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Fiduciary duties of trustees, directors, others

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Fiduciary Rule Update, August 2017
"The new FAQs state that it would not be 'fiduciary investment advice' to encourage additional contributions to a plan or IRA to 'maximize the value of employer matching contributions or ... to meet objective financial retirement milestones, goals, or parameters based upon the participant's age, time to retirement or other similar measures' provided no specific investment recommendations are made.... Some have suggested that the position being taken by DOL in this new FAQ guidance may conflict with earlier DOL guidance. In any case, the new guidance raises a question: does it extend to a recommendation that a participant not decrease her savings, e.g., not take a cash distribution on termination of employment?" (October Three Consulting)
Adding Sustainable and Responsible Investing Options: A Resource Guide for Defined Contribution Plan Sponsors (PDF)
12 pages. "This step-by-step guide assists plan sponsors considering the addition of a sustainable, responsible and impact investing (SRI) option to a defined contribution retirement plan.... [1] Increase your knowledge of SRI and related performance and fiduciary questions ... [2] Gauge participants' interest in adding an SRI option ... [3] Discuss implementation with your consultant and/or plan administrator ... [4] Choose a fund or funds (and monitor performance) ... [5] Educate participants." (US SIF Foundation)
Tibble's Trials Nearly Over, with a District Court Win
"[T]he court noted that for the first time [defendant Southern California Edison] argues that they had a right to invest in the retail-class shares to take advantage of revenue sharing, but found several problems with this argument, notably that it could have been made eight years ago.... Applying guidance from the Supreme Court in Tibble I, the court held that the defendants were liable for breaching the duty to monitor from August 16, 2001, onward.... 'Thus, even if Defendants successfully showed it would take months to make the switch, they are nonetheless liable for losses on each mutual fund at issue either beginning on August 16, 2001, or on the day after 2001 that institutional funds became available,' [Judge Wilson] wrote." [Tibble v. Edison, No. 7-5359 (C.D. Cal. Aug. 16, 2017)] (National Association of Plan Advisors [NAPA])
[Opinion] Fiduciary Rule Critics Cry Wolf
"Wall Street has received the message, and it isn't waiting around for the Labor Department. Brokers are paring high-priced funds from their mutual fund offerings to retirement savers. They're also moving those investors from commission-based accounts -- which charge a fee for each transaction -- to fee-based accounts -- which charge an annual fee based on assets." (Nir Kaissar, via Bloomberg)
[Opinion] ERIC Comments on Nevada Fiduciary Rule
"ERIC urges the Securities Division to model or mirror the language provided for under the DOL's rule.... S.B. 383 places a greater burden through more prescriptive requirements on brokers-dealers, investment advisers, and other financial planners that advise on retirement plans. While states are within their right to provide for greater standards than what the federal government requires, Nevada should be hesitant if doing so would lead to more cumbersome and costly administrative processes." (The ERISA Industry Committee [ERIC])
Federal Magistrate Recommends Dismissal of ESOP Challenge Against Wilmington Trust
"The judge noted that stock must be purchased at an inflated price and sold at a loss for an economic injury to occur.... Chief U.S. Magistrate Judge Mary Pat Thynge of the U.S. District Court for the District of Delaware found that the plaintiffs lack standing for subject matter jurisdiction because they did not allege an economic injury." (planadviser)
Everything You Need to Know About the Fiduciary Rule Delay
"The delay is not a done deal until OMB reviews the proposal and approves it, but the delay is consistent with the timeline requested by many parties within the financial industry when it came to phasing in this rule. The delay gives the DOL more time to conduct a review before the other parts of the rule are enforced, which include the Best Interest Contract (BIC) exemption rule. It also opens up the opportunity for the SEC to weigh in." (BenefitsNav)
[Opinion] Feeding Frenzy Is Averted as DOL Throws Giant Bone to 225,000 Firms That Dabble in the 401(k) Business
"The [DOL's] new guidance on the fiduciary rule just brought the 90% of advisors who dabble in retirement services out of uncharted territory and onto a more rigorously ruled grid -- one that gives them a much better shot at expanding and elevating their 401(k) practices. The [recent] Conflict of Interest FAQs ... also postpone -- perhaps indefinitely -- the day when those 225,000 advisors become so handicapped by new DOL strictures that the 25,000 advisors who specialize in the 401(k) business will be able to feast on those accounts unchecked[.]" (RIABiz)
[Discussion] Former Participant Mistakenly Treated as Nonvested; Retroactively Entitled to Early Retirement Benefit?
