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News Items, by Subject

Fiduciary duties of trustees, directors, others

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Second Circuit Affirms District Court's Equitable Remedy in Xerox Case
"[T]he Second Circuit upheld the district court's decisions to: [1] Apply the equitable remedy of reforming the plan, calculating benefits as if the plaintiffs were newly hired. [2] Award the plaintiffs prejudgment interest at the federal prime rate." [Frommert v. Conkright, Nos. 17-114, 17-738 (2d Cir. Jan. 14, 2019)] (Thomson Reuters Practical Law)
Best Interest and Best Practices, Part 13
"In most of the settled cases, the plaintiffs' class action attorneys require that certain conditions -- or 'best practices' -- be adopted by the plan fiduciaries. And, in settlement after settlement, those conditions are, by and large, the same. That raises the obvious question, why haven't plan committees reviewed these cases and instituted the practices required by the settlement agreements?" (
Developing a High-Performance Retirement Plan Committee
"[1] Choose the right number of members ... [2] Appoint a Chairman and a Secretary ... [3] Utilize a Committee Charter and Committee Roster ... [4] Provide formal fiduciary training ... [5] Meet 2 to 4 times per year (but no less than annually) ... [6] Keep meeting minutes ... [7] Maintain a 'fiduciary file' ... [8] Purchase fiduciary liability insurance." (Greenspring Advisors)
The Georgetown University 403(b) Decision and the Future of 403(b) Fiduciary Litigation
"Based on the nature of the arguments within the Court's analysis of the Stock fund, the Court based its opinion purely on the fund's returns, both the fund's nominal, or stated, and risk-adjusted returns. For the courts to start basing decisions even in part on Morningstar' 'star' system is not a good sign." [Wilcox v. Georgetown Univ., No. 18-422 (D.D.C. Jan. 8, 2019)] (The Prudent Investment Fiduciary Rules)
Examining the Fiduciary Duties of Investment Advisers Under State Common Law
"In 2018 the SEC published a draft of its interpretation of the fiduciary duties of investment advisers.... The SEC's draft could lead investment advisers to believe their conduct is 'o.k.' -- when in fact litigation (and arbitration) occurs as a result of state common law fiduciary claims -- and only very rarely under the Advisers Act itself ... [This article describes] the fiduciary duties of investment advisers, as discerned from both the SEC's proposed rule, but as augmented with state common law understandings of the fiduciary standard of conduct." (Ron A. Rhoades, JD, CFP)
Best Interest and Best Practices, Part 12
"This article discusses a novel approach for compliance with the fiduciary standard for the selection of investments for 401(k) plans.... [For the First Circuit Court of Appeals], the starting point is to consider index funds. Then, plan fiduciaries should seek to identify other funds, including actively managed funds, that can reasonably be expected to match or outperform the index funds." [Brotherston v. Putnam Investments, LLC, No. 17-1711 (1st Cir. Oct. 15, 2018)] (
[Opinion] 2019 Wish List for Regulation of Financial and Investment Advice
"[1] Have the SEC alter how the Advisers Act is applied and enforced.... [2] The states should move to adopt fiduciary standards for brokers who provide investment advice.... [3] Clean up mutual fund regulation.... [4] Solve the problems in defined contribution plans ... [5] Reduce broker-dealer conflicts of interest.... [6] Work to reduce regulatory overkill.... [7] Disband FINRA." (Ron A. Rhoades, JD, CFP)
$28 Trillion and Personal Liability: ERISA Roars Back
"[T]he 10 highest ERISA class action settlements in 2017 with respect to employer-sponsored retirement plans totaled nearly $1 billion.... In recent years, ERISA fiduciary litigation has increasingly focused on excessive plan fees and expenses... Looking ahead, fiduciaries' decisions about monitoring costs and who they appoint and hire to administer health plans will be important drivers of ERISA litigation -- and often, companies are not fully aware of this growing threat." (Crowell Moring)
Another University Wins 403(b) Suit
"In the course of the 28-page ruling, [Judge Collyer] took the plaintiffs to task for: [1] not appreciating the difference in standing between defined benefit and defined contribution plans ... [2] applying 401(k) plan standards to 403(b) ... and [3] 20/20 hindsight in evaluating investment decisions[.]" [Wilcox v. Georgetown Univ., No. 18-422 (D.D.C. Jan. 8, 2019)] (National Association of Plan Advisors [NAPA])
