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News Items, by Subject

Fiduciary duties of trustees, directors, others

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A Cascading Behavioral Roadmap for Fulfilling Fiduciary Duties
"Breaches of Fiduciary Duty and their poor outcomes tend to originate from poor behaviors and decisions that create a negative cascading effect on a Retirement Plan. A simple impact analysis can reveal whether the Plan Sponsor's/Investment Committee's behaviors and methodologies is having a positive or negative cascading effect on a Retirement Plan." (The Trusted Fiduciary)
403(b) Retirement Plan Fee Litigation: An Update
"While each lawsuit makes claims based on the particular facts and circumstances of the plan in question, there are some common themes that have emerged ... [P]lan sponsors should understand the issues being raised and keep track of the litigation, in order to manage risk. [A chart provides] a status update on each of the 403(b) lawsuits." (Cammack Retirement Group)
Complaint Alleges That Fidelity Charged Improper Fees
"Plan fiduciaries, regardless of whether they use Fidelity as their record keeper, should take the following steps: [1] Review and analyze investments and fee disclosures for investments (including any footnotes in fine print); [2] Ask their record keepers whether there are any nondisclosed fees similar to infrastructure fees paid by Fidelity; [3] Understand and analyze the employer's/plan sponsor's/fiduciary's own fiduciary obligations; [4] Consider whether additional actions may be appropriate to further the interests of plan participants, including changing the fund line-up or participating in litigation; and [5] Document the above steps." (Husch Blackwell)
U.S. Supreme Court Declines to Hear USC's Appeal in ERISA Arbitration Case
"The Ninth Circuit's decision held that the dispute falls outside the arbitration agreements that USC employees signed because the parties consented only to arbitrate claims brought on their own behalf and the employees' claims were brought on behalf of the ERISA plans. As a result of the decision, the litigation's discovery phase will continue to proceed in federal court." [Munro v. Univ. of So. Cal., No. 17-55550 (9th Cir. July 24, 2018; cert. denied Feb. 19, 2019)] (Schlichter Bogard & Denton)
BlackRock Fights $100M ERISA Fiduciary Suit
"Plaintiffs Charles Baird and Lauren Slayton hit BlackRock Inc., its subsidiaries and board members, along with BlackRock's investment consultant Mercer Investment Counseling, with a sprawling, 134-page, 11 count amended complaint in August. The suit alleges with the aid of Mercer, BlackRock mismanaged retirement plans by charging excessive hidden fees, selecting investments that charged up to 871 percent in premiums, violating ERISA and costing participants hundreds of millions of dollars in losses." (Cohen Milstein)
[Opinion] ACLI Written Testimony to House Financial Services Committee: Putting Investors First? Examining the SEC's Best Interest Rule
"ACLI supports rules requiring all financial profess ionals, when making a recommendation, to act in the consumer's best interest -- with care, skill, pr udence, and diligence -- based on the consumer's financial needs and objectives. ACLI also supports rules requiring financial professionals to avoid or reasonably manage conflicts of interest through inc reased transparency. This is consistent with National Association of Insurance Commissioners (NAIC) and [SEC] (SEC) initiatives underway." (American Council of Life Insurers [ACLI])
[Opinion] IRI Testimony at House Financial Services Committee Hearing: Putting Investors First? Examining the SEC's Best Interest Rule (PDF)
10 pages. "IRI supports the SEC's proposed Reg BI because it establishes a new, clear, consistent and workable best interest standard of conduct for financial professionals that will serve as a platform to help consumers make informed decisions and preserve investor choice. To avoid unintended consequences associated with Reg BI, the SEC should provide additional guidance and clarity regarding certain provisions." (Insured Retirement Institute [IRI])
[Opinion] IRI Testifies to Maryland Legislature on Proposed Fiduciary Rule
"Maryland consumers will have less access to professional financial advice, insurance products and investment products under proposed legislation that imposes sweeping, ill-defined burdens on financial advisors ... Maryland policymakers should collaborate with the SEC in its effort to develop appropriate, cohesive, and workable standard of conduct rules, but should not create additional regulatory layers until the SEC completes its national standard." (Insured Retirement Institute [IRI])
Brown University Settles 403(b) Fiduciary Class Action Suit for $3.5 Million
"Brown University, Providence, R.I., settled a class-action lawsuit alleging the university's 403(b) plans' managers breached their fiduciary duties under ERISA by offering too many similar investment options and paying excessive fees for investments." (Pensions & Investments)
How QDIAs Have Changed the Fiduciary Role of 401(k) Plan Sponsors
