Also known as: employee benefit plans · employee benefits plan · employee benefits plans · EBP · ERISA plan
Written by attorneys — see sources below.
A written stock-purchase, savings, option, bonus, stock-appreciation, profit-sharing, thrift, incentive, pension, or similar plan solely for employees, officers, and advisers of a company. The term includes an employee-welfare benefit plan, an employee-pension benefit plan, or a combination of those two.
Echelon Security asked its research director Evelyn Ellison to serve as trustee of an employee stock ownership plan holding company shares. After regulators sued Ellison for concealing trial risks in both her officer and trustee roles, Echelon maintained a liability policy covering the trustee claims. The policy remained valid even though the corporation lacked power to indemnify the same liability.
Isaac Boggs designated his second wife as beneficiary of his employee pension plan. After his death his first wife claimed community-property rights in the plan benefits under state law. The Supreme Court held that ERISA preempted the state claim because the plan was governed exclusively by federal rules protecting designated beneficiaries.
Isaac Boggs began working for South Central Bell in 1949 and remained employed until his retirement in 1985. He was married to Dorothy Boggs from 1949 until her death in 1979, and the couple had three sons. After Dorothy died, Isaac married Sandra Boggs in 1980, and they remained married until Isaac's death in 1989. Upon retirement, Isaac received a lump-sum distribution of $151,628.94 from the Bell System Savings Plan, which he rolled over into an Individual Retirement Account worth $180,778.05 at his death. He also received 96 shares of AT&T stock from the Bell South Employee Stock Ownership Plan and a monthly annuity of $1,777.67 from the Bell South Service Retirement Program. Dorothy's will bequeathed one-third of her estate to Isaac outright along with a lifetime usufruct in the remaining two-thirds, with naked ownership passing to the sons. A 1980 Louisiana judgment of possession ascribed to Dorothy's estate a community property interest in Isaac's Savings Plan account valued at $21,194.29. After Isaac's death, Sandra began receiving a survivor annuity and other benefits. The sons filed suit in Louisiana state court claiming a portion of the retirement benefits under Dorothy's will and Louisiana community property law. Sandra then filed a declaratory judgment action in the United States District Court for the Eastern District of Louisiana asserting that ERISA preempts the sons' claims. The District Court granted summary judgment against Sandra. The Fifth Circuit affirmed. The Supreme Court granted certiorari.
View caseDavid Egelhoff named his wife as beneficiary of his employee life-insurance policy and pension plan. Following their divorce a Washington statute automatically revoked the designation. The Supreme Court ruled that ERISA preempted the state statute because it impermissibly related to the administration of the employee benefit plans.
Donna Rae Egelhoff was married to David A. Egelhoff. Mr. Egelhoff was employed by the Boeing Company, which provided him with a life insurance policy and a pension plan. Both plans were governed by ERISA, and Mr. Egelhoff designated his wife as the beneficiary under both. In April 1994, the Egelhoffs divorced. Just over two months later, Mr. Egelhoff died intestate following an automobile accident. At that time, Mrs. Egelhoff remained the listed beneficiary under both the life insurance policy and the pension plan. The life insurance proceeds, totaling $46,000, were paid to her. Respondents Samantha and David Egelhoff, Mr. Egelhoff's children by a previous marriage, are his statutory heirs under state law. They sued petitioner in Washington state court to recover the life insurance proceeds. In a separate action, respondents also sued to recover the pension plan benefits. The trial courts, concluding that both the insurance policy and the pension plan "should be administered in accordance" with ERISA, granted summary judgment to petitioner in both cases. The Washington Court of Appeals consolidated the cases and reversed. Applying the statute, it held that respondents were entitled to the proceeds of both the insurance policy and the pension plan. The Supreme Court of Washington affirmed. Courts have disagreed about whether statutes like that of Washington are pre-empted by ERISA. The Supreme Court granted certiorari to resolve the conflict.
View caseThe IRS asserted a tax lien against a taxpayer's interest in an employee benefit plan. The taxpayer argued the interest was exempt under state law. The Supreme Court held that federal tax law determines whether the interest constitutes property reachable by the lien regardless of state characterizations of the plan.
In 1988, the Internal Revenue Service assessed $482,446 in unpaid income tax liabilities against Don Craft for his failure to file federal income tax returns for the years 1979 through 1986. At that time, Don Craft and his wife, respondent Sandra L. Craft, owned a piece of real property in Grand Rapids, Michigan, as tenants by the entirety. After notice of the federal tax lien was filed, the Crafts jointly executed a quitclaim deed purporting to transfer Don Craft's interest in the property to Sandra Craft for one dollar. When Sandra Craft later attempted to sell the property, a title search revealed the lien. The IRS agreed to release the lien to allow the sale on the condition that half of the net proceeds be held in escrow pending determination of the Government's interest. Sandra Craft then brought an action in the United States District Court for the Western District of Michigan to quiet title to the escrowed proceeds. The District Court granted summary judgment to the Government. On appeal, the United States Court of Appeals for the Sixth Circuit held that the tax lien did not attach to the property under Michigan law and remanded for consideration of the Government's fraudulent conveyance claim. On remand, the District Court found that the conveyance itself was not fraudulent but that the use of nonexempt funds to pay the mortgage constituted a fraudulent act, and it awarded the IRS a share of the proceeds. The Sixth Circuit affirmed that determination on the lien issue as law of the case. The Supreme Court granted certiorari to consider whether Don Craft had a separate interest in the entireties property to which the federal tax lien attached.
View caseYes. Model Business Corporation Act section 8.57 expressly authorizes a corporation to purchase and maintain insurance for an individual serving at its request as trustee of an employee benefit plan. Coverage is permitted regardless of whether the corporation could indemnify the same liability.
Supporting sources
Yes. ERISA's preemption clause supersedes state laws that relate to employee benefit plans. A statute that automatically changes plan beneficiaries conflicts with ERISA's requirement that plans be administered according to their written terms and designated beneficiaries.
Supporting sources
A director satisfies the standard by conducting herself in good faith and reasonably believing that her conduct with respect to the plan serves the interests of the participants and beneficiaries. Model Business Corporation Act section 8.51(b) treats such conduct as satisfying the best-interests requirement.
Supporting sources
…of marriage or a declaration of invalidity.” § 11.07.010(1). It defines “nonprobate asset” to include “a life insurance policy, employee benefit plan, annuity or similar contract, or individual retirement account.” § 11.07.010(5)(a). Respondents argued that they were entitled to the life insurance proceeds because the Washington statute…