Headlines about "Fiduciary duties of trustees, directors, others"
Gathered from the web by the editors at BenefitsLink.com.
Benefit Plan Protection: What Insurance Policies Are Needed?
Excerpt: "Experience has shown that benefit plans can face a wide range of potential legal claims and that comprehensive protection requires more than one type of insurance coverage. This publication discusses some common claims involving three insurance policies that can protect benefit plans, their trustees, fund office staff and, by endorsement, agreed-upon people or entities: fidelity bonds, fiduciary liability insurance and employment practice liability insurance." (Segal Company)
[Guidance Overview] ERISA: Life After the Stock Market Shock (PDF)
14 pages; reprinted by permission to the author from the Benefits Law Journal. Excerpt: "As the current financial crisis continues to unfold, questions abound about why the wheels fell off our economy and what, if anything, ERISA plan fiduciaries should do in response. What follows is the author's best guess as to what happened and what new problems ERISA fiduciaries face after the stock market shock." (Jones Day)
[Guidance Overview] Broker-Dealers and Other Non-Fiduciaries as Fiduciaries? (Part 2)
Excerpt: "The ultimate outcome of the great wrestling match among the executive and legislative branches of the federal government, and various powerful financial services interest groups as to whether broker-dealers will be turned into fiduciaries and, if so, what kind of fiduciary standard they will have to live up to is not yet known, of course. Given that, many of the registered representatives who believe that they already are fiduciaries to their clients cannot be blamed for perhaps feeling as though they're in a state of suspended animation." (Morningstar Advisor)
Second Circuit Limits Impact of Employer's Oral Misrepresentation of Benefits Plan
Excerpt: "Ever since the Second Circuit Court of Appeals held more than 15 years ago in Mullins v. Pfizer, Inc. . . . that a fiduciary's material misrepresentation concerning the availability of future voluntary retirement benefits could be considered a breach of fiduciary duty under [ERISA], the Second Circuit has been a relatively hospitable venue for such claims. Larger companies had the impossible task of policing hundreds of potential manager/human resource personnel 'fiduciaries' to prevent misrepresentations; a misrepresentation, even in a casual conversation, could be an ERISA violation. This all changed on September 30, 2009, when the Second Circuit decided in Ladouceur v. Credit Lyonnais . . . ." (Paul Hastings)
California Supreme Court Justices Question Conflict-of-Interest in San Diego Pension Case
Excerpt: "The California Supreme Court sounded ready yesterday to end the prosecution of six former city of San Diego pension board trustees, a move that could shut down part of a long-running legal battle. At a hearing that lasted more than an hour, the justices seemed skeptical about the case filed in 2005 by the county District Attorney's Office against the board members, charging them with breaking the state conflict-of-interest law." (SignOnSanDiego.com)
[Guidance Overview] Court Finds a Breach of Fiduciary Duty Despite Clear Statement in SPD that Employer Could Amend Retiree Medical Plan
Excerpt: "[The Third Circuit] held that Unisys breached its fiduciary duty by not informing retirees that Unisys retained the right to change the terms of their retiree medical benefits. In reaching this conclusion, the court rejected Unisys' key arguments that (1) there was no need to inform the individuals of Unisys' right to amend because no amendments were being contemplated at the time, (2) the Summary Plan Description (SPD) Unisys distributed expressly stated that Unisys retained the right to amend the plan, and (3) the injunction compelling Unisys to reinstate the plan without the right to change benefits impermissibly restricted Unisys in its capacity as a settlor." (Buchanan Ingersoll & Rooney)