"The real power behind the [qualified default investment alternative (QDIA)] lay in its allowance for plan sponsors to adopt the 'opt-out' default policy of automatically enrolling employees into the retirement plan.... That simplicity may appear to make life easier for the 401k plan sponsor -- maybe too simple.... While TDFs do reduce the fiduciary risk, they don't eliminate it.... [C]hoosing an appropriate target date fund provider presents the same level of fiduciary liability as that of selecting any other investment option." (Fiduciary News)
Mixed Ruling in Oracle ERISA Suit Strongly Favors Defense
"Despite a setback for Oracle at the class certification stage, a new ruling out of a federal court in Colorado pushes back strongly against many -- but not all -- of the plaintiffs' claims." [Troudt v. Oracle Corp., No. 16-175 (D. Colo. Mar. 1, 2019)] (planadviser)
MIT 401(k) Plan Participants Not Entitled to Jury Trial of ERISA Breach of Fiduciary Duty Claims
"The court followed the 'great weight of authority' in ruling that there is no right to trial by jury in ERISA actions for breach of fiduciary duty.... The MIT decision is notable because it may seal the small crack plaintiffs made in the wall of cases rejecting a jury-trial right in ERISA fiduciary-breach cases." [Tracey v. Mass. Inst. of Tech., No. 16-11620 (D. Mass. Feb. 28, 2019)] (McDermott Will & Emery)
[Opinion] American Benefits Council Comment Letter on Nevada Draft Fiduciary Regs
"State fiduciary rules, like the one enacted in Nevada and like the proposed regulation, are clearly preempted by ERISA.... [It] is difficult to argue that ERISA's savings clause would protect a state fiduciary rule like Nevada's from federal preemption. This is because Nevada's rule is primarily focused on the provision of investment advice, rather than the regulation of insurance, banking, or securities." (American Benefits Council)
Arizona Annuity Law Passes Senate
"The Arizona bill bans indices that have not been in existence for at least 10 years for use in fixed indexed annuity illustrations.... In addition, the bill requires that the insurer and agent 'retain copies of the disclosure document, illustrations and the buyer's guide and all other forms of advertising for the duration of the fixed indexed annuity or 10 years, whichever is shorter.' " (
ERISA: Thou Shall Not Pay Excessive Fees!
"While there have been recent, yet expensive, victories for not-for-profit plan sponsors in the Section 403(b) space, plan fiduciaries should not get too comfortable. There were also early victories in the 401(k) cases that were filed in 2006. However, the tide turned and some of those Section 401(k) cases ended up settling in the multi-million dollar range ... Litigation is not limited to large plans, as plaintiffs and the DOL have found that smaller plans are 'low hanging fruit' in terms of finding ERISA violations." (CKR Law, via Real Property, Trust and Estate Law [RPTE] eReport, American Bar Association)
State Fiduciary and Best Interest Developments
"A number of states are seeking to impose fiduciary or best interest requirements on broker-dealers, investment advisers, financial planners and/or insurance brokers and producers in their dealings with customers.... [These rules] are in addition to -- and sometimes inconsistent with -- federal requirements being considered by the SEC or by the [DOL] for retirement investment advice.... [A chart summarizes] the activities in each state along with proposals of the National Association of Insurance Commissioners (NAIC)[.]" (Drinker Biddle)
An Introduction to Modern Prudent Fiduciary Investing
"Investment uncertainties include the future in general and the unexpected -- both good and bad -- news that it brings such as which investments or investment managers, and so on, have outperformed (or underperformed). The antidote to these uncertainties is broad (across the asset classes that comprise a portfolio) and deep (within each such asset class) diversification of portfolio risk." (Morningstar Advisor)
United Loses in Court on Behavioral Health Coverage Guidelines
"A federal judge ruled Tuesday that United Behavioral Health breached its fiduciary duty to patients by using unreasonable and overly restrictive guidelines to make coverage decisions for tens of thousands of mental health and substance abuse patients. The decision, if upheld on appeal, could have wide ramifications of what insurers must cover in the fast-growing behavioral healthcare sector." [Wit v. United Behavioral Health, Nos. 14-2346, 14-5337 (N.D. Cal. Mar. 5, 2019)] (Modern Healthcare Online; free registration required)
Class Action Challenges Managed Account Revenue Sharing (PDF)
"This class action lawsuit shines a light onto the revenue sharing (or possible self-dealing and prohibited transactions) relationship between a recordkeeper and a managed account provider.... In a fee compressed world, recordkeepers are seeking ways to stay in business while remaining competitive. Managed Account is a new revenue source to put recordkeeping back in the driver's seat." [Davis v. Stadion Money Mgmt. LLC, No. 19-119 (M.D.N.C. complaint filed Jan. 25, 2019)] (Chao & Company, Ltd.)
