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Benefits in the News > By Subject >

Fiduciary duties of trustees, directors, others

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What's Next for the DOL Fiduciary Rule?
"DOL staff are rumored to be hard at work collecting data on the Obama-era fiduciary rule in order to potentially amend the more onerous aspects. In light of the court decision, Labor Secretary Alexander Acosta has a different decision to make: Does the department appeal the ruling? ... [O]ther immediate impacts ... [1] Watch the SEC.... [3] The industry no longer has to fear a regulatory action like the one William Galvin, secretary of the Commonwealth of Massachusetts, filed against Scottrade in mid-February.... [3] Suddenly, the National Association of Insurance Commissioners' March 24 meeting to possibly finalize a best-interest standard looms much larger." [Chamber of Commerce of the United States of America, et al. v. DOL, No. 17-10238 (5th Cir. Mar. 15, 2018)] (
What You Should Know About Your Plan's ERISA Fidelity Bond Coverage
"Plans should have ERISA fidelity bond coverage from an approved provider as of the beginning of the plan reporting period with a coverage amount in accordance with the regulations.... Who needs to be covered? ... What type of coverage do I need? ... Which coverage is required to be disclosed on the Plan's annual Form 5500? ... How much coverage do I need? ... Is my provider an approved provider?" (WithumSmith+Brown, PC)
Interesting Angles on the DOL's Fiduciary Rule, Part 83
"When will, or could, a recommendation of a higher-cost share class (and, therefore, a more expensive investment) satisfy the best interest standard of care (that is, the prudent person rule and the duty of loyalty)? What kind of disclosure of 12b-1 fees would be adequate under the fiduciary rule?" (
Ninth Circuit Finds 401(k) Service Providers Owe No Fiduciary Duty with Respect to Negotiating Their Fee Compensation
"[T]he United States Court of Appeals for the Ninth Circuit recently held that plan administrators ... are not ERISA fiduciaries when negotiating their own compensation with prospective customers. Instead, because the employer/plan sponsor has the express duty under ERISA to defray reasonable expenses of administering a 401(k) plan, any claims that fully disclosed fee arrangements are unreasonable 'lie against the employer, not the service provider.' " [Santomenno v. Transamerica Life Ins. Co., No. 16-56418 (9th Cir. Feb. 23, 2018)] (Masuda Funai)
Fifth Circuit Opinion Vacating DOL Fiduciary Rule (PDF)
65 pages. "DOL has made no secret of its intent to transform the trillion-dollar market for IRA investments, annuities and insurance products, and to regulate in a new way the thousands of people and organizations working in that market. Large portions of the financial services and insurance industries have been 'woke' by the Fiduciary Rule and BIC Exemption. DOL utilized two transformative devices: it reinterpreted the forty-year old term 'investment advice fiduciary' and exploited an exemption provision into a comprehensive regulatory framework. As in the UARG case, DOL found 'in a long-extant statute an unheralded power to regulate a significant portion of the American economy.' And, although lacking direct regulatory authority over IRA 'fiduciaries,' DOL impermissibly bootstrapped what should have been safe harbor criteria into 'backdoor regulation.' ... The Fiduciary Rule thus bears hallmarks of 'unreasonableness' under Chevron Step Two and arbitrary and capricious exercises of administrative power.

"DOL makes no argument concerning severability of the provisions making up the Fiduciary Rule and BICE exemption apart from the illegal arbitration waiver. In any event, this comprehensive regulatory package is plainly not amenable to severance. Based on the foregoing discussion, we REVERSE the judgment of the district court and VACATE the Fiduciary Rule in toto."

[Chamber of Commerce of the United States of America, et al. v. DOL, No. 17-10238 (5th Cir. Mar. 15, 2018)] (U.S. Court of Appeals for the Fifth Circuit)

401(k) Fiduciaries: Is It Time to Hone Your Processes?