[Guidance Overview] Court Says Participant in Overfunded DB Plan Has No Standing to Sue for Fiduciary Breach
Excerpt: "According to the opinion, all parties agreed that at the time [the plaintiff] filed his complaint, and at all times from 2001 to 2006, the plan was 'substantially overfunded,' according to actuarial valuation reports of the plan's assets and liabilities. The parties also agreed that plan never failed to pay benefits owed to participants or beneficiaries, and that AEGON had no intention to terminate the plan." (PLANSPONSOR)
[Opinion] Testimony of Morningstar Director of Research: Five Concerns About Target-Date Mutual Funds
Excerpt: "[T]here are certain concerns, given the extraordinary position that target-date funds now occupy as the default investment of choice for America's New Retirement Model. These concerns include:* Variation in fees; * The use of proprietary (in-house) funds; * Lack of manager ownership; * Variation in glide paths among the shorter-dated funds; * Lack of transparency" (Morningstar)
[Official Guidance] Court Says Participant in Overfunded Defined Benefit Plan Has No Standing to Sue for Fiduciary Duty Breaches
Excerpt: "[The 8th Circuit majority] held that plan participants 'would if anything be adversely affected by subjecting the Plan and its fiduciaries to costly litigation.'" (PLANSPONSOR)
[Guidance Overview] Chart and Outline of 401(k) Fee Litigation, Updated October 2009
Excerpt: "Over the past several years, more than two dozen lawsuits have been filed relating to 401(k) plan fees and, more specifically, 'revenue sharing' arrangements with plan service providers. Initially, the lawsuits were brought by plan participants against plan sponsors and alleged that, by allowing plan service providers to receive revenue sharing payments, the plan sponsors caused the participants to pay excessive fees, in breach of the sponsors' fiduciary duties to the participants. The focus of these lawsuits against the plan sponsors has evolved over time . . . ." (Groom Law Group)
[Guidance Overview] Fiduciary Debate Lands at Supreme Court
Excerpt: "The debate over investment advisors' fiduciary duty has made it all the way to the Supreme Court. On Monday, November 2, Supreme Court Justices heard oral arguments from lawyers for three investors who claimed that Harris Associates of Chicago, the investment advisor for the Oakmark family of mutual funds, charged them higher fees for similar services than it did to independent institutional investors such as pension funds." (Investment Advisor)
[Guidance Overview] Justices Tackle Case on Investment Fees
Excerpt: "Several Supreme Court justices on Monday seemed reluctant to make the courts arbiters of whether mutual fund investment advisers are charging excessive fees for their work on what has become an essential investment tool for Americans." (Washington Post; free registration required)
[Guidance Overview] San Diego Public Pension Conflict-of-Interest Case Makes It To State Supreme Court
Excerpt: "Public employee pension boards throughout the country are watching the case carefully, as it could affect the makeup of pension boards nationwide. The issue is whether the six San Diego pension board members voted to allow the city to underfund its pension plan in return for higher pension payouts. Defense attorneys argue it was not a 'quid pro quo,' and the defendants are not guilty of conflict of interest. The votes resulted in a billion dollar pension deficit that the city then hid from investors." (KPBS)
[Guidance Overview] DOL Issues Additional FAQs on Schedule C for 2009 Form 5500
Excerpt: "Generally, both pension plans and those welfare plans that are required to file Form 5500 must include Schedule C to report compensation received by plan service providers. Schedule C will not be required for a welfare plan, however, unless the plan has a trust or should have a trust because Technical Release 92-01 does not apply." (Employee Benefits Institute of America)
[Guidance Overview] Fiduciary Liability Insurance vs. ERISA Fidelity Bonds: What's the Difference?