Fiduciaries Get Final Win in Lawsuit Over Disney 401(k) Investment in Sequoia Fund
"[T]he appellate court found that Sequoia's investment and concentration in Valeant was facially consistent with the retirement plan documents, noting that both the plan's summary plan description and Sequoia's 2015 Prospectus note that Sequoia is 'non-diversified' and there are risks associated with Sequoia's investment strategy. To the extent that the plan documents even distinguish between 'value' and 'growth,' the 9th Circuit agreed with the District Court that these words were used simply to 'describe [Sequoia's] investments; not to also convey [its] overall investment strategy.' " [Wilson v. Fidelity Mgmt. Trust Co., No. 17-55726 (9th Cir. Mar. 1, 2019, unpub.)] (planadviser)
[Opinion] Fidelity Infrastructure Fee, Wells Fargo Pension Rebates: Intermediaries Enjoy Fund Payments
"The glaring questions these cases raise for regulators and investors are: Should major financial intermediaries, such as Wells and Fidelity, be permitted to agree among themselves to withhold, summarily disclose, or even mischaracterize, the payment arrangements between them? Is the answer to this question different when retirement plan assets, protected by the federal ERISA statute, are involved?" (Edward Siedle, via Forbes)
[Guidance Overview] Proposed Regulation BI Coverage of Retirement Investors (PDF)
"The debate centers around the atypical reference to 'legal representative' in the proposed retail customer definition. In the proposing release, the SEC points to trusts representing natural persons as the exemplar of such a legal representative. Some commentators have seized upon that reference to argue that plan sponsors or other fiduciaries acting for the plan as whole and not for participants individually -- e.g., in selecting investment options for a defined contribution plan or managing the assets of a defined benefit plan -- are or should be treated as 'retail customers' for this purpose." (Eversheds Sutherland)
Respondeat Superior in the ERISA Context (PDF)
"Respondeat superior claims in the ERISA context may be made in one of two ways; while there is no circuit split on this issue, there is a split of authority as to the manner in which these claims should be addressed, and this article considers these rulings." (The Wagner Law Group, via Benefits Law Journal)
Wildman v. American Century: Process Saved the Day (PDF)
"This case has dispelled the increasing beliefs that: [1] lowest cost by the way of index investments is equivalent to a fiduciary safety net when compared to higher cost active alternatives; [2] a higher yielding stable value fund is a better fiduciary option; or [3] an investment on a Watch List for an extended period time without removal is imprudent. Meeting the fiduciary standard requires plan fiduciaries to inquire, collect, investigate, discuss, debate, and make informed decisions." [Wildman v. American Century Services, LLC, No. 16-737 (W.D. Mo. Jan. 23, 2019)] (Chao & Company, Ltd.)