"Establish and run processes that demonstrate they have leveraged the lowest cost fees based on their plan size and servicing needs. If the fees their plan pays exceed market norms, they need to be able to show why the fees are reasonable.... Articulate why one investment was chosen over the other. Dig down deeper in understanding whether actual fund plan investments align with investment objectives." (Fiduciary Plan Governance, LLC)
Voya Escapes Lawsuit Over 401(k) Robo-Adviser Fees
"A 401(k) investor who accused Voya Financial Inc. and its subsidiaries of overcharging for investment advice from robo-adviser Financial Engines Advisors LLC won't get another chance to make her case. A federal judge on March 13 denied the investor's request to amend her complaint ... The judge reiterated her prior conclusion that the investor couldn't use [ERISA] to challenge these fees, because the defendants weren't acting as ERISA fiduciaries when negotiating fees with Financial Engines." (Bloomberg BNA)
Tenth Circuit Rules in Favor of DOL Fiduciary Restrictions on Annuity Products
"[T]he Court described these annuity products' characteristics as not only complex, but creating more investment risk for savers, being less predictable than other investments, and offering more opportunity for advisor conflicts of interest in the sales process. The court cited these factors in finding that there was justification in the DOL's 2016 guidance requiring them to be sold under the terms of the more restrictive BIC exemption." [Market Synergy Group, Inc. v. DOL, No. 17-3038 (10th Cir. Mar. 13, 2018)] (Ascensus)
[Opinion] Retirement Risk: Don't Trade Downside Protection for More Upside
"The challenge with the Fidelity glide path isn't so much that they are suggesting a bad portfolio ... [T]hey are recommending a portfolio with a risk/reward tradeoff that is well above the level necessary for the participant profile their glide path is designed for.... To the extent that the anticipated level of reward is well above what is called for by the participant profile, participants are likely to experience greater risk and more potential regret than necessary." (Russell Investments)
NAIC to Huddle on Contentious Best Interest Model Law
"The Annuity Suitability Working Group will discuss their next steps after a recent comment period on the regulation. Critics from both sides have panned the attempt to deliver a best-interest standard.... NAIC model laws must then be adopted by a state before they are applicable. Several states, however, are not waiting. New York, Nevada, New Jersey and Connecticut are a few states where the fiduciary, best-interest standard is winning votes." (
[Opinion] Avoiding 'Lipstick on a Pig': Evidence-Based Investing for ERISA Fiduciaries
"[G]oing forward, expect to see the plaintiff's bar focus additional attention on the issue of a fiduciary's duty to be cost efficient and the closet index issue, as the evidence overwhelmingly establishes the failure of most actively managed funds to meet such hurdles.... Is any compensation 'reasonable' or in the 'best interest' of a customer if the historical performance ... indicated that such investments were not cost efficient and/or would have failed to provide any inherent value for a customer ... at the time the recommendations were made? " (The Prudent Investment Fiduciary Rules)
Tenth Circuit Opinion: BICE Applies to Fixed Indexed Annuity Sales (PDF)
"The DOL considered both sides of this issue and ultimately decided to treat FIAs differently than fixed rate annuities because of their risk, complexity, and conflicts of interests. It did so with evidentiary support in the record. It is not this court's role to 'displace the [agency's] choice between two fairly conflicting views.' " [Market Synergy Group, Inc. v. DOL, No. 17-3038 (10th Cir. Mar. 13, 2018)] (U.S. Court of Appeals for the Tenth Circuit)
Litigation Against 403(b) Plan Fiduciaries (PDF)
"The purpose of this article is to provide a brief overview of 403(b) plans, discuss when such plans are subject to ERISA, review the key allegations raised in ERISA breach of fiduciary duty lawsuits, and discuss the status of these cases." (Groom Law Group, via The Investment Lawyer)
'Patent Troll' 401(k) Investment Leads to $180k Settlement
"The deal resolves a lawsuit claiming Emerald Coast Eye Institute and its founder, Dr. Samuel Poppell, directed a significant portion of the 401(k) plan's assets into the stock of VirnetX, a company that allegedly specialized in acquiring patents and attempting to bring litigation against violators of those patents. Poppell, who allegedly had no background in investment management, learned of VirnetX through 'online message boards and unqualified or speculative investment blog-type websites,' according to the lawsuit." (Bloomberg BNA)
SunTrust Agrees to Pay $4.75M to Settle 401(k) Stock Drop Case
