Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Oct. 26 — The Louisiana Regional Transit Authority's welfare benefit plan is a governmental plan exempt from the provisions of ERISA, the U.S. District Court for the Eastern District of Louisiana ruled.
In an Oct. 23 order, Judge Carl J. Barbier dismissed a lawsuit filed by 40 retirees, and granted summary judgment after concluding that the plan was maintained by a political subdivision, and an agency or instrumentality of that political subdivision.
The retirees filed a suit alleging that the Louisiana Regional Transit Authority (RTA) and Transit Management of Southeastern Louisiana Inc. (TMSEL), as plan administrators, denied them premium-free medical insurance, quarterly Medicare premiums and deductible reimbursements in violation of the Employee Retirement Income Security Act and Louisiana state law. The administrators asked the court to dismiss the lawsuit.
In an earlier decision, the court granted the dismissal request and ruled that the plan was a governmental plan exempt from ERISA and therefore, the court lacked jurisdiction.
The retirees appealed and the U.S. Court of Appeals for the Fifth Circuit vacated the district court's dismissal, concluding that the defendants' argument that the plan was exempt from ERISA didn't raise a jurisdictional question.
After the case was remanded to district court, the administrators filed a motion for summary judgment arguing that RTA and TMSEL, as the entities that maintained the plan, qualified as political subdivisions since they were designated as such by state statute and their members were appointed by public officials. The retirees opposed.
The court noted that ERISA doesn't define the term political subdivision and that the Fifth Circuit hasn't directly addressed whether an entity is a political subdivision under the federal benefits law. As a result, the court applied a test articulated by the National Labor Relations Board for determining what constitutes a political subdivision.
The test was adopted by the U.S. Supreme Court in NLRB v. Natural Gas Utility Dist. of Hawkins County. Under this test, the entity is a political subdivision if it is either created directly by the state or is administered by individuals who are responsible to public officials or to the general electorate.
The court held that under Hawkins, RTA qualified as a political subdivision of Louisiana for the purposes of ERISA since it was created by a state statute and it was administered by individuals who were responsible to public officials.
The court also ruled that the appropriate test for determining whether TMSEL was an agency or instrumentality of the RTA was the six-factor test provided in Internal Revenue Service Revenue Ruling 57-128.
The court concluded that TMSEL was an agency or instrumentality of the RTA because it was created to manage and operate the public transportation system and it performed its functions on behalf of the RTA. Moreover, its operating expenses were solely funded by the RTA.
The retirees were represented by Sher, Garner, Cahill, Richter, Klein & Hilbert LLC, Administrators of Tulane Educational Fund, and Daigle Fisse & Kessenich. The administrators were represented by Proskauer Rose LLP.
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