Employee Benefits Legal Blog : Employee Benefits Lawyer & Attorney : Fox Rothschild Law Firm : Health Care, Retirement, ERISA : Philadelphia, New York, Northeast

On November 21, 2008, the New York Department of Insurance issued Circular Letter No. 27(2008) that acts as the New York State department of Insurance recognition of same-sex marriages performed in other jurisdictions.  The letter is in response to Martinez v. Monroe Community College, recognizing a Canadian same-sex marriage as valid in New York.  Governor Patterson issued a memo requiring state agencies to formulate policies to comply with this ruling and the department of insurance has now done so.

The letter has the effect of requiring that policies of insurance written in New York and insurers of those policies provide that the terms "spouse," "husband," "wife," and "married" encompass marriages of same-sex couples married in jurisdictions outside of New York.  Employers who offer health insurance are obligated to provide same-sex benefits but it does not require employers who sponsor self-insured or self-funded plans to provide that same coverage.  So if your plan is an insured plan from a New York insurer, your plan now provides same-sex couples benefits if they are married outside of New York.

While not unexpected, this letter did cause me a little pause mostly because it does not in any way deal with dependents of same-sex spouses or make any mention of the definition of "dependent" or "child."  How would New York treat the child of a same-sex couple married outside of New York, when the status of the child as a dependent of both parents has not been established?  Say, for example, partner A has a child and marries partner B.  They move to New York.  Partner B has health insurance through his or her employer but never adopts the child.  The child may not qualify as a dependent of B under the terms of the policy, leaving the child with no coverage while both A and B are insured.

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There are certain requirements in ERISA that employees be provided with documents like summary plan descriptions.  There is also a requirement under ERISA Section 104(b)(4) that a plan administrator must, upon written request from a participant, furnish a copy of the latest updated summary plan description, latest annual report, trust agreement, collective bargaining agreement or any other instrument under which the plan is established or operated.  Of course there are penalties for not providing this information.

This brings me to the case of Strom v. Siegel, Fenchel & Puddy (2nd circuit, 2007).  In this case, an attorney with the firm was making a claim that she was a "partner" in the firm and thus entitled to participate in the retirement plan.  She asked for a copy of the summary plan description to confirm whether she qualified as a participant.  The firm refused to provide it to her because she did not qualify as a participant so they had no obligation to provide the plan documents.  The Court determined that she was entitled to receive the document.  Why?  Because how could she appeal whether or not she was a participant without first seeing the document that governed the right to make a claim.

The case seems sort of silly, but it does remind us that participants (or people claiming to be participants) have a right to see the plan documents.  Also, ERISA requires that the plan provide them upon request.  There should be nothing secretive about what is contained in those documents.  You are not obligated to provide more than what the law requires, but my recommendation is always provide what the law requires when asked.  That way you don't subject your self to claims like the one in Strom.

Special side note: ERISA obligates plan administrators to provide notices of plan changes, summaries of material modifications and updated summary plan descriptions to participants.  When sending these documents to participants, make sure that they also go to participants who may be out on short or long term disability, COBRA, general leave or family medical leave.  They are still participants and still entitled to receive the information.

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As Monty Python would say, now for something completely different. I usually write about retirement or health plans but this particular benefit caught my eye. As of October 3, 2008, a bicycle commuter benefit is added to IRC 132(f), meaning employers can reimburse certain expenses for employees who commute to work via bicycle and the amounts of the reimbursement are excluded from gross income.

Employees may be reimbursed on a tax-free basis for "reasonable expenses" incurred by the employee during the calendar year for the purchase of a bicycle, bicycle improvements, repair and storage provided the bicycle is regularly used to travel between work and the employee's residence. An employee is considered a bicycle commuter if he or she uses the bicycle during any month for a "substantial portion" of their commute. Of course there is no definition in the code of "substantial portion" or "regularly used" so employers are expected to use their own interpretations of those terms.

The employer may reimburse the employee up to $20 per month for each month of the year that the employee qualifies as a bicycle commuter (that is regularly uses for a substantial portion), but the employee may not receive any bicycle commuter benefits in the same month as he or she receives any other qualified transportation benefits (such as transit passes or parking reimbursement). The reimbursement may be paid any time during the year in which the employee commuted by bicycle, or within 3 months after the end of that year for expenses incurred within the year. The employer must require proof that the expenses were incurred and must establish a bona fide reimbursement arrangement (some form of written document) though a formal written plan is not required. Plans can be effective beginning January 1, 2009.

In light of the efforts to promote "going green," this type of arrangement may be something of interest to your employees, particularly if they do not already take advantage of other commuter fringes. Obviously it is more likely to be of use in warmer months or warmer climates, but for your cycling employees, it might be of some value.

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I recently read an interesting article in the Business Law Magazine 2008 for the Northern Nevada Business Weekly written by Craig Denney, a noted criminal attorney.  Unfortunately I cannot figure out how to link it here, but the article summarizes some "dumb" decisions that businesses can make in these troubled times that could lead to criminal concerns.  One of the points he makes is the criminal concerns about taking money out of the company 401(k) plan to pay bills.

Mr. Denney opines that under Title 18 of the United States Code, Section 664, taking money from the plan would be a criminal offense.  I agree with him.  I also think that taking money from the 401(k) plan to satisfy the financial needs of the plan sponsor would constitute a significant breach of fiduciary duty.  That would subject the plan sponsor to ERISA penalties for misuse of plan assets.  Plus it would be a prohibited transaction.  But let's take it one step further.  What about using employee deferrals for company activity without putting them into the plan in a timely manner?

Typically employee elective deferrals come out of the employee paycheck and are held in a company account until the employer submits the contributions to the plan administrator for investment.  The employer has a "reasonable" period of time to submit those contributions.  However, when those funds are in the control of the employer, they are still considered "plan" funds for the purposes of identification.  They absolutely cannot be used for any employer purposes.  They must be put into the plan, or more specifically, the individual account of the participant.

Notwithstanding the breach of fiduciary duty issues that would arise if an employer uses those employee deferrals, Mr. Denney's analysis leads me to believe that using employee deferrals for company purposes would likely be criminal as well.  I had previously written an entry about US v. Jackson where the court upheld a 7-10 year criminal sentence for company executives who failed to make required EMPLOYER contributions to the plans.  I can only imagine what would be the sentence for failing to put the EMPLOYEE money into the plans.

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