[Opinion] Disclosure Requirements the SEC Could Adopt -- That Would Make Sense
"While disclosures are not the most effective means of consumer protection, the disclosure forms [in this article] would provide consumers with much more useful information. These forms of disclosure would more clearly provide consumers with information that permits them to understand the role their broker or investment adviser is in, and the duties owed (or not owed) to the consumer." (Ron A. Rhoades, JD, CFP)
Ninth Circuit Rejects Petition for Rehearing from Chevron 401(k) Participants
"On Jan. 3, three federal appeals court judges voted to deny the request for a rehearing en banc ... The participants had sought class-action status. They claimed that some funds in the Chevron plan's investment lineup had charged 'unreasonably high' investment management fees among the six fiduciary breach claims." [White v. Chevron Corp., No. 17-16208 (9th Cir. Nov. 13, 2018, unpub.)] (Pensions & Investments)
Four Critical ERISA Cases to Watch in 2019
"[1] Plan participants' role in retirement plan management put into question.... [2] Will the standard challenge finally make its way to the Supreme Court? ... [3] Courts grapple with which party must prove loss causation in a breach of fiduciary duty case.... [4] The [DOL]'s fiduciary rule meets its demise." (401K Specialist)
Second Circuit Allows IBM Stock Drop Case to Proceed
"Jander does not resolve the 'would have' vs. 'could have' issue. Instead, the Jander court holds that, ... where disclosure of the inside information is likely in the near future ... in effect no fiduciary could conclude that disclosure would do more harm than good. This holding, in the court's view, does not conflict with related restrictions on securities fraud litigation (a related securities fraud case based on more or less identical facts was dismissed), because the ERISA action is based on fiduciary breach, not fraud.." [Jander v. Ret. Plans Comm. of IBM, No. 17-3518 (2d Cir. Dec. 10, 2018)] (October Three Consulting)
Selecting and Monitoring Target Date Funds
"Things [for plan fiduciaries] to consider are: [1] How well does the TDF's characteristics align with the ages and expected retirement dates of the plan participants? [2] What are the principal strategies and risks of the fund? [3] Have there been any changes to the investment strategy or management team since the fund was initially chosen? [4] What is the glide path? [5] What are the fees and expenses, including sales loads?" (Retirement Management Services, LLC)
[Opinion] Not Impossible: Meaningful Reforms to the Regulation of Investment Advice
"[This article sets] forth two major rules the SEC could adopt, in lieu of its current proposed Reg BI. The first rule would be adopted under the Advisers Act and would define, correctly, the scope of the broker-dealer exemption from the requirement to register under the Advisers Act. The second major rule herein would define the scope of the investment adviser's fiduciary obligation, in order to correct misunderstandings that might otherwise have resulted over time." (Ron A. Rhoades, JD, CFP)
Ninth Circuit Opines on Effect of Actual Knowledge on ERISA's Statute of Limitations
"The Ninth Circuit's holding on this point make sense; a prohibited-transaction claim can be brought based solely on knowledge that a transaction occurred, thus the date a plaintiff learns of the transaction should start the three-year limitations period. But the Ninth Circuit's interpretation of 'actual knowledge' is practically problematic. A defendant will have to prove that a plaintiff in fact read materials in order to show a plaintiff had knowledge of facts contained in those materials." [Sulyma v. Intel Corp. Investment Policy Comm., No. 17-15864 (9th Cir. Nov. 28, 2018)] (McDermott, Will & Emery, via National Law Review)
Mutual of Omaha ERISA Plaintiffs Defeat Motion to Dismiss
"Citing a series of precedent-setting cases, Senior U.S. District Judge Joseph F. Bataillon of the U.S. District Court for the District of Nebraska [explained] that an ERISA complaint of this nature does not need to describe in exhaustive detail the ways in which plaintiffs claim defendants breached their fiduciary duties." [Lechner v. Mutual of Omaha, No. 18-22 (D. Nebr. Dec. 31, 2018)] (PLANSPONSOR)
[Opinion] The SEC Protects Brokers, Not Investment Advisers, and Not Consumers