Excerpt: "This article addresses an issue that every plan sponsor should consider whether they have ever been sued or not. We're talking about the issue of insurance, and more particularly, the distinction between fidelity bonds and fiduciary liability insurance. The issue is important because some confusion exists among retirement plan sponsors about their insurance needs." (Reish & Reicher)
Litigation Against Advisers Is Increasing
Excerpt: "We are seeing an increasing number of claims filed against advisers . . . both as civil lawsuits and FINRA arbitrations. While the increase in claims undoubtedly reflects the recent stock market losses, it is also the result of at least three other factors. Those are: an increasing awareness of the fiduciary standard; the growing focus on retirement savings, including rollovers to IRAs; and heightened expectations about the performance of advisers. Of course, there is always that fourth category . . . crooks who steal money." (Reish & Reicher)
Public Employee Retirement System Investments, 1993, 1995, 1997 and 2009 (PDF)
Excerpt: "Recommendation. The Government Finance Officers Association (GFOA) recommends that fiduciaries adhere to the following best practices regarding investments: 1. Pension fund fiduciaries should establish a written investment policy that lays out formal policies and procedures to regulate and monitor the system's investment program. The investment policy should: establish the objectives of the investment program; define acceptable risk; establish liquidity requirements at a level that does not compromise the system's cash flow needs; describe diversification requirements; comply with applicable state and local statutes." (Government Finance Officers Association of the United States and Canada)
[Guidance Overview] Plan Language Sufficient to Authorize Settlement of ERISA Benefit Claims with TCA's
Excerpt: "The recent decision in Faber & Young v. Metro. Life Ins. Co. highlights the boundary between conduct authorized under the plan on the one hand, and conduct forbidden by the fiduciary prohibitions of ERISA. The district court, influenced by the Second Circuit's opinion in Kendall v. Employees Retirement Plan of Avon Prods., 561 F.3d 112, 118 (2d Cir. 2009), held that the fiduciary's conduct did not cross the line drawn by ERISA's fidiciary constraints." (Roy Harmon III via Health Plan Law)
CALPERS Trustees Increasing Proportion of Risky Investments
Excerpt: "As the entire pension industry questions what level of risk it should be taking in the aftermath of last year's financial meltdown, Calpers in June increased its target for venture capital and private equity -- what the fund's advisor itself called the highest risk, highest reward bet -- to 14 percent of overall investments, up from 10 percent." (Reuters)
New York Attorney General Unveils Plan to Overhaul State Pension System
Excerpt: "New York Attorney General Andrew Cuomo unveiled his plan to overhaul the state pension system, even as the state comptroller expressed concern that there could be constitutional problems with it. . . . The proposed legislation would impose stringent limits on political contributions, require extensive disclosures from investment fund personnel, create a code of conduct, compel any licensed professional to report conflicts of interest, and would bar investment firms from using placement agents or lobbyists to get business from the state pension fund.One of the more significant proposals is to change oversight of New York's $120-billion pension fund - the state's single largest asset, Cuomo said - from the current system of sole trustee to a 13-member, bipartisan board of trustees. Currently, only three states - New York, Connecticut and North Carolina - have pension funds with a sole trustee." (Newsday)
401(k) Fee Litigation Report as of September 2009
Excerpt: "In addition to the lawsuits against plan sponsors, lawsuits have been brought against 401(k) plan service providers. These cases typically are based on allegations that the service providers are 'functional fiduciaries' under ERISA. The plaintiffs claim that, in negotiating for and receiving revenue sharing, the service providers breached fiduciary duties and engaged in 'prohibited transactions' under ERISA. Some of the lawsuits similarly challenge the use of actively managed mutual funds as investment options." (Groom Law Group)
Adviser Group Urges Congress to Keep 'Authentic' Fiduciary Standard
Excerpt: "A group of financial planners warned congressional leaders . . . against enacting proposed standards for advisers that are being endorsed by the brokerage industry. The Committee for the Fiduciary Standard, a group of 600 investment professionals, sent a letter to House Financial Services Committee Chairman Barney Frank, D-Mass., and others, voicing concern about proposals to adopt a new fiduciary code of conduct for brokers and advisers. 'The committee is concerned that misunderstandings of the authentic fiduciary standard could inadvertently be reflected in legislation and weaken the standard at the exact time that investors are looking to Congress and regulators to strengthen oversight of the financial system and Wall Street,' the letter said." (Investment News; free registration required)