[Opinion] Correlation of Returns: The ERISA 404(c) Fiduciary 'X' Factor
"[W]hen factoring in the correlation of returns between an actively managed mutual fund and a comparable index fund, actively managed funds often charge an effective annual expensive ratio that is often 500-600 percent higher than the fund's publicly stated expense ratio.... Mutual funds and plan service providers do not like to talk about cost-efficiency or 'closet' indexing. Plan sponsors must insist on such information in order to properly both the plan and themselves against fiduciary liability." (The Prudent Investment Fiduciary Rules)
Lessons for Employers from Recent Fiduciary Litigation Involving Health & Welfare Benefit Plans
"These lawsuits should prompt you to question how your ERISA-covered welfare benefit plans are being administered and craft new approaches to limit potential breach of fiduciary duty claims.... [1] Maintain legally compliant plan documents and summary plan descriptions (SPDs) ... [2] Distribute SPDs and other ERISA-required disclosures to employees on a timely basis ... [3] Maintain oversight of plan administrators and regularly assess plan operations for fiduciary compliance." (Fisher Phillips)
Fidelity Lawsuit Could Have Wider Effect on Plan Investment Options (PDF)
"Although Fidelity is called out specifically in this class action regarding its disclosure and potential conflicts pertaining to its practices involving the operation of its proprietary mutual fund platform ... the potential industry implication is wide and deep. Today, all recordkeepers and custodians are subject to the same growth and revenue pressures to maintain service competitiveness and survival; favorable court findings in support of the Plaintiffs could affect the 'open architecture' approach altogether." [Wong v. FMR LLC, No. 19-10335 (D. Mass. complaint filed Feb. 21, 2019)] (Chao & Company, Ltd.)
Will SEC's Reg BI Preempt State Fiduciary Rules?
"Opinions vary on the extent to which the SEC rule would raise brokers' obligations to investors. Less controversial is the fact that Reg BI and Nevada's fiduciary rule would create different requirements for brokers. And that is raising the question of whether the SEC's rule, coming from a federal agency, would preempt Nevada's and other state rules governing brokers' standard of conduct." (BenefitsPro; free registration required)
Plaintiffs Target Fidelity's Mutual Fund Shelf-Space Payments
"Although the 'secret' payments that the lawsuit takes aim at were apparently not made directly by the funds in which the plans invested, but by third party service providers, the lawsuit appears to adopt the theory that by extracting payments from those service providers, Fidelity indirectly exerted fiduciary control over fund expenses, since the cost of the payments would ultimately be passed through to investors." [Wong v. FMR LLC, No. 19-10335 (D. Mass. complaint filed Feb. 21, 2019)] (Groom Law Group)
[Opinion] SPARK Institute Comments on Nevada's Proposed Regs (PDF)
14 pages. "[T]he SPARK Institute believes that the fiduciary standard of care applicable to retirement plans and their participants should be established at the federal level, not the state level.... Second, the SPARK Institute is very concerned that the proposed regulations' definition of 'Investment Advice' would inappropriately extend Nevada's fiduciary standard of care and disclosure obligations to cover a wide range of beneficial conversations that our members routinely have with their customers to educate them and encourage them to save for retirement." (The SPARK Institute)
As States Clash with Feds Over Fiduciary, Regulation Jitters Rise
"The federal government's failure to rally behind a uniform fiduciary standard for brokers and advisors left a vacuum that lawmakers in a variety of states are looking to fill with their own rules for the wealth management sector. But some worry that state efforts will add an unwelcome new layer of regulation and impinge on SEC-registered advisors." (Financial Planning)
Intel Asks Supreme Court to Rule on ERISA Breach Case
"The participant alleged that plan managers violated their ERISA obligations by offering too many alternative investments in the plans' lineups and that the plans' disclosures of investment information were inadequate. The investment policy committee has argued that the participant missed the three-year deadline for filing ERISA claims." [Sulyma v. Intel Corp. Investment Policy Comm., No. 17-15864 (9th Cir. Nov. 28, 2018; cert. pet. filed Feb. 26, 2019)] (Pensions & Investments)
How Can Independent Fiduciaries Help Plan Fiduciaries? (PDF)
10 pages. "Independent fiduciaries provide independent, expert advice to plan participants; permit benefit plans to take advantage of investment opportunities that may otherwise be prohibited; help relieve 'regular' fiduciaries from conflicts of interest; and insulate plan fiduciaries from liabilities.... The most common situation for hiring an independent fiduciary is when a conflict of interest arises that precludes the regular plan fiduciary from acting. In many cases a transaction might be prohibited under ERISA Section 406 unless an independent fiduciary is hired to eliminate that conflict." (Gallagher)
Andrus Wagstaff Fights Class Bid in Nationwide 401(k) Fee Suit
"The lawsuit claims Nationwide's practice of charging a flat, 1 percent fee for administrative services allowed the company to collect fees that were nearly 10 times the median fee throughout the industry. Nationwide at one point received $625 per investor, per year, for servicing a 401(k) plan covering fewer than 30 people, when a reasonable fee would have been closer to $64, according to the complaint." (Bloomberg BNA)
Supreme Court Could Defend Fiduciary Decisions in Taking Up Putnam Case
"The Investment Company Institute (ICI) is urging the U.S. Supreme Court to take on a case against Putnam Investments ... ICI argues that shifting the burden of proving causation, or the lack thereof, from the plaintiff to the fiduciary ignores the ordinary default rule and the plain language of ERISA specifying that fiduciaries are liable for 'losses to the plan resulting from' a fiduciary breach." [Putnam Investments, LLC v. Brotherston, No. 17-1711(1st Cir. Oct. 15, 2018; cert. pet. filed Feb. 11, 2019, Docket No. 18-926)] (planadviser)
Retirement Plan Sponsors: Do You Know Where Your Securities Are?