"For decades the S.E.C. has diminished the line between 'product sales' (broker-dealer activities) and 'investment advice' (investment adviser activities). Without court intervention, there would be no line at all. And, even then, the S.E.C. refuses to draw common-sense lines, and to apply fiduciary standards of conduct to relationships that are advisory in nature." (Ron A. Rhoades, JD, CFP)
[Official Guidance] Text of GASB Exposure Draft: Implementation Guide -- Fiduciary Activities
37 pages. Includes amendments to existing Q&As, along with new Q&As covering: [1] Identifying fiduciary activities; ... [2] Reporting fiduciary activities in fiduciary funds ... [3] Statement of fiduciary net position ... [4] Statement of changes in fiduciary net position. (Governmental Accounting Standards Board [GASB])
New Class Action Lawsuit Examines How a Common Definition of 'Compensation' Was Applied
"According to the complaint, the plan provided that participants could elect to make pre-tax and after-tax elective contributions, while the employer was required to make matching contributions ... equal to a percentage of a participant's compensation. Also according to the complaint, the plan defined 'compensation' to include certain post-termination payments ... The plaintiff then alleges that the plan fiduciaries re-interpreted the plan to exclude such bonuses in 2016, thus failing to take elective deferrals from such payments and not matching such deferrals." [Karlson v. ConAgra Brands Inc., No. 18-8328 (N.D. Ill., complaint filed Dec. 19, 2018)] (Groom Law Group)
[Opinion] SEC's Proposed Form CRS Obfuscates, Rather Than Informs
"2019 may well be a watershed year for those who care about the future of the emerging profession of financial and investment advice. Against the backdrop of a court's overturning of the [DOL's] Conflict of Interest and related rules, and the SEC's bungling, several state securities administrators, and/or state legislatures, may step in to feel the void. First up may the New Jersey Bureau of Securities, which will likely release in early 2019 a proposal to impose fiduciary duties upon brokers who provide investment advice." (Ron A. Rhoades, JD, CFP)
Transamerica Faces Familiar Allegations in Self-Dealing ERISA Complaint
"Allegations in the text of the complaint put an emphasis on a warning that ERISA experts have been sharing heading into 2019, based on the results of both recent regulatory audits and litigation.... [If] a fund on a DC plan menu has been underperforming its stated benchmark for a long period of time and no action has been taken, this is a clear red flag." [Karg v. Transamerica Corp., No. 18-134 (N.D. Ia. complaint filed Dec. 28, 2018)] (planadviser)
A Fiduciary Focus: Steps 401(k) Plan Sponsors Should Resolve to Take in 2019
"[1] Outsource fiduciary liability ... [2] Remove all conflict-of-interest fees ... [3] Show employees how to take advantage of market volatility ... [4] Combine health and wealth wellness ... [5] Demonstrate the downside of leakage." (Fiduciary News)
Pension Plan OCIO: Is It Right for Your Company? (PDF)
"This paper reviews the primary challenges a plan sponsor faces when managing a [DB plan], and outlines the factors to consider in meeting objectives. It examines three models for running a pension: the internal team, the consultant assist, and the [outsourced chief investment officer (OCIO)]. With the help of a questionnaire, readers can better understand which model would be best for their unique pension need." (Vanguard)
New Year's Resolutions to Avoid 401(k) Fiduciary Frustration
"[1] Review plan fees ... [2] Review plan providers ... [3] Review salary deferral deposits ... [4] Review compensation ... [5] Review the employee census ... [6] Review active plan participation." (401K Specialist)
ERISA Implications for Firing a Whistleblower
"The Court held that the whistleblower's cooperation with the DOL was quintessential protected activity, and that defendants were liable because they arranged the vote by the full board of trustees that resulted in the whistleblower's termination, they influenced the vote by recommending the whistleblower's termination, and the trustee had the authority to remove other union trustees or have their positions with the union terminated." [Acosta v. Brain, No. 16-56529 (9th Cir. Dec. 4, 2018)] (Proskauer's ERISA Practice Center)
[Opinion] An Open Letter to the SEC and DOL: Please Clarify Who Is the 'Client' in Target Date Funds (PDF)
