All (not) Aboard: the Eighth Circuit Splits With the Eleventh, Fourth, and Seventh Circuits by Determining a Single-participant "plan" Is Not an Erisa Plan in Dakota, Minnesota & Eastern Railroad Corp. v. Schieffer

• Publication year: 2022

47 Creighton L. Rev. 539. ALL (NOT) ABOARD: THE EIGHTH CIRCUIT SPLITS WITH THE ELEVENTH, FOURTH, AND SEVENTH CIRCUITS BY DETERMINING A SINGLE-PARTICIPANT "PLAN" IS NOT AN ERISA PLAN IN DAKOTA, MINNESOTA & EASTERN RAILROAD CORP. V. SCHIEFFER

ALL (NOT) ABOARD: THE EIGHTH CIRCUIT SPLITS WITH THE ELEVENTH, FOURTH, AND SEVENTH CIRCUITS BY DETERMINING A SINGLE-PARTICIPANT "PLAN" IS NOT AN ERISA PLAN INDAKOTA, MINNESOTA and EASTERN RAILROAD CORP. V. SCHIEFFER

P. BRIAN BARTELS(fn*)

I. INTRODUCTION

Congress enacted the Employee Retirement Income Security Act of 1974, ("ERISA"),(fn1) as amended, to establish a comprehensive and uniform regulatory scheme for employee benefits.(fn2) ERISA regulates employee benefits in a variety of ways, such as by defining an "employee benefit plan" and prescribing disclosure, funding, and fiduciary responsibilities for employee benefit plans that are subject to ERISA.(fn3) The existence of a "plan," as defined by ERISA, is a precondition to the applicability of ERISA because ERISA applies only to "employee benefit plans."(fn4) Similarly, courts recognize that the existence of an ERISA plan is a subject matter jurisdiction requirement.(fn5) As part of its comprehensive regulatory scheme, ERISA defines the terms "employee welfare benefit plan," "welfare plan," "employee pension benefit plan," "pension plan," and "plan."(fn6) Recognizing these definitions are tautological, in Fort Halifax Packing Co., Inc. v. Coyne ,(fn7) the United States Supreme Court determined an ERISA plan exists when an ongoing administrative scheme or program is present, assuming the other ER-ISA requirements are satisfied.(fn8)

The definition of a "plan," and the question of whether ERISA applies to a "plan," is particularly challenging when the "plan" provides employee benefits to only one employee.(fn9) Employers may seek to establish a "plan" to provide certain employee benefits to one employee for a variety of reasons, such as incentivizing the employee to remain in employment with the employer, providing deferred compensation, providing severance benefits if the employer experiences a change of control event, or, prior to the enactment of the Patient Protection and Affordable Care Act, as amended, providing targeted health insurance benefits to an executive. The United States Courts of Appeals for the Eleventh, Fourth, and Seventh Circuits have determined that a "plan" that provides employee benefits to one employee is an ERISA plan.(fn10) In contrast, in Dakota, Minnesota and Eastern Railroad Corp. v. Schief-fer,(fn11) the United States Court of Appeals for the Eighth Circuit determined a "plan" that provides employee benefits to one employee is not an ERISA plan.(fn12) Following the decision of the Eighth Circuit in Schieffer, a split in authority exists among the federal circuit courts of appeals regarding whether a "plan" that provides benefits to one employee is an ERISA plan and thus subject to ERISA's various requirements.

This Article explores the split in authority among the Eleventh, Fourth, Seventh, and Eighth Circuits regarding whether a "plan" that provides employee benefits to one employee is an ERISA plan and considers certain implications of the split in authority. The Article proceeds in three sections. First, the Article provides background regarding the importance of determining whether a "plan" is an ER-ISA plan, the statutory definition of an ERISA plan, judicial interpretations of the term "plan" as used in ERISA, and the reasoning the Eleventh, Fourth, and Seventh Circuits applied to determine that a "plan" may provide employee benefits to only one employee and still be an ERISA plan. The Article then examines the district court and Eighth Circuit opinions in Schieffer and the reasons these courts determined a "plan" that provides employee benefits to only one employee is not an ERISA plan. Finally, this Article examines the implications of the Eighth Circuit's decision in Schieffer, including questions left unresolved by the Eighth Circuit and potential issues practitioners should consider when drafting "plan" documents that provide employee benefits to only one employee.