"If approved, the proposed settlement would end a 10-year lawsuit accusing SunTrust of breaching its fiduciary duties under [ERISA], when plan participants lost hundreds of millions of dollars as the market price of SunTrust stock fell 73 percent between May 2007 and October 2009.... The proposed deal would also provide plan participants with ... quicker vesting on matching contributions and a guarantee that the vesting schedule won't change to a less generous one for a period of at least three years. SunTrust also agreed to fund matching contributions in cash and enhance training for its fiduciary committee[.]" (Bloomberg BNA)
Potential ERISA Violation: Employee Fired After Switching to Employer's Health Plan
"An employee who ran one of a staffing agency's offices for years but was fired less than four months after he switched from his wife's health insurance plan to his employer's plan, and after four recent hospitalizations, avoided summary judgment on his ADA discrimination and ERISA retaliation claims. The federal district court in Ohio explained that enrolling in the health plan was protected activity under ERISA and the timing of his termination, which the employer said was for cost-cutting reasons, was evidence of a causal link." [Feldmeyer v. BarryStaff, Inc., No. 16-954 (S.D. Ohio Mar. 5, 2018)] (Wolters Kluwer; free registration may be required)
Issues for Plan Sponsors and Fiduciaries to Follow
"Fiduciary regulation may be substantially on hold, but other regulators are on the move ... Tax reform's impact on Schedule C reporting for expenses in 2018 ... DOJ memo to U.S. Attorneys regarding guidance policy in litigation has implications for health and retirement plans ... SCOTUS again considers claim of lifetime retiree medical benefits ... Short term limited duration insurance proposal ... Vasectomy or male contraception benefit disqualifies from HDHP status ... HSA contribution limit dropped for 2018." (Winstead PC)
Fidelity Puts 6 Million Savers on Risky Path to Retirement
"While deposits in the trillion-dollar sector have surged, Fidelity has seen nearly $16 billion in net withdrawals over the past four years ... The exodus stems in part from unease with the way Boston-based Fidelity has boosted performance -- by ramping up risk.... Fidelity portfolio managers now try to time market shifts, for instance by moving billions of dollars out of money-losing commodities bets and into Chinese stocks and U.S. tech shares[.]" (Reuters)
Should Plan Sponsors Consider Investing Retirement Plan Assets in Bitcoin? (PDF)
"Because cryptocurrency cannot be held and only exists as a few lines of computer code, the chance of it vanishing completely would be a concern to a plan sponsor who must have assets independently in the custody of a trust company.... One of the biggest challenges of bitcoin is its intangible nature.... Plan sponsors have to be able to know they own a particular asset and can value it in an accurate and timely fashion.... Cryptocurrencies remain a significant target for hackers and thieves." (Milliman)
Ninth Circuit: Plan Service Provider Not Subject to Fiduciary Duties When Negotiating Fees or Collecting Predetermined Compensation
"According to the court, ... claims that fully disclosed fee agreements are unreasonable lie against the hiring fiduciary, not the provider.... [T]he court dismissed claims related to the revenue-sharing payments because they were fully disclosed before the provider agreements were signed and did not come from plan assets. Finally, the court held that the provider's withdrawal of its predetermined, formula-driven fees from pooled accounts was a ministerial act that did not give rise to fiduciary liability." [Santomenno v. Transamerica Life Ins. Co., No. 16-56418 (9th Cir. Feb. 23, 2018)] (Thomson Reuters / EBIA)
Massachusetts Launches Investigation Into Wells Fargo Advisors Sales Practices
"Wells Fargo itself disclosed in a recent regulatory filing that it is 'assessing whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the company's investment and fiduciary services business' ... [The Massachusetts Secretary of the Commonwealth] is seeking additional information to determine the scope of Wells Fargo's internal investigation as well as reasonable assurances that any Massachusetts investors affected by unsuitable recommendations will be made whole." (Financial Advisor)
Investment Advisers and Conflicts of Interest
"[The] Share Class Selection Disclosure Initiative ... continues the SEC's focus on investment advisers who receive compensation or financial incentives in connection with their selection or recommendation of mutual fund share classes. For employers that sponsor retirement plans, the Initiative also raises the issue of whether plan fiduciaries, who engage the services of an investment adviser, have the appropriate information to fulfill their fiduciary obligations." (Spencer Fane)
401(k) Fiduciaries: Is It Time to Hone Your Processes?