"TDFs have become riskier since 2008 ... [P]roposed prudence standards [would] require consultants to hold client best interests above their own, but it depends on your definition of 'client.' ... Please make it clear that TDF beneficiaries are the 'clients.' These clients want to be protected from investment losses as they near retirement and they think they are being protected, but they are not." (Target Date Solutions)
Second Circuit Revives Dismissed IBM Stock-Drop Suit
"The Second Circuit reinstated a claim for breach of fiduciary duty under ERISA brought by participants in IBM's 401(k) plan who suffered losses from their investment in IBM stock.... In so ruling, the Second Circuit became the first circuit court since the Supreme Court's decision in Fifth Third Bancorp v. Dudenhoeffer ... to allow such a claim to survive a motion to dismiss. According to media reports, this has sparked renewed hope within the ERISA plaintiffs' bar in the viability of these claims." [Jander v. Ret. Plans Comm. of IBM, No. 17-3518 (2d Cir. Dec. 10, 2018)] (Proskauer's ERISA Practice Center)
Full Ninth Circuit Panel Asked to Review Chevron ERISA Case
"The plaintiffs request a review by the full appellate panel, rather than the three-judge panel that affirmed dismissal of the case, because they say the court imposed strict pleading standards that conflict with the decisions of the 9th and other circuits." [White v. Chevron Corp., No. 17-16208 (9th Cir. Nov. 13, 2018, unpub.; appellants' petition for rehearing filed Nov. 27, 2018)] (planadviser)
D.C. Court of Appeals: Delta Pilots Cannot Recover Fiduciary Breach Damages from Plan's Post-Termination Investment Gains (PDF)
"The Corporation argues that it is entitled under Section 1344(c) to any post-termination increase in the value of pension plan assets. In other words, the Corporation reasons, Congress has already decided who benefits or suffers the loss from a change in the value of plan assets once that plan has been terminated. Therefore, the Corporation concludes that the pilots cannot recover that money as equitable relief for an alleged breach of fiduciary duty. We agree.... The pilots' request for post-termination investment gains is fundamentally flawed." [Lewis v. PBGC, No. 17-5068 (D.C. Cir. Dec. 21, 2018)] (U.S. Court of Appeals for the District of Columbia Circuit)
401(k) Suits Point to Need for Litigation Risk Prevention
"These settlements cover financial institutions that have filled their 401(k) plans with proprietary investments ... Although defendants admitted no wrongdoing and agreed to pay money, many settlements include non-monetary remedies for plan management practices that could have reduced litigation risk in the first place." (Pensions & Investments)
Under ERISA, Ignorance Is Bliss in the Ninth Circuit
"[T]he Ninth Circuit concluded that the statute of limitations was not triggered when the documents were made available to the plaintiff.... [T]he plaintiff was required to have actual knowledge that Intel increased the retirement funds' alternative investments and that those investments were imprudent." [Sulyma v. Intel Corp. Investment Policy Comm., No. 17-15864 (9th Cir. Nov. 28, 2018)] (Ogletree Deakins)
In with the New, Out with the Old: A Flood of Quasi-fiduciary Rules Is Coming (PDF)
27 presentation slides. Topics include: [1] SEC initiatives; [2] DOL activity; [3] State fiduciary initiatives; [4] ERISA litigation trends; [5] 2019 legislative outlook. (Fi360)
Most Counts Against GE Allowed to Proceed in ERISA Lawsuit
"[The district court said] that, although mere knowledge that 'something was awry' is insufficient for actual knowledge ... Congress intended the actual knowledge requirement to excuse 'willful blindness by a plaintiff.'... [T]he defense unsuccessfully argue[d] that ERISA Section 406 does not apply here because the management fees are not a 'plan asset,' and that even if management fees are a plan asset, the claims must be dismissed because plaintiffs have not pled a non-exempt prohibited transaction." [In re G.E. ERISA Litigation, No. 17-12123 (D. Mass. Dec. 14, 2018)] (PLANSPONSOR)
Second Circuit Gives New Life to Stock Drop Claim
"The Second Circuit reversed dismissal of an ERISA stock drop class action finding plaintiff alleged enough to plausibly show that disclosure of alleged corporate problems would not have done more harm than good and sketching a treasure map for ERISA plaintiffs seeking to recover for 401(k) plan losses." [Jander v. Ret. Plans Comm. of IBM, No. 17-3518 (2d Cir. Dec. 10, 2018)] (Seyfarth Shaw LLP)
Seventh Circuit: Plaintiffs Seeking Plan Benefits Need Not Cite Specific Plan Provisions to Survive Motion to Dismiss
