UPDATED with: SAG-AFTRA Health Plan assertion: The day after former SAG president Ed Asner’s death, a federal choose indicated Monday that she is inclined to permit the category motion lawsuit that bears his title to proceed in opposition to the SAG-AFTRA Health Plan and its trustees.
Earlier at this time, U.S. District Court Judge Christina A. Snyder issued a tentative determination (learn it here) that denied the Plan’s movement to dismiss the case. A digital listening to was then held to permit attorneys from each side – seven in all – to make arguments about why she ought to or mustn’t uphold her tentative determination, which can enable for discovery to proceed as soon as it’s made closing.
At the top of the listening to, Snyder stated that she is going to take a look at a number of factors that the defendants’ attorneys made at this time, however cautioned that she does “not expect” to make any main modifications to her tentative determination. Then she added: “Just as it’s never too late to settle, it’s never too early to settle.”
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Today’s beforehand scheduled digital listening to got here after Asner’s death Sunday at age 91.
In a press release, the SAG-AFTRA Health Plan stated: “Last year, responding to continually skyrocketing healthcare costs and in the midst of the unprecedented economic realities of a global pandemic, the SAG-AFTRA Health Plan Trustees responsibly planned for the future while ensuring high-quality benefits for as many as possible. The Court’s stated intention to allow the case to proceed does not address the legality of the changes made by the Trustees, and we look forward to proving in court that the Trustees acted in the best interests of the participants in adopting these changes. We are confident that the courts will ultimately reject this meritless litigation.”
In Edward Asner et al versus the SAG-AFTRA Health Plan et al, Asner and 9 different SAG-AFTRA members allege that modifications to the Plan’s eligibility necessities earlier this 12 months “illegally discriminate based on age and violate the Age Discrimination and Employment Act of 1967,” and are a breach of fiduciary obligation beneath the Employee Retirement Income Security Act (ERISA).
“I understand that discovery can be burdensome,” the choose informed the attorneys at this time. “I hope you all work together to keep it as efficient and limited as possible. I don’t think the plaintiffs have a lot of deep pockets, either, so I think we have a lot of very able lawyers here and you ought to be able to work things out if you proceed. But I do think the plaintiffs have successfully alleged claims for relief.”
The different named plaintiffs within the case are Michael Bell, Raymond Harry Johnson, Sondra James Weil, David Jolliffe, Robert Clotworthy, Thomas Cook, Audrey Loggia, Deborah White, and Donna Lynn Leavy. In addition to the Plan itself, the Plan’s trustees, together with former SAG-AFTRA nationwide govt director David White and AMPTP president Carol Lombardini, are named as defendants.
As Snyder famous in her tentative determination (learn it here), the grievance asserts 4 breaches of ERISA-imposed fiduciary obligation claims. Count I is for breach of fiduciary obligation in violation of ERISA in reference to the 2017 merger of the SAG Health Plan with the AFTRA Health Plan. This Count is in opposition to the SAG Health Plan Board of Trustees and the SAG Trustee Defendants.
Count II is for breach of fiduciary obligation in violation of ERISA in reference to the August 2020 reductions to advantages supplied by the merged SAG-AFTRA Health Plan and in reference to the failure to reveal the Plan’s funding shortfall previous to the profit reductions. This Count is in opposition to the SAG-AFTRA Health Plan Board of Trustees and the SAG-AFTRA Trustee Defendants.
Count III is for breach of fiduciary obligation by a co-fiduciary in violation of ERISA in opposition to the SAG Health Plan Board of Trustees and the SAG Trustee Defendants in reference to the ERISA violations alleged in Count I.
Count IV is for breach of fiduciary obligation by a co-fiduciary in violation of ERISA in opposition to the SAG-AFTRA Health Plan Board of Trustees and the SAG-AFTRA Trustee Defendants in reference to the ERISA violations alleged in Count II.
“At this stage, it is inappropriate to assess the evidence or make determinations about the effect awareness of the Plan’s financial condition would have had on the Codified Basic Agreement negotiation and approval processes.” The choose stated in her tentative determination. “Defendants may renew these arguments on a motion for summary judgment upon a developed factual record. Accordingly, defendants’ motion to dismiss plaintiffs’ claim for breach of ERISA fiduciary duty in Count II for failure to disclose is DENIED.”