[Guidance Overview] First Circuit Finds Plan Language Adequate for Delegation of ERISA Fiduciary's Authority
Excerpt: "Section 1105(c)(1)(B) of ERISA (29 U.S.C. 1105(c)(1)(B)) states that '[t]he instrument under which a plan is maintained may expressly provide for procedures . . . for named fiduciaries to designate persons other than named fiduciaries to carry out fiduciary responsibilities (other than trustee responsibilities) under the plan.' This First Circuit opinion examines the nature of the delegation process and provides guidance on the requirements necessary for an effective delegation of fiduciary authority. The issue is important since an ineffective delegation may lead to a benefit decision by a person or entity that has no claim to deferential judicial review." (Roy Harmon III via Health Plan Law)
[Guidance Overview] The Roles of the ESOP Trustee in the ESOP Valuation Process (PDF)
8 pages. Presentation at the ESOP Association Mid-Atlantic Chapter Conference, October 16, 2009, Charlottesville, VA. (Morgan, Lewis & Bockius LLP)
[Guidance Overview] Health Plan TPA Could Still Be a Fiduciary
Excerpt: "A federal judge in Massachusetts has ruled that a third-party administrator (TPA) for two health plans cannot be blamed as a 'functional fiduciary' for problems in processing claims that allegedly cost the plans millions of dollars. However, U.S. District Judge F. Dennis Saylor IV of the U.S. District Court for the District of Massachusetts indicated that a trial would have to be held to decide whether the TPA, BeneFirst LLC, was instead a 'named fiduciary.' Saylor asserted BeneFirst's discretion over the health plans, sponsored by a chain of New England and New York hardware stores, as well as its ability to control plan bank accounts did not rise to the level of making the TPA liable as a 'functional fiduciary' under the Employee Retirement Income Security Act (ERISA)." (PLANSPONSOR.com; free registration required)
401(k) Asset Allocation, Account Balances, and Loan Activity During 2008 (PDF)
63 pages. Excerpt: "After rising in 2003 and for the next four consecutive years, the average 401(k) retirement account fell 24.3 percent in 2008. The average 401(k) account balance moved up and down with stock market performance, but over the entire five-year time period increased at an average annual growth rate of 7.2 percent, attaining $86,513 at year-end 2008. The median 401(k) account balance increased at an average annual growth rate of 11.4 percent over the 2003?2008 period to $43,700 at year-end 2008." (Investment Company Institute)
[Guidance Overview] Should You Become an Investment Manager within the Meaning of ERISA?
Excerpt: "[I]ncreasing numbers of sophisticated plan sponsors are asking their advisors to serve as an ERISA 3(38) investment manager and/or conducting searches for those who do. Significant opportunities are emerging for advisors that are equipped to serve in this capacity, but it is a decision that must be carefully evaluated and prudently implemented." (Reish & Reicher)
[Guidance Overview] Benchmarking of 401(k) Investments and Service-Providers by Employers: Part of a Prudent Process
Excerpt: "When evaluating the relevant data, the fiduciaries should compare it to comparable information from the marketplace. In other words, fiduciaries have to 'benchmark' the investments and services in order to evaluate their quality, cost, effectiveness and other attributes. This requirement applies to all fiduciary decisions . . . ." (Reish & Reicher)
ERISA Litigation
Excerpt: "As the spate of recent cases show, the risk of ERISA litigation has increased for companies. Heavy stock losses and the severity of punishments for scandals being handed out by courts have encouraged plaintiffs to test the boundaries of ERISA fiduciary law. Defendants may be exposed to a costly battle. 'With any litigation, there is the risk of prolonged litigation and its attendant costs. That risk can be greater in ERISA litigation, where the complex benefit issues often require retention of experts and claims are brought on behalf of all participants in the plan,' explains Howard Shapiro, a partner at Proskauer Rose LLP. 'While only equitable relief is available under ERISA, such relief can be costly if reformation of the plan, reversal of a plan amendment, or the removal of plan trustees is a possibility.'" (Financier Worldwide Limited)
Current Wave of 401(k) Fee Lawsuits May Be a Harbinger of Things to Come
