offsets, premiums for insurer-funded disability benefit plans would increase approximately 30% to 50% (by some estimates even more). As a result of the integration of SSDI, disability benefit plans become an affordable option for employers who desire to provide these plans to their employees.

It is important to stress that the integration of SSDI with ERISA disability benefits plans is financial in nature. An award of SSDI does not mean that the participant qualifies for disability plan benefits, and for good reason. Employers will not provide voluntary benefit plans if their plans are coopted by the government and they must bow to the disability determinations of the Social Security Administration. Moreover, there are critical differences between Social Security and disability benefit plans. Social Security determinations are made according to a grid system in a multi-step process utilizing presumptions and other short-cuts, including presumptions about certain medical symptoms and age, as part of a governmental bureaucracy. SSDI determinations may take many months or even years.

Disability benefit plans are voluntary employer-sponsored programs. They reflect a congressional balancing of diverse interests. Disability plans are tailored to address specific employer and employee needs and limitations, and do not utilize the presumptions and short-cuts that are necessary to keep Social Security functioning.

Disability benefit plans provide a higher level of income replacement than Social Security is able to provide. The average monthly SSDI benefit is $1,065, which is below the poverty threshold. Disability benefit plans ensure that participants receive approximately 60%-65% of their prior earnings (which actually replaces a larger percentage of earnings when tax advantages are factored).

Disability benefit plans ensure that disabled workers receive monthly payments shortly after they cease working, often months or even years before Social Security disability benefits are paid. Disability benefit plans, therefore, provide a sustainable safety net for millions of American workers and their families who would be unable to survive on Social Security alone.

Return to Work Incentives

The Council admirably seeks to examine the management of disability risks “in an environment of individual responsibility.” But individual responsibility is sometimes missing in the context of disability benefit plans. Benefit plans provide monthly disability benefit payments. Plans also provide an array of important non-monetary benefits that participants too frequently discount and disregard. These non-monetary benefits include coverage for reasonable accommodation expenses, retraining programs, vocational counseling, and job placement services, all aimed at facilitating the return into the work force. Even if these important return to work services were mandatory, their success depends on the participant’s desire and motivation to return to work.

Benefits paid over time have the unfortunate consequence of eroding motivation, and sometimes creating a sense of entitlement. Individual responsibility means assuming direct responsibility for one’s future, including taking steps to secure a better future. While some participants’ medical conditions prevent them from pursuing the variety of return to work programs offered by disability benefit plans, many more participants could benefit from these programs but decline to do so. The Department of Labor should partner with employers to find effective means to promote the variety of return to work programs offered by disability benefit plans.

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Federal Gov’t Coerces Everyone To Buy Health Insurance – And It’s Constitutional

The Pundit is concerned that the federal government’s taxing power can be exerted as a coercive mechanism to enforce the government’s view of social welfare. At least the Supreme Court preserved our freedom to refuse to purchase broccoli health insurance. But freedom these days comes at a price. Those who choose not to purchase health insurance must pay a hefty tax penalty. Here is the Supreme Court’s Opinion.

The majority upheld the Individual Mandate as an exercise of the federal government’s taxing power: “Our precedent demonstrates that Congress had the power to impose the exaction in Section 5000A under the taxing power, and that Section 5000A need not be read to do more than impose a tax. This is sufficient to sustain it.” Justice Ginsberg, in a concurrence, would uphold the mandate under both the taxing power and the Commerce Clause.

Fundamentally, the Commerce Clause does not permit the government to regulate and penalize persons who refuse to engage in commerce. The Court should have stopped there. Instead, the Court transformed the Individual Mandate’s penalty enforcement provision into an innocuous sounding inactivity tax. While the government cannot enforce the Mandate by imposing a penalty on individuals who disobey, the government can “tax” those individuals. And so the Mandate’s enforcement mechanism–the unconstitutional financial penalty–becomes a constitutional tax on commercial inactivity. But it’s not really a tax. It’s a coercive penalty that punishes disobedience. When the government mandates conduct and imposes a monetary fine on individuals who refuse to comply, the government has created a penalty, not an inactivity tax. The Court has allowed the government to use the back door of the taxing power to regulate non-commercial inactivity that the government cannot constitutionally regulate through the Commerce Clause.

The Court also upheld the Medicaid expansion, but limited the federal government’s coercive powers with respect to the States. The federal government cannot penalize States that refuse to participate in the program by removing all Medicaid funding. “Nothing in our opinion precludes Congress from offering funds under the ACA to expand the availability of health care, and requiring that states accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding.”

The Pundit supposes that skeptics might read the Court’s majority decision politically. The Court can’t strike down the Affordable Care Act, which is the current administration’s only most significant achievement. Striking the ACA could be perceived by world markets as nullifying the President’s power and influence at a time of global economic decline, making the President appear ineffectual, the United States leaderless, and further diminishing confidence in world markets. But the Pundit declines to read Court decisions skeptically.