"[T]he Seventh Circuit declared that '[P]laintiffs alleging claims under 29 U.S.C. Section 1132(a)(1)(B) for plan benefits need not necessarily identify the specific language of every plan provision at issue to survive a motion to dismiss under Rule 12(b)(6).' Dr. Griffin did not need to point to a particular plan provision specifying entitlement to 'greater payment,' as such a requirement would 'turn notice pleading on its head[,]' especially when the plan failed to provide Dr. Griffin with 'information necessary to allege with more detail where the plan's calculation of the usual and customary rate went astray.' " [Griffin v. TEAMCARE, No. 18-2374 (7th Cir. Nov. 26, 2018, amended Nov. 30, 2018)] (Arent Fox)
Fiduciary Status for the Unwary
"Since the determination of whether a broker-dealer is a fiduciary is 'functional,' that is, based on conduct, courts consider all of the facts in the relationship in determining whether the five-part fiduciary advice test is met. This includes the terms of the service agreement between the parties, as well as the conduct of the broker and the client's reliance on the broker's suggestions. Relevant factors may include: the regularity of the advice; the length of the relationship; the broker's knowledge about the plan client; the client's expertise in financial matters; whether the client is receiving any other investment advice for the plan assets; and whether the client has ever rejected the broker's recommendations." (Drinker Biddle)
Sixth Circuit Holds Employer Has No Duty to Notify of Conversion Options
"[T]he court held that the test is not whether the plan provider should know that the former employee might be interested in converting his group life insurance -- because he did not ask the question, the plan provider was not obligated to provide an answer.... [T]he court held that neither ERISA nor its implementing regulations required [the employer] to provide any more information about conversion options than what was found in the summary plan description." [Vest v. Resolute FP US Inc., No. 18-5046 (6th Cir. Oct.10, 2018)] (Carlton Fields)
New ERISA Class Actions Claim Underpayment of Pensions Due to Unreasonable Actuarial Factors
"Three recent lawsuits, filed within 15 days of each other, have targeted large corporate pension plans for using what the plaintiffs claim are unreasonable actuarial equivalent factors, including 'outdated' mortality tables, when calculating plan benefits payable in various annuity forms of distribution.... Given the lack of guidance in this area, the unsettled nature of the 'reasonableness' standard, and the interplay of fluctuating interest rates with gradual changes in mortality rates, it is difficult to predict how the courts will view these issues." (Groom Law Group)
Ninth Circuit Addresses 'Actual Knowledge' in ERISA Statute of Limitations Decision
"The Court determined that based on current law and precedent, 'actual knowledge' is something more than knowledge that a transaction has occurred.... The Court noted that the required level of knowledge will vary depending on the nature of the claim ... 'The key is that, whatever the underlying ERISA claim, the limitations period begins to run once the plaintiff has sufficient knowledge to be alerted to the particular claim.' " [Sulyma v. Intel Corp. Investment Policy Comm., No. 17-15864 (9th Cir. Nov. 28, 2018)] (FosterSwift)
Second Circuit Holds that Participants Stated Plausible ERISA Claim for Breach of Duty to Manage ESOP Assets Prudently
"[T]he Court was presented with the question of what standard one must meet to plausibly allege that fiduciaries of an [ESOP] have violated ERISA's duty of prudence.... On appeal, Plaintiff proposed just one alternative action: early corrective disclosure of the microelectronics division's impairment, conducted alongside the regular SEC reporting process. The Court found that a prudent fiduciary could not have concluded that the corrective disclosure would do more harm than good." [Jander v. Ret. Plans Comm. of IBM, No. 17-3518 (2d Cir. Dec. 10, 2018)] (Kantor & Kantor)
Litigation Lessons for 401(k) and 403(b) Fiduciaries: Apply These in 2019
"[1] Your process matters.... [2] Put it in writing.... [3] Know and review your options.... [4] Understand target date funds.... [5] Benchmark plan fees ... [6] Retain an expert to help you.... [7] Consult outside counsel when necessary.... [8] Hold regular committee meetings.... [9] Review your providers.... [10] Schedule regular RFPs." (Cohen & Buckmann, P.C.)