Excerpt: "The complaint's accusations include charging excessive fees, SJP and VLP effectively setting their own compensation by disbursing plan assets to themselves via Charles Schwab Trust Co. without the sponsor's knowledge, and failing to adequately disclose the revenue-sharing they received. Because the providers effectively exercised fiduciary control over the plan for the purposes of enriching themselves, the complaint says, they violated ERISA. The complaint compares the recordkeeping fees it says were charged by VLP with those of its replacement, Allen, Gibbs & Houlik, L.C. (AGH). If the plan 'had engaged AGH in 2007 instead of VLP to provide recordkeeping services, compensation paid to the recordkeeper for the Plan would have been $2,425 instead of $15,106,' the complaint says, adding that the services provided were 'virtually identical.'" (PLANSPONSOR.com; free registration required)
[Guidance Overview] Court Dismisses Company Stock Suit against Harley-Davidson
Excerpt: "The U.S. District Court for the Eastern District of Wisconsin has dismissed a lawsuit accusing Harley-Davidson and certain of its executives of breaching their fiduciary duties under the Employee Retirement Income Security Act (ERISA) by continuing to offer company stock as an investment option in the company's retirement plans. After first determining that former employee Lisa Bosman had standing to sue even though she had cashed out her retirement plan account, Chief U.S. District Judge C. N. Clevert, Jr. said that 'Stating a valid claim of imprudence under these circumstances requires more than allegations that there were gaps between supply and demand and a corresponding bad quarter.'" (PLANSPONSOR.com; free registration required)
Mixed Reaction to Attorney General Andrew Cuomo's Pension Fix for New York
Excerpt: "Attorney General Andrew Cuomo's push to create a 13-member oversight board to end pay-to-play in the state pension fund got mixed reviews Thursday. Three state senators, including Democratic leader John Sampson and Long Island Republican John Flanagan, appeared with Cuomo to support the bill, which essentially would eliminate the state controller as sole trustee of the fund. 'This bill will provide the necessary checks and balances to root out abuse and restore confidence in our state retirement systems,' Sampson said." (NYDailyNews.com)
[Guidance Overview] Fiduciaries Again Defeat ERISA Stock Claims at Trial in Brieger et al. v. Tellabs, Inc. (PDF)
3 pages. Excerpt: "In Tellabs, the corporate and fiduciary defendantssecured another complete victory, proving, once again, that stock drop cases are eminently winnable if the defendants, and their carriers, are willing to stay the course and allow the trier of fact to hear the evidence." (Professional Liability Underwriting Society via Morgan, Lewis & Bockius LLP)
Seven Qualitative Due Diligence Factors in Investment Selection
Excerpt: "A good due diligence process begins by measuring investments using quantitative factors against set benchmarks and in relation to peers. The fi360 Fiduciary Score, for example, is calculated using eleven quantitative factors that we consider to be the minimum due diligence criteria that you should use when evaluating an investment. But in addition to quantitative analysis, fiduciaries should consider applying qualitative factors, which can help detect organizational instability. Organizational instability, over time, usually leads to underperformance.' (Investment News; free registration required)
[Guidance Overview] District Court Concludes That Defendants Had No Discretion to Eliminate or Liquidate Citigroup Stock Fund (PDF)
Pages 1-2 of 5 pages. Excerpt: "The Citigroup decision is noteworthy because the court focused on the plan terms to determine the appropriate scope of any fiduciary duties regarding investments in employer stock. The decision suggests that, if the terms are sufficiently explicit, they could eliminate the prospects of a viable fiduciary breach claim for failure to discontinue stock fund investments." (Proskauer Rose LLP)
[Opinion] 401(k) Fiduciary Responsibility: Conventional Wisdom and the Law of Unexpected Consequences (PDF)
10 pages. Excerpt: "For almost 30 years, conventional wisdom has maintained that 401(k) fiduciaries can easily fulfill their duties of loyalty and prudence by (1) hiring a competitively priced recordkeeper that routinely deals with plans of their size, (2) using a well-respected investment consultant to advise on selecting and monitoring 'competitively' priced investment options, and (3) complying with the letter (as distinct from the spirit) of the law. Conventional wisdom also assumed that employees are rational adults who are fully willing and capable (educationally and financially) of tackling the challenges of achieving a financially secure retirement. Unfortunately, conventional wisdom, more often than not, reflects what we wish to believe rather than fact." (Richard D. Glass via InvestmentHorizons.com)