"Last year's litigation ... attacks 401(k) fiduciaries on the quality of their process and on outcome. The fiduciaries that were sued last year were for the most part doing what their lawyers told them to do. They followed a 'prudent process stratagem' and entered into pretty low cost arrangements but they still got hammered with a lawsuit." (Fiduciary Plan Governance, LLC)
Trap for the Unwary: Family Members as Investment Advisors for IRAs and Plans
"[If], for example, a mother asks her son, who is an advisor at a broker-dealer, to manage her IRA, any compensation paid to the son would be a prohibited transaction. That is, the mother is causing a family member -- a person in whom she presumably has an interest that could affect her fiduciary judgment -- to receive compensation. The consequences are harsh." (Drinker Biddle)
Understanding the DOL Fiduciary Rule: An Exception for Certain Large Independent Fiduciaries
"Though the phased implementation period ultimately may be further extended, plan sponsors will want to become familiar now with the new fiduciary rule and exemptions, as well as the exception. While attempts by advisers to avoid fiduciary responsibility are not new, the investment adviser currently can avoid acceptance of fiduciary responsibility and hope that it stays with a sophisticated plan fiduciary by incorporating the exception's terms into his or her agreements." (HR Daily Advisor)
Interesting Angles on the DOL's Fiduciary Rule, Part 82
"On February 12, 2018, the SEC announced a remedial program called the 'Share Class Selection Disclosure Initiative' (SCSDI) ... [which allows] investment advisers who have received undisclosed 12b-1 fees can correct and self-report.... [W]hat are the consequences under the Fiduciary Rule (which became applicable on June 9, 2017) for advisory services to IRAs, where an investment adviser receives undisclosed 12b-1 fees? ... [T]he Fiduciary Rule is more demanding for discretionary investment management than the SEC rules are.... [T]he DOL Fiduciary Rule for non-discretionary advice is similar to the SEC's, but still more demanding." (
Fifth Circuit Changes Course on Firestone Interpretation
"The US Court of Appeals for the Fifth Circuit has held that the default (and less deferential) de novo standard of review under the Supreme Court's Firestone decision applies to benefit denials based on factual determinations under [ERISA], rather than the more deferential abuse of discretion standard. The decision overrules long-standing Fifth Circuit precedent, which had become the subject of a circuit split." [Ariana M. v. Humana Health Plan of Texas, Inc., No. 16-20174 (5th Cir. Mar. 1, 2018)] (Thomson Reuters Practical Law)
Supply and Demand in the Markets and the Retirement Saver's Best Interest
"The fiduciary who can effortlessly and clearly explain the mechanism of supply and demand no doubt helps retirement savers embrace their best interests.... Retirement savers must maintain long-term orientation regarding their assets. Supply and demand shock and generally easy to identify and often temporary in nature. During these kind of extreme events, in most cases, doing nothing is the best road to take." (Fiduciary News)
Who's Your Fiduciary?
"According to an online survey of defined-contribution executives, many don't acknowledge their role as a fiduciary ... The study of 1,000 such executives ... found that almost half (49 percent) did not consider themselves a fiduciary, while another 6 percent had no idea about their status.... [Of] the 104 respondents who managed plans over $500 million, 48 percent did not consider themselves fiduciaries." (Human Resource Executive)
How Low Can 401(k) Advisory Fees Go?