[Opinion] American Benefits Council Letter to New Jersey Bureau of Securities: State Fiduciary Standards Should Not Apply to ERISA Plans
"[The Council is] concerned that state action on this matter could quickly evolve into a major threat to the workability of employee benefit plans maintained by large multi-state plan sponsors because different states' rules will inevitably adopt standards different from each other and different from the federal standards imposed through ERISA. ERISA explicitly protects employee benefit plans from this type of disruption." (American Benefits Council)
New Class Action Wave: Actuarial Equivalents in Pension Plans (PDF)
"A court in New York is being asked to certify a class action lawsuit served on MetLife earlier this month. This was followed by a nearly identical lawsuit in Texas served on American Airlines as well as another in New York served on PepsiCo. The first two suits fault the use of an old mortality table in determining optional forms of distribution; the PepsiCo suit faults simplified option factors.... These cases highlight the possible need to periodically re- evaluate the reasonableness of factors currently used in ERISA pension plans." (Buck)
$3M Settlement Reached in Edward Jones Self-Dealing Lawsuit
"In response to the defendants' motion [to dismiss], the plaintiffs amended their complaint by replacing the one questioned plaintiff with another; removing allegations concerning the three Edward Jones managed mutual funds; and adding the Edward Jones Profit Sharing and 401(k) Administrative Committee and its members as defendants. After this complex set of motions and rulings, the parties have now opted to settle the matter rather than proceed to the full trial." (PLANSPONSOR)
Best Interest and Best Practices, Part 11
"[W]hile there may be cases where non-diversified recommendations could be made, the starting point -- and the general rule -- is that a Best Interest advisor should recommend a balanced portfolio that is appropriate for the investor. It is fair to say that Best Interest advice mandates the use of a balanced portfolio, absent circumstances that would reasonably justify an exception." (
End of Year IRS Checklist for Retirement Plan Providers
"The IRS provides a list of the 'Top Ten Failures Found in Voluntary Correction Program' to alert businesses to common benefit plan tax problems, including ... [1] Review benefits plan for tax law changes.... [2] Review plan definition of compensation for determining contributions.... [3] Collecting loan repayments under IRC 72(p).... [4] Are the minimum age-based distributions being made? ... [5] Failure to pass the ADP/ACP nondiscrimination tests under IRC 401(k) and 401(m).... [6] Failure to properly provide the minimum top-heavy benefit or contribution under IRC 416 to non-key employees." (Butterfield Schechter LLP)
ERISA Class Action Litigation over Fees in Health and Welfare Plans
"Although the primary issue is whether these plans were improperly designated as governmental entity plans ... the key issue for health-plan fiduciaries is whether Atrium retained a costly, affiliated entity as a third-party administrator for its health plan and failed to ensure that participants paid only 'reasonable' fees for services, co-insurance and deductibles." [Shore v. Charlotte-Mecklenburg Hospital Authority (d/b/a Atrium, f/k/a Carolinas Healthcare System), No. 18-961 (M.D.N.C. complaint filed Nov. 19, 2018)] (McDermott Will & Emery)
How the DOL Fiduciary Rule Proposal Affected Fund Flows
"[T]he DOL fiduciary rule proposal was successful in mitigating lower returns resulting from conflicted advice in the two years after the rule was proposed.... While loads appeared to play a big role in directing fund flows from 1993 to 2014, they do not seem to affect fund flows in a statistically significant way from 2015 onward. In short, brokers may have been swayed to steer their clients to funds that shared more loads with them, but that does not seem to be the case anymore." (Morningstar Advisor)
States Expected to Ramp Up 'Best Interest' Efforts Early in 2019
"As many as 14 states want to put a 'fiduciary duty' on insurance agents via new regulations ... The regulation chatter is heaviest in big, populous states where progressives are in key political posts -- such as California and New Jersey ... New York is furthest along with a best interest rule that covers annuities and life insurance. It is slated to take effect in August 2019 for annuities and six months later for life insurance." (
Is Discovery Allowed When a Breach of Fiduciary Duty Claim Is Asserted?
