Search the News Archive

Prominent attorney Robert E. "Rob" Hoskins, 50, died on February 27. A partner in the Greenville, South Carolina office of Foster Law Firm, LLC, Rob handled ERISA and insurance claims involving long term disability, health insurance, life insurance, accidental death and dismemberment insurance, and pension/retirement matters before various courts including the U.S. Supreme Court. He wrote and lectured extensively on ERISA. His peers rated him as an "AV" lawyer in Martindale-Hubble. Rob was a co-administrator of ERISABoard.com, a popular forum for ERISA attorneys, where he contributed over 4,300 posts. His complete biography is online. Services in Greenville are on March 3. He will be greatly missed.  MORE >>

"Plan fiduciaries have become more aggressive in their attempts to recover mistaken overpayments to retirees. The plan may elect to recoup the overpayments by reducing future pension payments, but what if the participant received a lump sum or the recoupment method will not work, for example, because the retiree is elderly and the value of the future payments is not large, or because the payee wasn't really entitled to any vested pension? ... Recent actions by the U.S. Supreme Court may make it even more difficult to prevail in a lawsuit to recover pension overpayments."  MORE >>

"Plaintiffs had three policies: a D&O policy, fiduciary liability insurance, and excess fiduciary coverage. They were sued by the DOL following a formal investigation for selling stock to an ESOP at an inflated price, but the court ruled that the policies didn't cover the plaintiffs for the following reasons: [1] The policies didn't cover actions taken before the effective date. [2] The D&O policy didn't cover ERISA claims at all. [3] Plaintiffs failed to give notice of the claims during the policy period, where the claim was specifically defined as including an investigation by the [DOL] or the [PBGC]. [4] The excess coverage didn't kick in until the policy limits in the basic policies had been reached[.]" [Bilyeu v. Nat. Union Fire Ins. Co. of Pittsburgh, No. 50,049-CA (La. Ct. App. Sept. 30, 2015)]  MORE >>

"As plan audits have uncovered more and more payment errors, many plans have acted as if no time limits or other restrictions applied to their repayment demands.... [P]lan fiduciaries can consider the following steps to improve their chances of prevailing in these suits: [1] Make sure that plans have specific provisions for recouping overpayments. [2] Give the payee the opportunity to argue that the payment is correct under ERISA's claims and appeals procedures.... [3] Do self-audits regularly and if a lawsuit seems necessary, file it promptly. [4] Pay attention when retirees call to question whether they are receiving the right payments." [Pharmacia Corp. Supp. Pension Plan v. Weldon, No. 4:14CV1498 (E.D. Mo. Aug. 24, 2015)]  MORE >>

"The court made the following rulings ... [1] The decision to annuitize was not a fiduciary act.... [2] The possibility of annuitization was not required to be disclosed in the [SPD].... [3] Participant consent was not required for annuitization of their benefits.... [4] Section 510 of ERISA ... was not violated merely because the plaintiffs did not have rights to continued plan participation, ERISA coverage or PBGC insurance.... [5] Paying $1 billion in fees and expenses as part of the $8.4 billion annuitization was not a fiduciary breach.... [6] It was not imprudent to purchase one group annuity contract from Prudential rather than from multiple insurers." [Lee v. Verizon Comm. Inc., No. 14-10553 (5th Cir. Aug. 17, 2015)]  MORE >>

"The IRS should consider the following changes to preserve individually-designed plans: Modify its rule that a document defect found on audit goes automatically into the closing agreement program ... Modify its long-criticized rule that interim and discretionary amendments must be adopted by the end of the year in which they are effective or the plan sponsor's tax return deadline for that year.... Approve major modifications to a plan, such as conversion to another type of plan as if a new plan had been adopted at the effective date of the change.... Issue more model and sample language and add choices, similar to the way that adoption agreements can be used for different choices."  MORE >>

"[1] Start by clarifying and narrowing the activities which result in fiduciary status.... [2] Provide a clear carve-out for the actuaries, lawyers and accountants who perform typical professional services in connection with investments.... [3] Provide a carve-out for sophisticated IRA investors similar to the carve-out for large plan investors with financial expertise.... [4] Eliminate the 'catch 22' for acknowledging fiduciary status.... [5] Fix the 'Best Interest' exemption."  MORE >>

"[A recent] Ninth Circuit decision clearly states that estoppel is not available where relief ... would contradict the written plan provisions. However, [in] another decision in Michigan ... a retiree named Paul successfully sued to estop a plan from correcting pension overpayments. Why did Paul succeed and should plan fiduciaries be worried about this decision? ... [U]se of clear disclaimers is still a good practice. Regular self-audits should still permit plan sponsors to correct typical honest mistakes. And this whole lawsuit could have been avoided if the elements of Paul's calculation had been carefully checked when he asked about his service." [Paul v. Detroit Edison, No. 13-14256 (E.D. Mich. Mar. 30, 2015)]  MORE >>

"[A] federal district court in Utah has ruled that former participants are entitled to benefits under both their original plan and their new plan for the same period of service because they were not notified of the transfer of their benefits.... This is clearly a result that the parties never intended.... How can plan sponsors avoid it? ... [These] practices put sponsors in a position to respond effectively to double-dipping claimants:" [Anderson v. CEMEX, No. 2:12-00136 (D. Utah Dec. 29, 2014)]  MORE >>