"During 2016, adviser fees declined 12.5% for plans with $50 million to $400 million in assets ... DC plan advisers covering plans under $25 million [saw a] 1% increase; advisers to plans under $5 million experienced a 4.7% increase.... With increased regulatory scrutiny on fees and more litigation, plan sponsors will continue to be more, not less, price-sensitive.... [As] margins get thinner upmarket, consultants and elite advisers will migrate down-market, bringing more competitively priced fiduciary services with them." (InvestmentNews)
ESOP Sponsor's Board of Directors Sued Over Company Stock
"The company stock held in Lifetouch's ESOP declined by more than $840 million between 2015 and 2018, representing an average loss of more than $22,000 in retirement savings for each of the plan's 16,000 investors, according to the lawsuit. This decline happened while several Lifetouch executives retired and cashed out their stock at favorable prices, the lawsuit claims." (Bloomberg BNA)
Georgetown Sued for Allegedly Violating Fiduciary Duties in Its 403(b) Plans
"Participants in two Georgetown University defined contribution plans ... who are seeking class-action status, complained that the two 403(b) plans should have reduced the number of record keepers to one from three, 'failed adequately to evaluate and monitor expenses,' and paid 'unreasonable and excessive fees' for investments and plan administration, according to the lawsuit." (Pensions & Investments)
Veil of Complexity Clouds Fiduciary Committee Review of Investment Service Providers
"With the combination of complicated laws, technical terminology, and the complex analyses of various investment plans on behalf of their workforce and donor groups, executives and investment committees often willingly give up control of these decisions to a team of 'trusted' investment partners ... The complicated nature of vendors' service offerings and pricing models, as well as the disproportionate emphasis they place on projected returns, dilutes the executive team's ability to examine the traits that really count ... A periodic comprehensive risk assessment is the solution." (Roland|Criss)
Interesting Angles on the DOL's Fiduciary Rule, Part 81
"The myth for this post is the oft-repeated statement that the Fiduciary Rule prohibits the payment of commissions.... Under transition BICE, there is only one explicit restriction on compensation. That is that advisors and their financial institutions can receive no more than reasonable compensation for their services." (
Appeals Court Orders Fiduciary Breach Case Against Transamerica to Be Dismissed
"In a complex case that dates back to 2011, the three-judge appeals court panel reversed a ruling by a U.S. District Court judge in Los Angeles that had supported the plaintiffs.... Plaintiffs argued that Transamerica had violated its fiduciary duties by offering certain investment options by Transamerica affiliates in a group annuity contract.... Transamerica maintained that it wasn't a fiduciary regarding the terms of its own compensation." [Santomenno v. Transamerica Life Ins. Co., No. 16-56418 (9th Cir. Feb. 23, 2018)] (Pensions & Investments)
NYU Workers Can't Bring Second Lawsuit Over Retirement Plans
"The second lawsuit, filed about a year after the first, is duplicative and can't move forward, a federal judge ruled. The judge said the second lawsuit was an impermissible attempt to get around her earlier rulings dismissing some of the employees' claims." [Sacerdote v. N.Y. Univ. Sch. of Med., No. 17-8834 (S.D.N.Y. Feb. 23, 2018)] (Bloomberg BNA)
Ninth Circuit Opinion: Service Provider Is Not an ERISA Fiduciary with Respect to Plan Fees (PDF)
"Indeed, any other outcome would lead to absurd results. If service providers were fiduciaries while negotiating fees, they would have to promise that its fees were no higher than those of any competitor, rather than negotiate at arm's length with an employer. And, an employer who knowingly agreed to a fee structure could nonetheless later sue to lower it, invoking the administrator's fiduciary obligation." [Santomenno v. Transamerica Life Ins. Co., No. 16-56418 (9th Cir. Feb. 23, 2018)] (U.S. Court of Appeals for the Ninth Circuit)
Retirement Plan Best Practices: Plan Monitoring (PDF)
14 pages. "Monitoring your investment menu managers, your plan providers, and plan fees is an important part of your overall fiduciary responsibility. Plan sponsors vary widely in how they monitor their plans. What are best practices, and what standards should you be following in your monitoring practices?" (Arnerich Massena)
Fairytale Ending for Defendants in the First Stable Value Fund Appeal
"Plaintiffs' loyalty theory largely centered on the assertion that Fidelity prioritized its interest in securing wrap insurance over the beneficiaries' interest in higher returns. But by publishing a more conservative benchmark than its peers, Fidelity risked market share as there were 'innumerable options available.' ... What the court did ... essentially gutted the logical core of any argument that a stable value fund is too conservative. Those arguments, the court underscored, impermissibly rely on hindsight." [Ellis v. Fidelity Mgmt. Trust Co., No. 17-1693 (1st Cir. Feb. 21, 2018)] (Mayer Brown)
[Opinion] American Benefits Council Letter to EBSA on ERISA Preemption of State Fiduciary Rules
"State fiduciary rules, like the one enacted in Nevada, are clearly preempted by ERISA.... ERISA defines who is a fiduciary, details that standard of care, and creates its own enforcement mechanisms through DOL, the IRS, and federal courts. States cannot add any new or additional requirements to that comprehensive system if their regulation 'relates to' an employee benefit plan." (American Benefits Council)
SEC Chairman Jay Clayton Outlines Goals for a New Fiduciary Standard
"Mr. Clayton did not offer any details on what an SEC fiduciary rule might look like. He did reiterate that he wants an advice regulation to clarify for investors what standard of care they receive from investment advisers and brokers." (Pensions & Investments)
Notice to Financial Advisers: State Regulators Are Enforcing the DOL Fiduciary Rule
"The Complaint alleges that, although Scottrade added new policies to comply with the impartial conduct standards, Scottrade expanded the scale and scope of the sales practices that the new policies were designed to curtail.... The Complaint [further alleges] that Scottrade 'failed to take any meaningful steps to remove retirement assets from the scope of the contests or ensure compliance with the Fiduciary Rule.' " (Financial Services Employment Law, Epstein Becker Green)
Fiduciary Conduct Is Good for Business
"The focus on compliance obscures the compelling business case that fiduciary conduct [1] is what clients want, [2] is operationally efficient and reliable, [3] strengthens client-adviser relationships and makes them more enduring, [4] provides the adviser with greater pricing power, and [5] enhances the advisory firm's brand and market valuation." (InvestmentNews)
Will Australia's Advisor Competency Standards Come to the US?