"[1] When you approve a new investment, review the documents to determine whether you are approving securities lending. This will likely be the case if you are approving a collective investment trust (CIT).... [2] Understand the securities lending program terms.... [3] Determine whether the lending arrangement is in the best interest of plan participants and document your reasons for your conclusion. [4] Make sure all the other requirements of the relevant PTEs are met." (Warner Norcross & Judd LLP)
Fiduciary Fallout Gets Personal for Human Resources VP
"HR managers are on the front lines. They are the parties responsible for ensuring that ERISA plans are operated according to a plan's provisions.... [T]ips for reducing your operational risk exposure [include:] [1] Study the plan document ... [2] Monitor all activities that support the plan's benefits to ensure compliance with the plan document ... [3] Be wary of payroll ... [4] Commission an operations risk assessment ... [5] Consider installing an automated operations control system." (Roland|Criss)
Should You Hire An ERISA 3(38) Fiduciary to Make Independent Investment Decisions?
"An ERISA 3(21)(ii) fiduciary makes investment recommendations to plan fiduciaries (e.g., committee members) who either approve or reject them while an ERISA 3(38) Investment Manager has the authority to make investment decisions without the approval of other plan fiduciaries.... [R]egardless of whether you hire an advisor in a 3(21) or 3(38) capacity, the advice and process should really be the same." (Greenspring Advisors)
[Opinion] 12b-1 Fees: What They Are and Why You Should Avoid Them
"Of the confusing 401(k) fees, few are more cryptic than 12b-1 plan fees. 12b-1 fees are paid to the salespeople who distribute mutual funds and are paid from the fund's assets. But what exactly are they? How do you know if you're paying them? What impact do they have on you? And how can you avoid these fees in the future?" (ForUsAll)
[Opinion] ICI Amicus Brief to Supreme Court Supporting Review of Burden of Proof in ERISA Investment Fiduciary Cases (PDF)
33 pages. "This ruling turns on its face the ordinary default rule, applied by the Second, Sixth, Seventh, Ninth, Tenth, and Eleventh Circuits, that the plaintiff bears the burden of proving loss causation. The deleterious effect of this ruling is compounded by the First Circuit's conclusion that showing that particular investment options did not perform as well as a set of index funds, selected by the plaintiffs with the benefit of hindsight, suffices 'as a matter of law' to establish losses to the plan." [Putnam Investments, LLC v. Brotherston, No. 18-926 (1st Cir. Oct. 15, 2018; cert. pet. filed Feb. 11, 2019)] (Investment Company Institute [ICI])
Arizona Is Latest State to Attempt an Annuity Sales Rule
"The bill was pushed by Secure Financial Solutions, a registered investment advisor firm doing business in Scottsdale, Ariz., [a] Senate spokesman said. The bill enjoys broad, bipartisan support and could move quickly ... Most significantly, the Arizona bill bans indices that have not been in existence for at least 10 years for use in fixed indexed annuity illustrations." (
[Official Guidance] Text of EBSA Prohibited Transaction Exemption for UBS Qualified Professional Asset Managers (QPAMs)
65 pages. "This exemption will be in effect for one year from the date of the judgment in the French First Instance Court against UBS and/or UBS France.... This exemption also aims to ensure that Covered Plans can terminate relationships in an orderly and cost effective fashion in the event the fiduciary of a Covered Plan determines it is prudent to terminate the relationship with a UBS QPAM.... The Department cautions that the relief in this exemption will terminate immediately if an entity within the UBS corporate structure is convicted of a crime described in Section I(g) of PTE 84-14 (other than the Convictions and the 2019 French Judgment Against UBS/UBS France) during the Exemption Period." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
The First Circuit's Putnam Decision: Where Does ERISA 401(k)/403(b) Litigation Go Now?
