Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Aug. 29 — UNITE HERE Health must pay $5.5 million to Greenbrier Hotel Corp. and its employees for breaching its ERISA fiduciary duties by amending plan documents to retain excess assets when the plan was terminated ( Greenbrier Hotel Corp. v. UNITE HERE Health , 2016 BL 280134, S.D. W.Va., No. 5:13-cv-11644, 8/26/16 ).
The amendment was “made for the purpose of depriving” certain participants of funds otherwise reserved for their benefit and, as such, was unreasonable, discriminatory and in bad faith, Judge Irene C. Berger held Aug. 26 after a six-day bench trial. Absent the amendment, the plan unambiguously required transfer of the funds upon termination, Berger said. Thus, UNITE HERE abused its discretion when it didn’t transfer the excess assets to Greenbrier’s newly created health plan, Berger said.
The dispute stemmed from an amendment to UNITE HERE’s health plan after its trustees announced their decision to terminate it.
Greenbrier and its employees sued UNITE HERE in the U.S. District Court for the Southern District of West Virginia to recover the $5.5 million in excess assets from the plan. Greenbrier argued that after the plan was terminated, its excess assets should have been remitted to the new, self-funded health plan sponsored by the hotel.
Last year, the court declined to dismiss the lawsuit, holding that Greenbrier was a fiduciary with standing to enforce the rights of its employees as plan beneficiaries.
During the trial, UNITE HERE argued that an assets transfer would violate the Employee Retirement Income Security Act because it would benefit Greenbrier by displacing money the fund would have otherwise spent to provide health benefits. In rejecting this argument, the court said it was undisputed that the money would be ultimately used to provide health benefits to Greenbrier’s employees.
As to the plan amendment, the court said that UNITE HERE’s trustees removed certain language pertaining to their fiduciary obligations and then amended the plan’s termination clause in an effort to “bolster” the fund’s claim to the excess assets. In doing so, the trustees failed to follow the plan’s amendment procedures and thus the amendment was invalid.
The plan documents allowed the trustees to use the money to provide benefits to plan participants or to transfer the money to a plan that would do so, the court said.
Spilman Thomas & Battle and Masters Law Firm represented Greenbrier and the employees. Bowles Rice McDavid Graff & Love and Seyfarth Shaw represented UNITE HERE.
To contact the reporter on this story: Carmen Castro-Pagan in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)