II. BACKGROUND

A. THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), IDENTIFIES THE IMPORTANCE OF A "PLAN" BEING AN ERISA PLAN AND DEFINES THE TERM "PLAN"

1. A "Plan" Must Be an ERISA Plan for ERISA and Its Requirements to Apply

Determining whether an employee benefit plan exists under ER-ISA is important because ERISA only applies to employee benefit plans.(fn13) When it enacted ERISA, Congress intended to establish a comprehensive and uniform regulatory scheme for employee bene-fits.(fn14) As part of its regulatory scheme, ERISA generally preempts state laws relating to "any employee benefit plan."(fn15) Thus, if an employee benefit plan does not exist, then ERISA's preemption provision does not apply.(fn16) Unless an exemption or a limitation applies, ERISA imposes a number of requirements with respect to employee benefit plans.(fn17) For example, ERISA imposes fiduciary duties on persons who are fiduciaries "with respect to a plan," so the existence of an ERISA plan is necessary to implicate those duties.(fn18) Fiduciaries of employee benefit plans are generally subject to the fiduciary responsibility provisions set forth in Title I, Subtitle B, Part 4 of ERISA.(fn19) For example, fiduciaries must discharge their duties with respect to a plan "solely in the interest of the participants and beneficiaries" by applying a prudent person standard of care.(fn20) Employee benefit plans are also subject to disclosure and reporting obligations under ERISA.(fn21) ERISA establishes mechanisms for participants and beneficiaries to enforce certain rights under an ERISA plan.(fn22) If an ERISA plan exists, participants or beneficiaries may bring a civil action to recover benefits due under the terms of a plan.(fn23) Under ERISA and federal regulations, employee benefit plans must also provide a claims proce-dure.(fn24) Therefore, because the substantive provisions of ERISA apply to, or are triggered by, the existence of an "employee benefit plan" (as defined by ERISA), the determination of whether an ERISA employee benefit plan exists is a threshold question.(fn25)

2. ERISA, Its Implementing Regulations, and the United States Department of Labor Define or Interpret Key Terms Relating to ERISA Plans

ERISA defines the term "plan" and establishes a comprehensive scheme of federal regulation for employee benefit plans.(fn26) Except for certain statutory exceptions, ERISA applies to "any employee benefit plan" that is established or maintained "by any employer engaged in commerce or in any industry or activity affecting commerce."(fn27) ER-ISA defines the terms "plan" or an "employee benefit plan" as "an employee welfare benefit plan or an employee pension benefit plan or a plan which is both an employee welfare benefit plan and an employee pension benefit plan."(fn28) An "employee welfare benefit plan" is defined as:

any plan, fund, or program . . . established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services, or (B) any benefit described in section 186(c) of this title (other than pensions on retirement or death, and insurance to provide suchpensions).(fn29)

Under ERISA, an "employee pension benefit plan" is generally defined as:

any plan, fund, or program . . . established or maintained by an employer or by an employee organization, or by both, to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program-(i) provides retirement income to employees, or (ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond, regardless of the method of calculating the contributions made to the plan, the method of calculating the benefits under the plan or the method of distributing benefits from the plan.(fn30)

United States Department of Labor regulations further define the types of arrangements that constitute an employee benefit plan under ERISA. For purposes of Title I of ERISA, an employee benefit plan generally must have employees who are participants covered under the plan.(fn31) As an example, the Department of Labor provides that "a Keogh plan under which one or more common law employees . . . are participants covered under the plan, will be covered under Title I [of ERISA]."(fn32) United States Department of Labor regulations prescribe the time at which an individual becomes a participant of an employee welfare benefit plan or an employee pension plan.(fn33)

3. In Fort Halifax Packing Co., Inc. v. Coyne, the United States Supreme Court Determined an Ongoing Administrative Scheme Is Required for a "Plan" to Be an ERISA Plan

In Fort Halifax Packing Co., Inc. v. Coyne ,(fn34) the United States Supreme Court established guidance for interpreting the ERISA definition of a "plan."(fn35) The Fort...