"[M]uch like Australia served as an indicator for what regulation was to come [for financial advisors in the US] (with a fiduciary rule that took effect 5+ years ahead of the US), Australia's new adoption of competency standards for financial advisors may be a good indication of where the regulatory focus will be next in a post-fiduciary world in the US." (Nerd's Eye View)
Massachusetts Heats Up DOL Rule (PDF)
"While this is hardly the first case regarding a broker-dealer's use of incentives, it is the first enforcement action -- of any kind -- to incorporate the [DOL's] fiduciary rule. In light of the approach now demonstrated by a prominent securities regulator, financial firms should reassess existing controls and their compliance with internal procedures." (Winstead PC, via The Texas Lawbook)
Making Sure 401(k) and 403(b) Fees Are 'Necessary' and 'Reasonable', Part 3
"Reference checking is part of the due diligence process.... It is appropriate to stipulate that the references work with the service team they are assigning to you.... Think of the entire process as a negotiation. You want to maintain your leverage right up to the end of the process." (Fiduciary Plan Governance, LLC)
Fidelity Stable Value Fund Suit Gets Final Dismissal from Appellate Court
"The appellate court notes that the primary investment objective of the MIP is to 'seek the preservation of capital as well as to provide a competitive level of income over time consistent with the preservation of capital.' As a benchmark, the MIP used the Barclay's Government/Credit 1-5 A- or better index throughout the relevant time period. The 1st Circuit points out that during the years covered by the lawsuit, the MIP fully achieved its objective of preserving the investors' capital." [Ellis vs. Fidelity Management Trust Co., No. 17-1693 (1st Cir. Feb. 21, 2018)] (planadviser)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 80
"[T]he non-enforcement policy does not give a free pass during the transition period. Instead, there are expectations about good faith efforts to comply with the Impartial Conduct Standards and about the adoption and application of policies, procedures and practices to mitigate the effects of conflicts of interest and incentive compensation." (
Should You Switch to an Unbundled Service Provider for Your Defined Contribution Plan?