[Guidance Overview] Flight from Equities in Cash Balance Plan no ERISA Miscue, According to Judge
Excerpt: "An employer's move to reduce its equity holdings and increase fixed income investments in its cash balance pension plan did not represent an illegal benefits reduction, a federal judge has ruled. U.S. District Judge J.P. Stadtmeuller of the U.S. District Court for the Eastern District of Wisconsin asserted that the decision by S.C. Johnson & Sons did not violate the anti-cutback rule in the Employee Retirement Income Security Act (ERISA). Stadtmeuller said the employer's pension plan changes did not result in a 'reduction of accrued benefits' that would trigger the ERISA provision prohibiting sponsors from changing their plan in a way that generates lesser benefits for participants." (PLANSPONSOR.com; free registration required)
Judge Dismisses WaMu Employees Lawsuit vs JPMorgan
Excerpt: "A U.S. District Court dismissed a lawsuit of former employees of Washington Mutual against JPMorgan Chase & Co to recover their retirement account losses after the collapse of the thrift. The plaintiffs filed a case in November 2007 against Washington Mutual asserting the financial company breached duties it owed under the Employee Retirement Income Security Act by allowing them to invest their 401(k) funds in Washington Mutual stock. The funds declined as the stock of Washington Mutual, one of the largest U.S. financial institutions, plunged -- hurt by mounting losses." (Reuters News Service via ABC News)
New Guidance on Department of Labor Enforcement Priorities for Employee Benefits
Excerpt: "In a September 14, 2009 speech, Assistant Secretary of Labor Phyllis C. Borzi announced that EBSA has initiated a criminal project to prosecute what she referred to as 'the most egregious and persistent violations' of ERISA, and also plans to focus enforcement efforts on several key civil areas. All plan sponsors, administrators and other fiduciaries should be aware of these enforcement priorities." (Arent Fox LLP)
[Guidance Overview] Court Dismisses Stock Drop Case against Humana
Excerpt: "The U.S. District Court for the Western District of Kentucky has dismissed claims by retirement plan participants that Humana officials violated their fiduciary duties by holding plan assets in company stock after mistakes made in pricing Medicare Prescription Drug Plans led to decreased company earnings. In his opinion, Judge John G. Heyburn, II said defendants were following the plan's explicit terms by investing plan assets in Humana stock, and that '[t]he allegations do not suggest anything more than poor judgment on the part of the fiduciaries who relied on well-reasoned and researched advice in determining the earnings projections.'" (PLANSPONSOR.com; free registration required)
[Guidance Overview] Eleventh Circuit Upholds ERISA's Plan's Benefit Denial Under Doyle Test
Excerpt: "The unpublished decision in Keith v. Prudential affords further insight into the Eleventh Circuit's take on the proper approach to judicial review in cases of conflicted fiduciaries. The Court has previously held that Met Life v. Glenn implicitly abrogated its prior approach which involved a heightend standard of review and burden shifting. In Keith, the Court signals how this change can make a practical difference in outcomes." (Roy Harmon III via Health Plan Law)
Suit Claims IGT Employees Harmed by Retirement Plan Investment
Excerpt: "There's a new twist in the shareholder legal actions against International Game Technology over the decline in IGT's stock price since 2007. The casino supplier is now being sued by two groups of employee retirement plan participants who say the plan made a poor investment decision when it invested in the company's own stock. Two lawsuits seeking class-action status to represent past and current IGT employees were filed against IGT on Friday in U.S. District Court for Nevada, charging the employees were harmed when the company's retirement plan invested in IGT stock at a time when IGT stock allegedly was inflated by false statements about the company's prospects." (Las Vegas Sun)
[Official Guidance] Text of Proposed Individual Prohibited Transaction Exemption for Chrysler Healthcare VEBA (PDF)
Excerpt: "Pursuant to the UAW Retiree Settlement Agreement between New Chrysler and the UAW . . . the UAW Chrysler Retiree Medical Benefits Plan . . . will be established to provide retiree medical benefits to certain Chrysler-UAW represented employees and retirees, and their spouses and dependents. . . . Certain transactions called for or necessitated by the Settlement Agreement between New Chrysler and the New Chrylser VEBA Plan are prohibited by the restrictions of 406 of ERISA. Accordingly, the Applicant requests an administrative exemption from the Department with respect to: (1) The acquisition by the New Chrysler VEBA Plan of the Shares and the Note from New Chrysler; (2) the holding by the New Chrysler VEBA Plan of the Shares and the Note; (3) the management of the Shares and Note by an Independent Fiduciary; and (4) the asset transfers to and from the New Chrysler VEBA Plan necessitated by the transition of benefits payment responsibility from one plan to another, or due to mistaken deposits into the New Chrysler VEBA Plan." (Employee Benefits Security Administration, U.S. Department of Labor)