"[D]iscovery is usually limited in appeals of the denial of ERISA-governed benefits. This is especially true when there is de novo review. But watch out if a breach of fiduciary duty claim is asserted. That same rule (prohibiting discovery) does not apply when a party seeks discovery into purported breaches of fiduciary duty under 29 USC 1132(a)(3)." (Lane Powell PC)
Advisor Best Practices: Providing Fiduciary Education to Plan Sponsors
"Most plan sponsors would benefit from foundational education covering topics such as [1] The fiduciary standards under ERISA and how that translates into specific responsibilities related to overseeing a retirement plan; [2] Bonding requirements; [3] Plan fees and fee disclosure rules; [4] Current service provider relationships and any delegation of fiduciary duties ... [5] Terms of the investment policy statement ... [6] Terms of the plan document; [7] Critical compliance deadlines." (Newport Group)
MetLife Sued by Pension Plan Participants
"A class-action lawsuit ... [claims] the company underpaid retirement plan participants by using outdated mortality rates to calculate certain alternative retirement benefits.... The plaintiffs are demanding the insurer ... [pay] all previously withheld benefits, recalculate the benefits that have been paid, and provide an accounting of all prior payments of benefits to determine how much should have originally been paid." [Masten v. Metropolitan Life Ins. Co., No. 18-11229 (S.D.N.Y. complaint filed Dec. 3, 2018)] (Pensions & Investments)
Ninth Circuit Upholds Dismissal of 401(k) Fee Case
"The court sided with defendants on one of the critical issues in current 401(k) fee litigation: whether a plaintiff may state a claim for breach of the ERISA duty of prudence merely by alleging that there was a less expensive, 'identical' alternative to the service/fund provider selected by plan fiduciaries.... The Ninth Circuit's most recent decision, ... while brief, included a pointed discussion of the critical issue[.]" [White v. Chevron Corp., No. 17-16208 (9th Cir. Nov. 13, 2018; unpub.)] (October Three Consulting)
[Opinion] Is 401(k) Chaos Coming for Plan Sponsors?
"If SCOTUS upholds the 1st Circuit's decision, and a plan's advisory contract contains that clause insulating the advisor from liability, it will then fall solely on the plan sponsor to prove that it was prudent in the selection of their plan's investment options.... [In] most cases they will simply not be able to do so, resulting in full liability, including unlimited personal liability for a plan's fiduciaries." [Brotherston v. Putnam Investments, LLC, No. 17-1711 (1st Cir. Oct. 15, 2018)] (The Prudent Investment Fiduciary Rules)
Challenges Too Many 401(k) Plan Sponsors Don't Consider
"[1] Understanding the extent of legal liability ... [2] Must proactively decide plan hardship provisions ... [3] Bad fees vs. Good fees ... [4] The link between employee financial fitness and company profitability ... [5] Don't know what they don't know." (Fiduciary News)
Fiduciary Breach Suit Against Caterpillar Record Keeper Comes to an End
"Plaintiffs and defendants agreed to drop litigation in a lawsuit by Caterpillar Inc. 401(k) participants alleging the plan's record keeper and an affiliate violated their fiduciary duties when they subcontracted a financial advice service to Financial Engines." (Pensions & Investments)
Court Dismisses Fiduciary Breach Lawsuit Against Washington University 403(b) Retirement Plans
"Plaintiffs alleged that [fiduciaries]: ... [1] paid too much for recordkeeping and administrative services; [2] caused losses to plan participants by offering only retail class funds, when lower-cost institutional fund options were available; and [3] failed to remove poorly performing funds.... The judge ... [found] that the university satisfied its duty to offer an acceptable array of investment funds with reasonable fees, and that no facts indicated that the fiduciaries failed to use a prudent process in selecting plan investment options." [Davis v. Washington Univ. in St. Louis, No. 17-1641 (E.D. Mo. Sept. 28, 2018)] (Hodgson Russ LLP)
Best Interest and Best Practices, Part 10
"A 'best interest' analysis requires that an advisor consider the investor's needs and circumstances in determining which recommendation would result in a lower cost to the investor based on, among other things, the holding period. This point is not limited to considerations of A shares versus C shares." (
[Opinion] Dechert Comment Letter to SEC Regarding Standard of Conduct for Investment Advisers (PDF)
"[U]nless the standards provide appropriate flexibility to accommodate the vast diversity of advisers and clients, and allow for evolving and differing business models, they will harm advisers and clients, damage the industry, and stymie innovation. If the Commission decides to move forward with a final interpretation and does not withdraw the IA Proposal, we believe that the Commission must address a number of concerns." (Dechert LLP)
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