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Supreme Court Transcripts: Oral Argument on Federal Coercion and Severability of Individual Mandate

Pundit News
On March 28, 2012, the marathon 6 hour Supreme Court debate on the constitutionality of ObamaCare concluded with oral argument on federal coercion and the severability of the individual mandate from the Affordable Care Act. The debate focuses on whether the Act is coercive upon the states, and whether the Act’s 450 provisions must be scrapped if the individual mandate is found unconstitutional. The liberal wing of Justices Ginsburg, Kagan, and Sotomayor, perhaps sensing that the individual mandate might be constitutionally doomed, seem to support severability, with Justice Kagan commenting that half a loaf is better than none. The conservative wing, spearheaded by Justice Scalia, seem to reject severability, asserting that the task of wading through the Act’s 2,700 pages to find provisions that survive is not the Court’s task, but a legislative function. Here is the Transcript of Wednesday’s Supreme Court oral argument on federal coercion. Here is the Transcript of the debate on whether the Act can survive without the individual mandate.

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Federal Jurisdiction “Clarification” Act signed by Obama

Pundit News
On December 7, 2011, President Obama signed into law the Federal Jurisdiction and Venue Clarification Act. One of the provisions requires that federal courts, in removed cases based on federal question jurisdiction, sever and remand to state court any non-removable claims that are not covered by the court’s supplemental jurisdiction. In addition, consent to remove is not required from the defendants to non-removable state law claims.

The ERISA Pundit initially refused to return calls from Pundit News, but finally offered this comment: “The Pundit always questioned the sense of requiring consent of all defendants to remove an action to federal court. A defendant to a state law claim should not have the power to prevent removal of federal claims. The Clarification Act ensures that federal claims such as ERISA claims can be removed to federal court without giving veto power to defendants to purely state law claims. The Pundit is aware of cases in which plaintiffs have asserted state law claims against nominal defendants, “friendlies” to the plaintiff such as insurance brokers, specifically to withhold consent to removal of federally governed ERISA claims.”

Here is a summary of the law’s provisions, courtesy of the Congressional Research Center:
Title I – Jurisdictional Improvements
Section 101 –
Amends the federal judicial code to declare that, with respect to diversity of citizenship, the U.S. district courts shall not have original jurisdiction of any civil action between citizens of a state and citizens or subjects of a foreign state who are lawfully admitted for permanent residence in the United States and are domiciled in the same state.

Section 102 –
Modifies the citizenship rules to treat corporations as citizens of any foreign state: (1) by which it has been incorporated, and (2) where it has its principal place of business. Treats insurers as citizens of any foreign state: (1) of which the insured is a citizen, (2) by which the insurer has been incorporated, and (3) where the insurer has its principal place of business.

Section 103 –
Separates the removal requirements governing civil cases and those governing criminal cases into two separate categories. Declares that, upon removal of any civil action with both removable and nonremovable claims, the district court shall sever from the action all nonremovable claims and remand them to the state court from which the action was removed. Requires only defendants against whom a removable claim has been asserted to join in or consent to removal of the action. Prescribes requirements for filing notices of removal, including assertion in the notice of the amount in controversy, when it exceeds the necessary amount, if the initial pleading seeks: (1) nonmonetary relief; or (2) a money judgment, but the state practice either does not permit demand for a specific sum or permits recovery of damages in excess of the amount demanded. Allows removal of a case based on diversity of citizenship more than one year after commencement of the action if the district court finds that the plaintiff has acted in bad faith in order to prevent a defendant from removing the action.

Title II – Venue and Transfer Improvements
Section 202 –
Revises general requirements for the scope of venue of civil actions. Requires the proper venue of any civil action brought in a U.S. district court to be determined without regard to whether the action is local or transitory in nature.

Section 203 –
Repeals the “local action” rule that any civil action, of a local nature, involving property located in different districts in the same state, may be brought in any of such districts.

Section 204 –
Allows a district court to transfer a civil action to any district or division to which all parties have consented. Prohibits transfers from a U.S. district court to the District Court of Guam, the District Court for the Northern Mariana Islands, or the District Court of the Virgin Islands.

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Supreme Court to Rule on the Constitutionality of ObamaCare

Pundit News
The Supreme Court has set aside 5 1/2 hours for oral argument on the constitutionality of President Obama’s health care act, passed last March. But the health care act might not be subject to challenge at all. Although the D.C. Circuit recently upheld the act’s constitutionality, Judge Kavanaugh’s dissent found that the Tax Anti-Injunction Act–which prohibits taxpayers from challenging a tax law before it goes into effect and before the taxpayers have been “damaged” by the law–bars any court from deciding the health care act’s constitutionality now.