"The First Circuit's decision was ... well-reasoned and well-written. While the decision itself was important, perhaps the most memorable aspect of the decision was the First Circuit's admonition to 401(k) and, by implication, 403(b) ERISA plans and plan sponsors ... The First Circuit's statement raises a number of questions for ERISA 401(k)/403(b) excessive fees/breach of fiduciary duty litigation going forward." [Brotherston v. Putnam Investments, LLC, No. 17-1711 (1st Cir. Oct. 15, 2018)] (The Prudent Investment Fiduciary Rules)
VP of HR Sued by Former Senior Director of Global Benefits Over 401(k) Operational Error
"[T]he troubling takeaway from this case is that Conagra's simple failure to follow the written terms of the plan [may be] sufficient for a court to find that it violated its fiduciary duty. The other concern is that operational errors relating to the definition of compensation are among the IRS 'top ten' failures corrected in the [VCP.]" [Karlson v. Conagra Brands, No. 18-8328 (N.D. Ill., complaint filed Dec. 19, 2018)] (E is for ERISA)
Pension Funds' Lawsuit Against Credit Suisse Allowed to Proceed
"The complaint alleges that Credit Suisse misrepresented its trading and risk-limit controls and that they were increased to allow it to accumulate nearly $3 billion in distressed debt and U.S. collateralized loan obligations that later proved to be difficult to liquidate. A subsequent disclosure by Credit Suisse of a $633 million write-down related to the sale of those positions led to an 11% stock drop, the plaintiffs allege." [City of Birmingham Ret. and Relief System vs. Credit Suisse Group AG, No. 17-10014 (S.D.N.Y. Feb. 19, 2019)] (Pensions & Investments)
Supreme Court Lets Stand Ninth Circuit's Refusal to Compel Arbitration in USC ERISA Lawsuit
"The U.S. Supreme Court has denied the University of Southern California's petition to have the high court determine whether participants who filed a lawsuit challenging the management of the university's two [ERISA] retirement plans should be compelled to arbitrate their claims pursuant to an agreement signed with the university." [Munro v. Univ. of So. Cal., No. 17-55550 (9th Cir. July 24, 2018; cert. denied Feb. 19, 2019)] (planadviser)
[Opinion] Industry Associations Provide Joint Statement to NAIC on Best Interest Standard of Care for Annuities and Securities Transactions
"The standard that life insurance companies and financial professionals support will enable retirement savers at all income levels to maintain access to, and information about, annuities, the only financial products in the private marketplace that can guarantee lifetime income." (American Council of Life Insurers [ACLI], the Association for Advanced Life Underwriting (AALU) and the National Association of Insurance and Financial Advisors (NAIFA).)
Details of Settlement of Franklin Templeton Self-Dealing Lawsuit Revealed
"[In] addition to the settlement payment, the fiduciaries to the plan with responsibility for selecting plan investment options will add a nonproprietary target-date fund option (TDF) to the investment lineup, which will be maintained as a plan investment option for the duration of the compliance period in addition to the plan's qualified default investment alternative (QDIA) -- the LifeSmart Target Date Funds." (PLANSPONSOR; free registration may be required)
What Is a DOL Adviser Investigation Like?
