3 Supreme Court opinions likely to impact employee benefit plan administration

The end of the U.S. Supreme Court’s latest session delivered three opinions that could fundamentally change the way government agencies operate, including their oversight of employee benefit plans. These opinions are likely to shift many policy decisions from the government agencies’ technical experts to federal judges, which is expected to have far-ranging implications, including for employee benefit plans.

Furthermore, the opinions are likely to increase the number of legal challenges to agency guidance on issues affecting health and retirement plans, with regulatory provisions more likely to be limited or overturned entirely. In addition, the opinions may affect how Congress drafts future legislation and how agencies approach rulemaking. The full impact will likely play out over an extended period of time while various legal challenges work their way through the courts. Here are additional details:

1. Securities and Exchange Commission v. Jarkesy. In a 6 – 3 decision, the Supreme Court ruled that those individuals facing civil penalties from the Securities and Exchange Commission (SEC) have the right to a jury trial. More broadly, the Jarkesy decision calls into question whether any federal regulatory agency, in addition to the SEC, can bring in-house proceedings to enforce civil penalties. This is particularly noteworthy because although some government agencies (such as the SEC) may choose whether to pursue civil penalties in federal court or via an in-house administrative proceeding, other agencies may only do so if statutorily authorized.
2. Loper Bright Enterprises v. Raimondo. In a 6 – 3 decision, the Supreme Court overturned Chevron v. Natural Resources Defense Council, the most-cited case in administrative law. Known as Chevron deference, the doctrine required judges to defer to agencies’ interpretations of ambiguous federal laws. Now, courts are likely to play a more active role in interpreting statutes, and judges will be able to impose their own readings of the law — giving them broad leeway to upend regulations, including on healthcare topics. This shift will likely lead to more rigorous scrutiny of agency interpretations across the board.
3. Corner Post, Inc. v. Board of Governors of the Federal Reserve System. In another 6 – 3 decision, the Supreme Court held that the six-year statute of limitations for challenges under the Administrative Procedure Act (APA) begins to run from the time of the plaintiff’s injury by final agency action, as opposed to when the agency takes final action. This decision dramatically expands the statute of limitations for lawsuits challenging agency rules under the APA — one that is commonly cited when the agencies release employee benefit rules.

Going forward

• Employer plan sponsors should carefully monitor future court decisions and government regulations.
• Plan sponsors should closely review statutory language, regulatory guidance and judicial interpretations of statutes and agency guidance when making plan decisions to ensure they maintain compliance.
• As a result of these opinions, the next several years could see a rapid evolution of administrative challenges and standards. Employers may be in a better position to challenge rules from federal agencies, which may be more susceptible to court challenges.