According to Harvard Law School’s Noah Feldman, writing at Bloomberg: “Kavanaugh was sending a distinct message to [Justice Anthony] Kennedy: You don’t have to go there. If he were to follow Kavanaugh’s lead, Kennedy could conclude that the court must wait a few years before deciding whether mandatory coverage is constitutional. Some of the other conservatives might be willing to join him rather than split 4-4 with the court’s liberals on the constitutionality of the provision.”

If the Court finds that the health care act is ripe for challenge, the Court must tackle the tough question: Whether Congress overstepped its authority in requiring that every American buy health care coverage. Justices Scalia, Alito, and Thomas are likely to find the individual mandate unconstitutional. Chief Justice Roberts and the Court’s institutional swing voter, Justice Kennedy, will be the decisive votes.

Professor Noah Feldman, writing for Bloomberg, offers this take on Justice Kennedy’s swing vote: “Justice Kennedy remains the key. But with the conservative position fractured and his former law clerk offering him a way out, the likelihood of his striking down the health-care plan before the election is increasingly remote.”

If the individual mandate is unconstitutional, does ObamaCare fall or can the Court sever the unconstitutional portion from the whole? The Eleventh Circuit held that the individual mandate does not take down the entire act and is severable.

Finally, the Court will decide the constitutionality of the law’s Medicaid amendments, which require the states to increase Medicaid spending. The major issue here is whether the health care act’s Medicaid provisions are coercive, effecting a federal misappropriation of the states’ spending power. No court that has addressed ObamaCare has ruled in favor of the states on this issue.

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Justice Alito laments the decline of judicial craftsmanship

Justice Samuel Alito, in a recent speech at Rutgers School of Law (Newark), lamenting the decline of craftsmanship in judicial opinions.

“If Learned Hand’s opinions are like the products of a bespoke tailor, the opinions coming out of the Ninth Circuit are like the products of a factory that is staffed by machines and menial workers who are overseen from afar by a handful of overworked managers.”

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Is there a Future for Retirement?

Is retirement possible
An article by Stephen Blakely “Is There a Future for Retirement?” is available for download on SSRN. Here is the article’s abstract:

This paper summarizes the presentations and discussions at the Employee Benefit Research Institute’s May 12, 2011, policy forum, on the topic: “Is There a Future for Retirement?” This was EBRI’s 68th policy forum held in Washington, DC, and was attended by about 120 policy and professional experts. The EBRI Retirement Readiness Rating™ finds that many individuals will need to keep working past normal retirement age in order to have sufficient resources to pay the bills; said another way, they have insufficient resources, even including Social Security and Medicare, to pay their bills. Many articles and papers have been written in recent years suggesting that working an extra two or three years would solve the problem for most people, but this has not been well documented or quantified. But will it be enough if workers simply stay on the job just a few extra years? New EBRI research presented at this May 2011 policy forum addressed that question with comprehensive data from its Retirement Security Projection Model.® These findings, presented by EBRI’s research director and published in the June 2011 EBRI Issue Brief, show that if Baby Boomers and Gen Xers delay their retirement past the age of 65, many of them still would not have adequate income to cover their basic retirement expenses and uninsured health care costs — especially low-income workers. Even if workers delay their retirement age into their 70s, there is still a chance the household will be “at risk” of running short of money in retirement. A speaker from Callan Associates presented research showing the impact of automatic features in 401(k) plans on retirement income adequacy, as well as data on the impact of “leakage” of savings in 401(k) plans (such as through cash-outs at job change, hardship withdrawals, and loans). Other speakers suggested that retirement plan sponsors should provide workers with more help in investing, since many workers will not be able to save more money or retire later, and that workers could improve their financial security by better asset management — in particular by cutting debt and using guaranteed income products such as life annuities to manage longevity risk. A variety of speakers touched on how a substantial number of Americans will not be able to work longer than traditional retirement age even if they want to because of layoffs, mergers, or poor health.

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26 States Petition the Supreme Court to overturn Medicare expansion of health care reform

Pundit News
The Patient Protection and Affordable Care Act affects virtually every American. The Act dramatically expands federal regulation of health care and private health insurance industries. The Act mandates health coverage for virtually everyone, and imposes a monetary sanction on those who fail to comply. The Eleventh Circuit struck the individual insurance mandate as an unconstitutional expansion of the federal government’s power under the Commerce Clause, and not authorized as an exercise of the government’s taxing power because the mandate is a civil penalty and not a tax. But the Eleventh Circuit defeated the claims of 26 states that the expansion of the Medicare program is an unconstitutional expansion of the Spending Power that destroys the careful balance of power between the federal government and state governments in violation of principles of federalism. This week, Paul Clement representing the 26 states, filed this Petition for Certiorari to the U.S. Supreme Court.

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What have the Romans Ever Done for Us?