As for Counts III and IV, she wrote that “Defendants claim that Counts III and IV of the Complaint alleging co-fiduciary liability under ERISA should be dismissed because…Plaintiffs have not adequately pled an underlying breach of fiduciary duty in Counts I and II. However, as described herein, plaintiffs state a claim for breach of fiduciary duty in Counts I and II. Accordingly, defendants’ motion to dismiss Counts III and IV is DENIED.”
In conclusion, she wrote, “the Court DENIES defendants’ motion to dismiss plaintiffs’ First Amended Complaint.”
The choose, in nice element, went via the historical past of the case main as much as at this time’ tentative determination.
On April 30, 2021, defendants moved to dismiss the primary amended grievance and filed a memorandum of regulation in assist of their movement. Defendants additionally filed a request for judicial discover of six reveals. On June 1, 2021, plaintiffs filed their opposition to defendants’ movement to dismiss.
The case has its roots within the 2012 merger of SAG and AFTRA to grow to be SAG-AFTRA. Prior to the merger, pension and well being advantages have been supplied to the respective members of SAG and AFTRA by separate pension and well being plans that have been collectively bargained and topic to ERISA. A gaggle of SAG members unsuccessfully tried to forestall the merger via litigation, arguing that SAG had not adequately studied, evaluated, or disclosed the affect of the merger and that the anticipated future mergers of the SAG and AFTRA well being and profit plans would adversely affect SAG members.
During that litigation, the choose wrote, “the SAG members submitted the declaration of Alex M. Brucker, whom plaintiffs allege is an skilled in pre-merger due diligence for ERISA plan mergers. In his declaration, Brucker acknowledged ‘you can’t merge a wealthy plan (SAG) with a comparatively poor plan (AFTRA) and thereby produce two SAG degree plans. Either advantages have to be reduce or contributions have to be elevated. Studying this situation is the due diligence required.
“Plaintiffs allege that SAG asserted that any future merger of the unions’ profit plans could be inside the purview of the profit plan trustees, who would decide whether or not a merger was in the very best pursuits of the individuals and their beneficiaries.
“SAG Health Plan Trustee John McGuire, a defendant right here, submitted a declaration stating that the SAG Health Plan was ruled in accordance with the SAG Health Plan Trust Agreement. SAG additionally submitted a ‘Feasibility Report’ by legal professional Deborah Lerner, which acknowledged that ‘acting as plan fiduciaries, a majority of the trustees of each plan would have to conclude separately that a merger would be in the best interests of their plan participants. Because there is no legal requirement multiemployer plans be merged merely because the sponsoring Union of such plans has merged with another Union, each plan’s board of trustees is free to simply accept or reject any merger proposal.
“The Lerner Report also stated that ‘where a plan’s governing documents provide that the trustees’ actions are taken in a fiduciary capacity, the United States Department of Labor has clarified that their actions to establish, amend, design, merge or terminate a plan are also taken in their capacities as fiduciaries of the plan.’”
Despite efforts to dam the merger, it was permitted by the membership in March 2012, and in June 2016, the union’s management introduced that the SAG Health Plan Board of Trustees and the AFTRA Health Plan Board of Trustees had agreed to merge the SAG Health Plan with the AFTRA Health Plan. The union stated on the time that “extensive study” had been required previous to the Health Plans’ Merger. The Health Plans’ merger was efficient January 1, 2017, and was not not topic to the approval of the individuals of both plan.
In her tentative ruling, the choose famous that the plaintiffs allege that on the time of the merger of the well being plans, SAG-AFTRA president Gabrielle Carteris, who shouldn’t be a defendant in case, “stated that the merger would position the new health plan to be financially sustainable for all members for years to come.” In a letter to SAG-AFTRA members in the summertime of 2016, defendant David White acknowledged that the Health Plans Merger “is tremendous news for our membership on many fronts. Fully 65,000 souls who depend on these plans will become beneficiaries of a single, financially strengthened plan that offers automatic family coverage for all participants.”