Managing Pension Risk Through Dynamic Investment Policy
Excerpt: "In this three-part series, we provide a comprehensive overview of dynamic investment policies (dynamic IPs) for defined benefit plans. Part One covers the events that have contributed to the rise of dynamic investment policies, and Part Two reviews the basic mechanics of a dynamic investment policy. And finally, Part Three (available in October) will offer some additional practical considerations for plan sponsors." (Hewitt Associates)
[Guidance Overview] Written Plan Requirement Defeats Breach of Fiduciary Duty Claims
Excerpt: "'[W]e held in Perreca that an oral statement purporting to alter the terms of an ERISA benefit plan was insufficient to give rise to a claim for promissory estoppel. Perreca, 295 F.3d at 225 [2d Circuit]. This logic applies with equal force to alleged breaches of fiduciary duty when the alleged breach is an oral representation that purports to change an ERISA benefit plan.' . . . . In this case, the plaintiffs alleged that the corporate defendant and its human resources director orally misrepresented the effect of a merger on their pension benefits." (Attorney Roy F Harmon III in the Health Plan Law blog)
Hearing on Defined Benefit Pension Plan Funding Levels and Investment Advice Rules
October 1, 2009. Includes links to testimony. (U.S. House of Representatives, Committee on Ways and Means)
Vick Agrees to $400K Settlement of DOL Charges
Excerpt: "Disgraced NFL quarterback Michael D. Vick has agreed to pay $416,461 in restitution to a pension plan sponsored by his company MV7 LLC to settle allegations Vick had funneled off plan assets for his personal use." (PLANSPONSOR.com)
[Opinion] Joint Testimony of PSCA and Others Before the Committee on Ways and Means Hearing on Investment Advice and DB Plan Funding Levels (PDF)
12 pages; October 1, 2009. (Profit Sharing/401k Council of America)
Detroit Retirement Plan Sued Over Indefensible Investments
Excerpt: "The lawsuit alleges violation of the state Public Employee Retirement System Investment Act, two counts of breach of fiduciary duty, one count of gross negligence and one violation of the Michigan Constitution." (Workforce.com)
Recent Policy Actions And The Outlook for U.S. Inflation
Excerpt: "The prospect of high inflation has some investors worried, given the aggressive monetary and fiscal steps taken to combat the financial crisis. What is reasonable to expect? Our simulations indicate that inflation could trend near 3%. But important risks exist." (Vanguard)
No Government Immunity for Detroit Pension Fund Trustees, Court Says
Excerpt: "A class action suit seeking to hold the Detroit General Retirement pension fund (DGR) trustees accountable for their investment decisions has been approved in what is said to be a precedent setting case. " (Global Pensions)
Where Investment Committees Spend Their Time
Excerpt: "Investment committees often spend too much time on things they can't control and too little time on things they can. Use this tool to see if there are opportunities for your committee to use time more wisely." (The Vanguard Group, Inc.)
[Official Guidance] Text of Proposed Prohibited Transaction Exemption for GM VEBA's Employer Securities (PDF)
12 pages. Excerpt: "According to the Applicants, when the New GM VEBA Plan acquired the New GM Common Stock, the Preferred Stock, the Note and the Warrants, each asset might not have been a 'qualifying employer security' within the meaning of section 407(d)(5) and therefore the acquisition of each would not be permitted under section 406(a). Additionally, the Applicants note that even if the New GM Common Stock, the Preferred Stock, the Note and the Warrants were considered qualifying employer securities, the aggregate fair market value of employer securities held by the New GM VEBA Plan would exceed the 10 percent limitation in section 407(a)(2)." (Employee Benefits Security Administration, U.S. Department of Labor)
[Guidance Overview] Court Clears Computer Sciences Corp. of Wrongdoing and Dismisses Participant Fiduciary Breach Lawsuit Against the Company
Excerpt: "The Question: Did an employer breach its fiduciary duty under the Employee Retirement Income Security Act (ERISA) by maintaining a company stock option in its 401(k) plan despite a 12% decline in its share price related to publicity over the company's potential stock option backdating problems?" (PLANSPONSOR.com; free registration required)
[Guidance Overview] Early Returns in 401(k) Fee Cases Favor Defendants
