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Two cases decided on May 23 by Judge Esther Salas in the US District Court for the District of New Jersey (Univ. Spine Ctr. v. Aetna, Inc. and Univ. Spine Ctr. v. United Healthcare – both unpublished decisions) reiterate the importance of including clear anti-assignment language in health plans to prevent healthcare providers from circumventing plan terms to obtain payment.

In this age of skyrocketing health costs, plan sponsors typically work with their advisors and insurers to craft reimbursement structures for services under their health plans. This often includes a lower reimbursement rate for certain out-of-network services. In recent years, many plans have had more claims from out-of-network providers trying to circumvent these design decisions and seek full reimbursement from the plans.

The US Supreme Court ruled on May 21 in Epic Systems Corp. v. Lewis that class and collective action waivers in employment arbitration agreements are enforceable under the Federal Arbitration Act (FAA). The court sided with employers, rejecting arguments that class and collective action waivers were unenforceable because they violated the National Labor Relations Act (NLRA).

The employees argued that the FAA’s saving clause provided a basis for courts to refuse to enforce arbitration agreements that also include a waiver of the right to bring a class or collective action, because such waivers violate the NLRA. The employees also argued that the NLRA itself reflected a clearly expressed and manifest congressional intention to displace the FAA and bar class and collective action waivers, because the NLRA guarantees workers the right to engage in concerted activities for the purpose of collective bargaining or other mutual aid or protection. The Supreme Court rejected each of these arguments, finding that the NLRA does not contain a conflicting congressional command, and instead can be harmonized with the FAA to permit class and collective action waivers in employment arbitration agreements.

Join Morgan Lewis in May 2018 for these programs on a variety of topics in employee benefits and executive compensation, including investment related matters.

We’d also encourage you to attend the firm’s Global Public Company Academy series:

Visit the Morgan Lewis events page for more of our latest programs.


The Internal Revenue Service (IRS) recently updated the Examination Steps for General Hardship in the Internal Revenue Manual (IRM) to incorporate the summary substantiation method for safe-harbor hardship distributions. Plan sponsors should consider whether they want to adopt this method of substantiating hardship withdrawals, rather than requiring participants to provide documentation supporting the existence of an “immediate and heavy financial need.”


The IRS issued internal guidance in February 2017 to its employees conducting plan audits, setting forth guidelines for what 401(k) plan sponsors and administrators are required to show as substantiation to support that a hardship withdrawal was due to an immediate and heavy financial need under the safe-harbor standards for a hardship distribution under Treas. Reg. Section 1.401(k)-1(d)(3)(iii)(B).

The Internal Revenue Service (IRS) recently announced that it is requesting comments on the possible expansion of its favorable determination letter program for individually designed plans. Specifically, the IRS is interested in public input on circumstances it should consider in its decision to accept applications for favorable determination involving amended plans, or types of plan amendments, during calendar year 2019. Currently, the IRS only accepts applications for rulings on initial plan qualification or qualification on termination.


Effective January 1, 2017, the IRS eliminated the staggered approach to accepting applications for favorable determination where such applications were accepted in a calendar year for plans in that year’s filing cycle. A plan’s filing cycle was based on the last digit of its sponsor’s employer identification number, and the cycles were identified as Cycles A through E. This elimination effectively terminated the favorable determination letter program for ongoing plans, though the program continued for plans where initial qualification or qualification on termination was sought.

Join Morgan Lewis in April 2018 for these programs on a variety of topics in employee benefits and executive compensation.

We’d also encourage you to attend the firm’s Global Public Company Academy series:

And, don’t forget to visit our resource center on Navigating US Tax Reform, which lists our upcoming tax reform events, including:

Visit the Morgan Lewis events page for more of our latest programs.

The IRS has started issuing Letter 226-J to employers who may have an Affordable Care Act Shared Responsibility excise tax for 2015. As these letters have a short 30-day response time, it’s important to make sure that a responsible and appropriate person in your organization is ready to receive and act on this letter. We recommend that you review Part 1 of your 2015 Form 1095-C and, in particular, Item 7 (which has the name of the person to contact). Be sure this person is still in your employ (at the address in the previous item numbers) and is ready to receive and act on any Letter 226-J. We are aware that some vendors put their own employees into Item 7 (which may result in a misdirected Letter 226-J). If the person listed on Item 7 is not a current employee at the addresses listed on the Form 1095-C, you should consider submitting a corrected Form 1095-C with the appropriate person and/or address. Follow the instructions on pages 4 and 5 for Form 1095-C regarding completing and submitting a corrected Form 1095-C (which can usually be done on paper, even if the initial Form 1095-C was filed electronically). For more information about Letter 226-J, please see our prior post, IRS Gears Up to Enforce ACA Shared Responsibility.

Two recent decisions, CNH Industrial N.V. v. Reese, 138 S. Ct. 761 (2018), and Cooper v. Honeywell International, Inc., 2018 WL 1190385 (6th Cir. Mar. 8, 2018), continue the trend favoring employers in litigation challenging the termination of retiree medical benefits. 

In CNH, the collective bargaining agreement (CBA) provided healthcare benefits to employees who retired during its term. The CBA contained a general durational clause, which provided that all terms and conditions provided through the CBA would expire when the CBA expired. The CBA expired in 2004 and CNH sought to terminate retirees’ healthcare benefits. CNH retirees sued, claiming their benefits were vested. A district court granted judgment in the retirees’ favor and the US Court of Appeals for the Sixth Circuit affirmed. According to the Sixth Circuit, the durational clause was not dispositive and other language “tied” healthcare benefits to pension eligibility. These provisions rendered the CBA ambiguous, opening the door to extrinsic evidence, which the court concluded established vesting.

The tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (Act), signed into law on December 22, 2017, modifies the Internal Revenue Code (Code) in a way that impacts many qualified plan (and 403(b) plan) hardship withdrawal provisions. The Act adds a paragraph to Section 165 of the Code restricting the deduction for casualty losses to those losses that are attributable to a federally declared disaster. A withdrawal from a plan by a plan participant to pay certain expenses that qualify for the Section 165 casualty deduction is one of a few withdrawals that meet the “deemed immediate and heavy financial need” standard under the Section 401(k) Treasury regulations. This “safe harbor” standard allows plan sponsors to consider withdrawals necessary due to hardship without having to take on the more burdensome evaluation of a participant’s need based on relevant facts and circumstances.

Restricting the casualty loss deduction to losses attributable to a federally declared disaster means that only withdrawals to pay expenses to repair damage caused by a disaster determined by the president as warranting assistance by the federal government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act will satisfy the deemed immediate and heavy financial need standard. This change is effective for taxable years beginning after December 31, 2017, which, for most employees, means it is effective now.

Join Morgan Lewis in March 2018 for these programs on a variety of topics in employee benefits and executive compensation.