"The number of [DOL] investigations of financial advisers has steadily increased over the years; here is a primer on the DOL's sources of authority, and what to expect when examiners come knocking." (planadviser)
Unusual Facts Help Preserve Stock Drop Claim Based on Nonpublic Information
"If the existence of a breach depends on the fiduciary's reasonable expectation of future harm, this case suggests that economic data showing the likelihood of future harm in analogous situations may be relevant. And if the expected future harm is a market overreaction, this case suggests that trading in an efficient market might neutralize that concern." [Jander v. Ret. Plans Comm. of IBM, No. 17-3518 (2d Cir. Dec. 10, 2018)] (Thomson Reuters / EBIA)
Categorical Conflict of Interest Does Not Alter Standard of Review of Benefit Denials
"The Second Circuit held that plaintiffs' allegations that the defendant suffered from a 'categorical potential conflict of interest' -- because it both funded the plan and was the claim's decision-maker -- did not affect the application of the arbitrary and capricious standard of review in the absence of a showing by the plaintiffs that the conflict actually affected the plan administrator's decision-making." [Kirkendall v. Halliburton, Inc., No. 17-3487 (2d Cir. Jan. 24, 2019)] (Proskauer's ERISA Practice Center)
403(b) Plan Participants Drop ERISA Lawsuit Against Long Island University
"Participants in a 403(b) plan run by Long Island University have dropped their ERISA lawsuit after having accused plan manager of having allowed excessive fees.... The record keeper, TIAA-CREF, was not named as a defendant." [Mulligan v. Long Island Univ., No. 18-2885 (E.D.N.Y. Feb. 8, 2019)] (Pensions & Investments)
Texas Federal District Court Finds for Defendants in Post-Jander Stock Drop Case
"The court found that this proposed alternative action did not pass the 'more harm than good test': 'The Court cannot say that attempting to prevent Exxon's alleged misrepresentations would have been so clearly beneficial that a prudent fiduciary could not conclude that it would be more likely to harm the fund than to help it.' ... The court also rejected plaintiffs' (Jander-based) 'disclosure was inevitable' argument, finding that 'investigations into [as distinguished from the filing of charges against] Exxon by state attorneys general and the SEC' did not make it inevitable that the non-public information 'would come to light.' " [Fentress v. Exxon Mobil Corp., No. 16-3484 (S.D. Tex. Feb. 4, 2019)] (October Three Consulting)
Best Practices for Plan Sponsors, Part 7
"[N]ow that 401(k) plans have become the primary retirement plan for most employers and employees, it seems fairly obvious that the burden of success of 401(k) plans needs to fall primarily on employers and fiduciaries. That is, in part, a legal burden. However, it is also a societal burden ... If those legal and societal expectations are to be met, plan sponsors need to take charge of their plans and run them like businesses. In other words, they need to have budgets and measure whether budget-to-actual is being realized." (
Multinational Companies Take Note: U.K. Proposes Jail Time for Mismanagement of DB Plans
"[T]he prospect of this major tightening of UK pension regulations and possible criminal penalties seems likely to influence the decisions around pension funds and transactions involving UK pension plan sponsors in the future. Multinational companies will want to consider these.... [T]he UK has seen a movement toward de-risking pensions similar to the US and government initiatives such as these may well accelerate that trend." (Groom Law Group)
Georgetown Prevails in ERISA Fee Litigation Case
"[T]he court concluded that plaintiffs ... had not experienced any harm ... because they failed to allege that: [1] they were invested in the challenged funds, [2] the challenged funds outperformed plaintiffs' alleged comparable investment fund, and/or [3] that they had withdrawn, or planned to withdraw from, one of the funds ... The court rejected plaintiffs' excessive recordkeeping fee claim because plaintiffs did not show that the fees were excessive relative to the services that were being offered." [Wilcox v. Georgetown Univ., No. 18-422 (D.D.C. Jan. 8, 2019)] (Proskauer's ERISA Practice Center)
Charles Schwab 401(k) Lawsuit Trimmed but Moves Forward
"Former Schwab employee Michael Dorman can move forward with a challenge to how the company replaced an affiliated stable value fund in its 401(k) plan with other funds. But Dorman's other allegations, which challenged the fees and performance of the plan's Schwab-affiliated funds and certain loan transactions, were dismissed[.]" [Dorman v. Charles Schwab Corp., No. 17-285 (N.D. Cal. Feb. 8, 2019)] (Bloomberg BNA)
Themes in Recent Employee Benefits Litigation
"Good fiduciary process continues to win ... Who must prove a fiduciary breach caused losses? It depends.... Administrative staff can create fiduciary liability ... Harder for fiduciaries to win on statute of limitations grounds ... Pension lawsuits challenge benefit calculation ... Fiduciaries win life insurance conversion suit ... Benefit interference claim proceeds." (CapTrust)
Maryland Pursues Fiduciary Rule Along with New Jersey, Nevada
"Maryland's sweeping consumer protection bill includes language that would define an array of financial professionals as fiduciaries ... The proposal would extend fiduciary responsibilities to broker-dealers, their agents and insurance providers, as well as investment advisors and their reps." (Financial Planning)
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