Excerpt: "The fact that defendants are thus far winning these cases does not mean that fiduciaries need not be concerned with fees under 401(k) plans. What the courts seem to be saying thus far is that they will not micromanage 401(k) plans or second-guess fiduciary decisions that appear reasonable, even if not perfect. The best evidence for a fiduciary in these cases and future cases, however, is a well-documented record showing that the fiduciaries understood the basic factors affecting fees, were aware of the alternatives they could choose, and made rational decisions that were in the interests of the plans and their participants." (O'Melveny & Myers LLP)
Report Suggests Florida Public Pension Could Use More Governance
Excerpt: "A new staff report about plan governance at U.S. public pension programs recommended Florida get an annual independent auditor to examine its state pension fund. A Miami Herald news account said the staff report, presented to the state Cabinet this week, asserted that the Sunshine State's program has fewer people overseeing it than most other states, and that annual independent audits may improve public confidence in investment decisions. The document was the result of a study of governance at the State Board of Administration (SBA), which oversees more than $110 billion in assets for the pension fund and other state accounts." (PLANSPONSOR.com; free registration required)
[Guidance Overview] Plan Language and Design Make All the Difference in In re Citigroup ERISA Litigation
Excerpt: "Take a retirement plan, add company stock -- and throw in a dash of economic turmoil. The result is a volatile mix that sometimes leads to 'stock drop' litigation. The U.S. District Court for the Southern District of New York recently granted the defendants' motion to dismiss a stock drop case in In re Citigroup ERISA Litigation. The decision is a veritable roadmap that plan fiduciaries can use as a guide to protect themselves from claims of breach of fiduciary duty that may result when the price of company stock held in their plan declines." (Faegre & Benson LLP)
[Guidance Overview] TPA's Fiduciary Liability Was Properly Limited to Amount of Health Plan Assets Over Which It Exercised Control
Excerpt: "EBIA Comment: The ERISA definition of fiduciary contains a key limitation: A person is a 'fiduciary' with respect to a plan 'to the extent' that he or she has or exercises certain types of authority or control, including exercising any authority or control over plan assets. The Sixth Circuit's focus on this 'to the extent' phrase is a reminder that fiduciary status is generally not an all-or-nothing concept, but is a functional test that requires a determination of whether a person is a fiduciary regarding the particular activities in question. Here, the TPA had fiduciary liability under ERISA, but only to the extent that it had exercised control over plan assets when its TPA contract ended." (Employee Benefits Institute of America)
[Guidance Overview] Plan Fees: Fiduciaries Must Focus on Float
Excerpt: "During this period of heated debate on economic instability and health care reform, retirement plan fiduciaries should not forget that plan fee reform is on the horizon. Legislation regarding plan fees is moving through Congress, and the Department of Labor (DOL) is finalizing regulations regarding fee disclosure under ERISA. These efforts will focus on: Revenue sharing (the process by which one service provider collects fees from plan assets and distributes them among other providers), and Disclosure of plan fees to plan participants and the government. This WorkCite article focuses on 'float' ? a form of service provider compensation that continues to be in the plan fee spotlight." (McGuireWoods LLP)
U.S. Supreme Court to Hear Case Regarding Excessive Mutual-Fund Fees This Fall
Excerpt: "[The U.S. Supreme Court] is scheduled to hear the case of Jones vs. Harris Associates this fall. The case concerns allegedly excessive fees paid by mutual funds to their investment advisers. Last summer, a three-judge panel in the U.S. 7th Circuit Court of Appeals in Chicago rejected the lawsuit brought by investors, who charged that three Oakmark mutual funds had overpaid their investment adviser. Chief Judge Frank H. Easterbrook wrote in the opinion that the marketplace should determine whether such fees were excessive. In his dissent opinion, however, Judge Richard A. Posner said the marketplace can't always be trusted to regulate such fees. Further, he said, executive compensation is spinning out of control and is not adequately regulated. That Posner and Easterbrook should disagree to such an extent practically guaranteed that the case would be brought before the Supreme Court, says Robert C. Christenson, a partner in the Atlanta office of Fisher & Phillips." (Human Resource Executive Online)
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