The Pundit is dismayed by the number of colleges that have cut their programs in classical studies, the backbone of a “university” education and a free-thinking society. Virgil and Homer are offered only in English translation, and the “doors of perception” to the ancient world have been closed. To answer those who question what the Romans ever did for us, the Pundit encourages you to watch this video, (courtesy of Leiter Reports for the pointer).

The Pundit has a busy summer and will be posting soon on the topic of stranger originated life insurance (STOLI) and judicial blindness restraint, two problems that converged in one recent court opinion with astonishing results.

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Wearing Out One’s Welcome: Sitting by Designation on the Court of Appeals

The Pundit appreciates dissent. Sometimes the best dissents arrive dressed as concurrences, as in Price v Board of Trustees of the Indiana Laborer’s Pension Fund (6th Cir. Jan 2011), written by a district court judge sitting by designation on the Court of Appeals.

The issue in Price is fairly straightforward: whether the old Plan or the newly amended Plan governs the plaintiff’s ongoing eligibility for disability benefits. The old Plan—in force when benefits initially were approved—provided benefits until retirement age. The amended Plan capped benefits after two years. The plaintiff argued that his benefits “vested” under the old Plan when his disability claim was approved. But vesting isn’t the correct terminology. The plaintiff never had a vested right to disability benefits. Vested benefits cannot be taken away, yet any number of events could have terminated the plaintiff’s benefit eligibility prior to retirement age, the most obvious being medical improvement or death. Upon the initial determination of eligibility, the plaintiff did not acquire a vested right to future benefits. Whether the old Plan or the amended Plan governs is a matter of contract interpretation, and because the trustees have discretionary authority, the trustees’ reasonable interpretation is controlling. After clearing away the underbrush created by the misnomer of “vesting,” the Sixth Circuit panel remanded the case to the district court to review the trustees’ Plan interpretation under the arbitrary and capricious standard.

But the visiting district court judge respectfully disagrees with the panel majority. The judge’s dissent, awkwardly finessed into a concurrence (lest one wear out one’s welcome), advocates an across-the-board “vesting” approach for all disability plans, though thankfully the concurrence avoids the terminology of vesting. The concurrence concludes that an initial grant of benefits freezes the Plan’s terms and forever governs the participant’s rights to future benefits. The concurrence champions the “salutary practical effect” of this approach because the plaintiff, whose disability benefit package was created under a collective bargaining agreement, “reasonably expects nothing less: the terms of the Plan in effect at the time of the initial benefit award should define the contractual rights and obligations of the parties.” “It is as though the Plan effectively issues the participant a benefit package IOU promising to pay the terms of the benefit in effect at the time of qualification.”

Why the concurring opinion’s IOU theory is “salutary” is unknown. Even the interests of disabled employees continue to be represented by their unions, so disabled participants’ interests were not completely unrepresented when the revised Plan was adopted through collective bargaining. There may be compelling reasons to revise the terms of an ERISA plan prospectively. Actuarially the Plan may require revision to ensure funding for future claims, so the Plan can remain a viable safety net for all employees rather than a defunct memory. Requiring benefits to be paid according to the old Plan for the group of disabled employees may undermine the financial integrity of the Plan, which is precisely what the union sought to avert in agreeing to adopt a revised Plan. The concurring opinion’s approach impedes flexibility, which in turn jeopardizes the Plan’s ability to provide coverage to all employees. There is nothing “salutary” in that result.

The concurring opinion fixates on enforcing the coverage expectations of the plaintiff, but at the expense of all Plan participants. There is no reason why working employees (with the same seniority as the plaintiff) should have to pay higher dues to prop-up an old disability benefit package for disabled employees when working employees are receiving a smaller disability benefit package, or that an employer should be saddled with these costs indefinitely, which unduly discourage employers from offering these voluntary benefit programs.

The concurrence expresses concern that Plans could be amended to exclude or limit benefits after occurrence of the initial qualifying event, whereas the IOU approach “is consistent with both the agreed general rules governing ERISA welfare benefits, and the reasonable contractual expectations of the parties.” The IOU approach isn’t consistent with ERISA at all. While employers may agree to establish unmalleable benefit programs, employers are not required to do so. See Marrs v. Motorola, Inc., 577 F.3d 783 (7th Cir. 2009) (plan amendments prospectively apply to a participant’s future benefit eligibility unless the plan provides otherwise); Owens v. Storehouse, Inc., 984 F.2d 394 (11th Cir. 1993) (employer did not have a “vested” right to $1 million in lifetime health benefits, thus employer could reduce the benefit to $25,000 for AIDS and other health conditions even after the plaintiff contracted AIDS).

Although the district court judge, sitting by designation, disagrees with the majority panel’s reasoning and states that a remand is unnecessary, the judge “does not object” to the unnecessary remand. So a dissent transforms into a concurrence. With profuse respect and repeated genuflect, The Pundit dissents concurs in the result.

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