"Our company's DB plan states that an employee becomes 100% vested upon termination of employment after age 55 if he has worked at least a year (which is an exception to the 5-year cliff vesting schedule that otherwise would apply). An individual met those requirements but the recordkeeping system did not record him as becoming vested when employment terminated. Now, at age 65 (the plan's normal retirement age), he has contacted the plan administrator and wants back payments as if he had elected early retirement at age 62. The plan responded that he should have applied for his early retirement benefit before he became 62. Is the plan required to make those back payments?" (BenefitsLink Message Boards)
Interesting Angles on the DOL's Fiduciary Rule, Part 58
"[In newly-issued FAQs, [the DOL] reversed its prior position by responding that [certain] recommendations would not be fiduciary advice.... [T]he 'rules of the road' for recommending increased contributions to plans or IRAs, while avoiding fiduciary status, is to [1] make the recommendation based on an objective measurement, and [2] avoid a concurrent discussion of investments or investment strategies for the plan or IRA." (
[Guidance Overview] Major Developments in Fiduciary Rule
"The DOL has submitted to [OMB] a delay in applying the full requirements of the [BICE], and two related prohibited transaction exemptions.... Significantly, the delay leaves the Fiduciary Rule itself in place.... The DOL has issued FAQs [which] note that many providers have already communicated with their customers about the Fiduciary Rule and corresponding changes in services and operations. The DOL expects those communications will frequently be sufficient to function as change notices for purposes of the 408b-2 rules." (FIS Relius)
Fifth Circuit Oral Arguments May Provide New Hope for Fiduciary Rule Opponents (PDF)
"In questioning consistently skeptical of the DOL's arguments, [Judge Edith Jones] asked whether the DOL has the authority to redefine the term 'fiduciary' in a manner that is inconsistent with its common law meaning.... One of the Chamber of Commerce's challenges is that [BICE] conflicts with Supreme Court precedent stating that agencies cannot create causes of action. Judge Jones ... rejected a defense put forward by the DOL's attorney stating, 'You are deliberately creating fiduciary duties.' " [Chamber of Commerce v. Acosta, No. 17-10238 (5th Cir. oral argument July 31, 2017)] (Groom Law Group)
[Guidance Overview] DOL Issues Additional Fiduciary Rule Transition FAQs
"[The FAQs] address: whether updates to service provider fee disclosures are required during the transition period in light of the new definition of an investment advice fiduciary; whether a recommendation to a plan participant or an IRA owner to increase his or her contributions constitutes fiduciary investment advice; and whether a recommendation to an employer or plan fiduciary regarding plan design changes that are intended to increase participation and contributions constitutes fiduciary investment advice." (Morgan Lewis)
[Opinion] An Open Letter to the OMB: No Further Delays in the DOL Rule and Bice
"[A]ny arguments by the investment industry that the fiduciary duties imposed on broker-dealers and stockbrokers under the Rule and BICE are onerous and/or unfair are meritless, as those same duties have already been recognized by their own SRO, FINRA and its predecessor, the NASD.... The significant and irreversible damage that has already been done, and will continue to be done, by further delaying full implementation of the Rule and BICE has been documented by several independent research organizations." (The Prudent Investment Adviser Rules)
Sears Hit with Second Lawsuit Over Company Stock in 401(k) Plans
"Numerous publicly known 'red flags' alerted Sears that its own stock was an 'unsuitable' investment for retirement, a participant in Sears' savings plan alleged in a lawsuit filed Aug. 10 in federal court in Illinois. Despite this knowledge, plan fiduciaries 'stood idly by' and failed to properly monitor the continued prudence of investing Sears stock while the value of the participants' investments in stock continued to plummet, the lawsuit said." (Bloomberg BNA)
[Guidance Overview] DOL's Latest Set of FAQs: 408(b)(2) Disclosures and Plan Contribution Recommendations
"[T]he existing 408(b)(2) regulation -- including the obligation to provide any changes within 60 days -- is separate from any other requirement of the fiduciary rule or the related exemptions. As a result, some service providers have been confused about whether they need to provide a change notice related to their fiduciary status under the fiduciary rule, and if so, when such a change notice would be required.... DOL's latest set of FAQs provides significant relief through a very broad interpretation of the 408(b)(2) regulation based on the unique circumstances of the fiduciary rule[.]" (Drinker Biddle)
[Guidance Overview] New Conflict of Interest FAQs Address ERISA Section 408(b)(2) (PDF)
"The 408(b)(2) FAQ will allow some service providers to avoid changing previously provided 408(b)(2) notices and give others additional time to adjust the content of those notices. The contribution FAQs should ease concerns that encouraging retirement savings could lead to fiduciary status.... [T]he guidance could signal the Department's willingness to take a more measured approach to the Fiduciary Rule[.]" (Groom Law Group)