"For plan sponsors focused intently on fiduciary considerations, ... bundled service providers also mean restricted investment selections and limited insight into the true costs of asset management and asset servicing. Neither of those plan components are without an associated cost, and the issue of costs and expenses has been the lynchpin in many recent lawsuits filed against plan sponsors." (BNY Mellon)
4Q Annuity Sales Show Market Moving on from Fiduciary Rule
"Fourth-quarter sales of fixed annuities fell 2 percent to $26.1 billion compared to the year-ago period, while sales of variable annuities also fell to 2 percent, to $24.7 billion[.]" (
Massachusetts Brings Enforcement Action Against Brokerage Firm Based on Violations of Fiduciary Rule Compliance Policies
"The Complaint has garnered attention because it is the first enforcement action related to the Fiduciary Rule and also because it is part of a wave of state action (regulatory, legislative, and now enforcement) that sends a signal that if the DOL relaxes its requirements, states may step in. The Complaint also represents the first enforcement effort that relates to a financial institution's compliance with the Fiduciary Rule." (Groom Law Group)
401(k) Plan Sponsors Must Separate These Fiduciary Rule Facts from Fiction
"Right now, the biggest challenge plan sponsors and fiduciaries face is that they have and continue to be presented with changes to existing relationships with advisers, recordkeepers, and other providers that are described as 'required by' or 'due to' the Fiduciary Rule. Sorting what is fact from fiction is the greatest focus area [for] plan sponsors right now. Luckily, many plan sponsors are well equipped for this world because it simply means enhancing and redoubling their diligence and monitoring of their service providers." (Fiduciary News)
Risk vs. Readiness: The 401(k) Plan Annuity Conundrum
"Annuities offer a guaranteed stream of retirement income that can provide life-long financial security. Yet fewer than 10 percent of plan sponsors have made any move to include annuities as a 401(k) investment option." (Society for Human Resource Management [SHRM])
Third Circuit Dismisses Retiree Challenge to Post-Sale Transfer of Plan Obligations
"[The plaintiff] alleged that he was injured because he would not have invested in the plans if he had known they would be transferred; the transfer 'substantially increased [his] risk of loss'; an insurance policy and a trust meant to protect participants in the event of default were nonexistent or insufficient; some DC investment options were no longer available after the transfer; and some of the new investment options 'charged considerably higher management fees' and 'generated less return than the investment vehicles [he] had chosen through Siemens.' The plaintiff did not allege that Sivantos had failed to pay him any benefits he was owed." [Krauter v. Siemens, No. 17-1662 (3d Cir. Feb. 16, 2018)] (planadviser)
Managed Accounts: 'You Can't Always Get What You Want'
"By taking into account factors such as outside assets, contribution levels, existence of a defined benefit plan, and risk tolerance, managed accounts offer participants the promise of a more personalized asset allocation.... [J]ust over half of plan sponsors offer a managed account solution, and nearly all who do offer it on an opt-in basis. But there are often limited choices when it comes to selecting a managed account provider, with recordkeepers typically offering only one or two options." (Callan)
Fiduciary Liability Insurance: Not Optional Even Though Not Legally Required
"[1] Your corporate policy will not protect you if you are accused of a fiduciary breach -- fiduciary activities are usually excluded. [2] Your company's agreement to indemnify you may be limited by state law or worthless if your company goes bankrupt. [3] Even if you win a fiduciary breach lawsuit, and are found to have done nothing wrong, you will have legal defense fees that could be high. [4] Settlements and court awards in fiduciary breach cases have been substantial. Some have exceeded $50 million." (Cohen & Buckmann, P.C.)
ERISA Class Actions Settlements Cost Employers Nearly $1 Billion in 2017
"A dominant force in 2017 ERISA class action litigation was the filing by the plaintiffs' class action bar of a wave of new 401(k) and 403(b) fee and investment lawsuits against various employers, with a heavy focus on institutions of higher education.... Among workplace class actions, ERISA cases settled in 2017 were the most costly for employers in total. At $927.8 million they strongly outpaced the second-largest category--wage-and-hour settlements-- valued at $525 million." (HR Daily Advisor)
Lawyer Fighting DOL Rule Blasts Scottrade Fiduciary Charges
"Eugene Scalia, ... who represents the nine plaintiffs suing the [DOL] over its fiduciary rule, told the U.S. Court of Appeals for the 5th Circuit on Friday that Massachusetts' action Thursday against Scottrade for allegedly violating the fiduciary rule's Impartial Conduct Standards is 'without merit,' and will spark 'private plaintiffs exploit the rule to concoct state law claims.' ... Among the nine plaintiffs that Scalia represents are the Securities Industry and Financial Markets Association [SIFMA], the Financial Services Institute and the U.S. Chamber of Commerce." (ThinkAdvisor)
Firms May Need to Revisit DOL Rule Compliance Efforts After Scottrade Charges
"[T]he state claims Scottrade ignored the policies and procedures it put in place ... to comply with the DOL rule. By ignoring those policies, the state claims Scottrade violated state laws by conducting transactions in bad faith... The Trump administration advised early in 2017 that it would not be pursuing enforcement of the fiduciary rule as long as companies were acting 'in good faith' to comply. But few could have foreseen a situation in which state regulators would seize on lax compliance with the federal regulation as an impetus for state charges[.]" (Advisor News)

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