"This case seems on course to give us some rules about when a transaction's principal purpose is to evade liability. We have already had some guidance in another circuit on how that phrase is applied in the multi-employer plan context, as the Sun Capital Partners court found that simply taking less than an 80% ownership interest wasn't an attempt to evade liability. However, this case involves an interest that was originally higher than 80% and was reduced. Further, this court seems to be willing to entertain the idea that a transaction can have more than one principal purpose." [PBGC v. The Renco Group, No. 13-cv-621 (S.D.N.Y. Mar. 5, 2015)]  MORE >>

"[We] can't count on any regulatory changes actually coming into effect any time soon. What does this mean for plan fiduciaries? If they are following best practices, new rules will probably be a non-event because they will already be getting their investment advice from ERISA fiduciaries.... Plan committees don't need action by a government authority in order to hire these professional fiduciaries and protect themselves. If they all did so, this debate would be moot for 401(k) plans (IRAs may be a different story) because non-fiduciaries wouldn't be consulted."  MORE >>

"Alliance Bernstein recently released the shocking result of a survey it had taken of plan sponsors: a whopping 37% of those fiduciaries surveyed didn't know that they were fiduciaries. Obviously, it is unlikely that these individuals are fulfilling their fiduciary responsibilities if they are unaware of their status.... ERISA has a functional definition of fiduciary, which means that you become a fiduciary based on what you do.... Another form of ignorance can complicate this problem, because it is also possible to believe that your plan service providers are fiduciaries when they are not."  MORE >>

"Due to differences in the way liability was calculated, plans that were well or even fully-funded on an ongoing basis could have unfunded termination liability and 4062(e) liability under the PBGC's rules. Now plan underfunding will be measured under the ongoing rules used to determine whether variable rate premiums are due, and plans that are at least 90% funded under those rules are exempt. Instead of disproportionate funding of termination liability, a plan sponsor that has a Section 4062(e) event may elect to make additional contributions over those required by the minimum funding rules to fund unfunded vested benefits over seven years."  MORE >>

"Had CIGNA properly communicated the challenged plan changes, more realistically and with less puffery, it could have avoided liability for unintended benefits. Companies that adopt prototype plans need to be especially alert when distributing plan communications, because in almost all cases their vendor has not assumed legal responsibility for administration or the communications it sends out." [Amara v. CIGNA, Nos. 13-447-cv and 13-526 (2d Cir. Dec. 23, 2014)]  MORE >>

"Members of the board of directors of the plan sponsor have a residual fiduciary responsibility to prudently appoint and monitor the named fiduciaries, including committee members, that they hire. Although they were not named in the [DOL's Severstal Wheeling] complaint ... the board can never shed all of its fiduciary responsibility by delegation to a pension committee or hired advisors."  MORE >>

"[I]n a letter addressed to the heads of the IRS, Department of Labor, PBGC and the new Consumer Financial Protection Bureau. Ron Wyden, Chairman of the Senate Committee on Finance, and Tom Harkin, Chairman of the Committee on Health, Education, Labor and Pensions urge these agencies 'to consider clarifying all of the circumstances and conditions under which de-risking strategies are permissible in the absence of a formal plan termination' and 'to move forward expeditiously with rules to protect plan participants.' While acknowledging the right of employers to terminate parts of their plans, the Senators want guidance requiring advance notice and expanded disclosure of the risks to participants, and new rules to clarify the standards that apply to the choice of an annuity provider and other fiduciary duties involved."  MORE >>

"IRS has simplified the rules for those who filed U.S. tax returns, even if they failed to attach Form 8891. Under the new procedures, the deferral will be available for those who filed U.S. income tax returns and didn't include earnings on the accounts in income, and for those in this situation in the future.... What about those who were eligible to defer the tax on their accounts but did not file income tax returns for every year? The new rules seem to leave them in limbo. Even worse, they may become subject to a $10,000 penalty for not filing a form reporting participation in Canadian plans."  MORE >>

"Any strategy aimed at maximizing DC plan value should be sensitive to the particular needs and circumstances of plan stakeholders.... [W]here, as is most often the case, the majority of an employer's workforce are not sophisticated investors, pooled, administrator-managed DC investments may be seen as a considerable value-add, increasing DC benefit security. By contrast, this strategy may be viewed as overly 'paternalistic' to participants in an institutional investors' DC plan."  MORE >>

"Apart from setting contribution levels and trying to educate members on how to create winning personal investment strategies, it is often the case that too little thought is given to ways of maximizing DC plan value.... [1] Are you missing low cost ways to enhance the value of your DC plans and increase member appreciation of these plans' true potential? [2] Could your plan do more to encourage employees to participate and maximize their contributions? [3] Is there more that you could do to communicate the value of your DC plans to your workforces? [4] Should you (and your record keeper delegatees) be doing a better job developing effective communication programs to prepare members for important decumulation decisions as they approach retirement?"  MORE >>

"A positive aspect of this decision is that it is important that there be bright lines to warn those who deal with employee benefit plans in advance of their assumption of fiduciary responsibilities under ERISA. If we accept that plan fiduciaries have the negotiating leverage described in the Santomenno opinion, this may well be a correct interpretation of ERISA.... However, this decision also does little to help fiduciaries of smaller plans who do not -- in the 'real world' -- have much leverage to negotiate lower fees or different service terms." [Santomenno v. John Hancock Life Ins. Co., No. 13-3467 (3d Cir. Sept. 26, 2014)]  MORE >>