Initially, the merged SAG-AFTRA Health Plan continued to offer Senior Performer Coverage to each SAG and AFTRA individuals. Senior Performer Coverage supplied the Union well being profit to members (and their certified dependents and surviving spouses) who have been age 65 and older and receiving a pension from both the SAG pension plan or AFTRA pension plan, so long as they’d obtained a sure variety of Union pension credit from years of service.
Senior performer Coverage was secondary to Medicare, except the participant certified for SAG-AFTRA as major protection via Earned Eligibility, which was based mostly on the participant’s whole earnings. A participant whose earnings included solely residuals was eligible just for secondary protection beneath the SAG-AFTRA Health Plan.
But the SAG-AFTRA Health Plan’s 2017 Summary Plan Description acknowledged that future advantages “are not promised, vested or guaranteed” and reserved the fitting to “reduce, modify or discontinue benefits or the qualification rules for benefits at any time.”
In her tentative determination the choose famous, “Plaintiffs claim that, by mid-2018, the SAG-AFTRA Health Plan Trustees knew the health benefit structure was not sustainable, which plaintiffs claim suggests that the SAG Health Plan Trustees either failed to sufficiently evaluate the Health Plans Merger or discovered the benefit structure was not sustainable and proceeded anyway. Accordingly, plaintiffs allege that the ‘SAG Health Plan Trustees breached their ERISA fiduciary duties in effecting the Health Plans Merger and the related amendments to the SAG Health Plan Trust Agreement.’ Plaintiffs contend that ‘a diligent pre-merger investigation and analysis would have revealed that the merged health plan would not have a benefit structure sustainable for all participants under the operative collective bargaining agreements, and the inadvisability of proceeding with the merger given the detrimental impact it would have on the interests of the SAG Health Plan participants and their beneficiaries.’ In any event, the SAG-AFTRA Health Plan had widening deficits beginning in 2018 and continuing thereafter.”
On August 12, 2020, the SAG-AFTRA Health Plan introduced modifications to its profit construction that the Plan acknowledged have been pushed by its dire monetary situation. The Benefit Amendments included the elimination of Senior Performer Coverage, which beforehand entitled individuals and their dependents and surviving spouses to a lifetime of SAG-AFTRA well being advantages at age 65 upon accruing 20 years of vested pension service.
The lawsuit alleges that amendments to the eligibility necessities “disqualified residuals earnings of participants age 65 and older who are taking a Union pension from counting toward earnings-based eligibility for the Union health benefit,” and that the modifications “immediately set the base earnings year for all participants 65 years of age or older to October 1-September 30.” They additionally allege that this modification “unfairly limited the time for these affected older participants to urgently pursue sessional opportunities,” and that these modifications to earnings-based eligibility “targeted participants age 65 and older to prevent these participants from obtaining the Union health benefit.”
They additionally allege that the Benefit Amendments “impose penalty on participants age 65 and older who take a Union pension, as participant’s decision whether to take a vested pension is taxed with the loss of residuals earnings toward the Union health benefit,” and that individuals who will now not qualify for the well being profit have funded the SAG-AFTRA Health Plan’s fund reserve all through their careers and that their contributions to the well being plan will proceed to be made on the identical fee.”
They additionally declare that the SAG-AFTRA Health Plan Board and the SAG-AFTRA Trustee Defendants breached their ERISA-imposed fiduciary obligations in reference to their alleged failure to reveal the Plan’s funding shortfall, regardless of the chance to treatment the shortfall by securing extra funding via the negotiation and approval processes for 3 main contract negotiations.
Defendants argue that their alleged failure to reveal the Plan’s funding shortfall throughout the negotiation and ratification of three Codified Basic Agreements in 2019 and 2020 can’t topic them to ERISA’s fiduciary obligation guidelines as a result of they weren’t undertaken in a fiduciary capability.
In response, plaintiffs cited case regulation suggesting that “an ERISA fiduciary has an obligation to convey complete and accurate information material to the beneficiary’s circumstances, even when a beneficiary has not specifically asked for the information.”
Plaintiffs additionally contend that “the SAG-AFTRA Health Plan Trustees had been working nearly every day since mid-2018” to handle the SAG-AFTRA Health Plan’s structural imbalance, however withheld this information, regardless that it “was vitally important to the Plan participants and their representatives” in reference to the contract negotiation and approval processes that have an effect on the funding of the Plan.