Insurance Execs Say June 9 DOL Doomsday a Dud
"[If] June 9 provided little disruption to agents and clients, the same can't be said about the fiduciary rule affecting sales of certain annuity market segments.... Lingering ambiguity around the rule's implementation will continue to exert a drag on annuity sales ... Even so, individual insurers have found ways to spur sales through repricing." (
DOL to Proposes Extension of Fiduciary Rule Transition Period to July 1, 2019
"The DOL's potential extension of the transition period appears to mean: Fiduciaries impacted by the regulations would temporarily benefit from a 'good faith' compliance standard through at least July 1, 2019, instead of January 1, 2018.... The written disclosure requirements for certain prohibited transaction exemptions would be scheduled to take effect on July 1, 2019 instead of January 1, 2018." (Mazursky Constantine LLC)
DOL to Propose Extension of Fiduciary Rule Transition Period
"[T]he proposed amendments seek to defer the applicability of the full conditions of such exemptions for 18 months until July 1, 2019, but this date is subject to OMB clearance and may be changed before the proposal is officially published in the Federal Register. Moreover, the proposal likely will be subject to a notice and comment period so that interested parties may comment on the merits and length of the delay, as well as to further OMB review of any DOL proposed final rule. Thus, the ultimate length of the delay (if any) will not be clear until the DOL publishes a final rule." (Morgan Lewis)
Another Fiduciary Rule Delay Would Cost Retirement Savers $10.9 Billion Over 30 Years
"[A map] shows how much retirement savers would lose in each state over the next 30 years as a result of an additional 18 month delay. The losses range from $16 million in Wyoming to $132 million in Iowa to $646 million in Texas to $1.2 billion in California." (Economic Policy Institute)
[Opinion] SIFMA Submits Comments and New Evidence of the DOL Fiduciary Rule's Negative Impact on Retirement Savers
"SIFMA provides the following to assist in the DOL's review of the Rule: [1] data detailing the negative impact to investors as firms move to implement the Rule and Exemptions; [2] An explanation of why it is unnecessary to create a new private right of action to change the standard of conduct in the financial services sector; [3] Changes to the regulatory language needed to help make this Rule work for retirement savers; [4] Comments regarding the Exemptions; and [5] A proposed new principles-based exemption that protects investors and provides certainty to service providers seeking to comply with the Rule's intent." [See full text of comment letter and Deloitte study commissioned by SIFMA.] (Securities Industry and Financial Markets Association [SIFMA])
Dalbar Puts a Sellers' Exemption to Fiduciary Rule on DOL's Desk
"In comment letters to the DOL, Empower Retirement and attorneys at Davis & Harmon are among those calling for a so-called sellers' exemption, which would distinguish one-time sales of investments by brokers and insurance agents from fiduciary advice. In its comment letter, Dalbar goes further, and actually submits a proposed sales professional exemption. At its heart, the proposed exemption ... would prohibit brokers and insurance agents from marketing themselves as fiduciaries, something many fiduciary proponents say the [SEC] should have been doing all along." (ThinkAdvisor)
[Guidance Overview] DOL to Seek 18-Month Delay of Best Interest Contract Exemption and Other Fiduciary Rule Exemptions
"Although the Transition Period is currently scheduled to end on January 1, 2018, the DOL's court filing states that the DOL seeks to extend the Transition Period by 18 months, to July 1, 2019. If adopted, it appears that the BICE, Principal Transaction Exemption, and PTE 84-24 will continue to be available as long as the impartial conduct standards are satisfied, without regard to any other conditions of those exemptions." (The Wagner Law Group)
[Guidance Overview] DOL Announces Proposed 18-Month Extension of the Fiduciary Rule Transition Period (PDF)
"In the notice of administrative action, DOL states that it has submitted 'proposed amendments' extending the Transition Period to [OMB]. The words 'proposed amendments' could mean that DOL is only at the 'proposed rule' stage with a delay. If that is the case, then there is a probability that the length of the delay or other specifics of the delay could change; there is also some risk that the delay may not become finalized." (Groom Law Group)
Robo-Advisers: More Complex Than They May Appear (PDF)
"What is a robo-adviser? ... How are robo-advisers regulated? ... What special challenges do robo-advisers confront in satisfying their disclosure obligations? ... Can robo-advisers satisfy their fiduciary duties to their clients? ... Are robo-advisers operating unregistered investment companies? ... Can robo-advisers satisfy their compliance responsibilities?" (Katten Muchin Rosenman LLP, via Bloomberg Law Securities Regulation & Law Report)
[Guidance Overview] DOL Issues FAQs Clarifying Required Fiduciary Status Disclosures Under ERISA Section 408(b)(2)
"The FAQs provide examples of communications that would not be considered fiduciary investment advice, including: [1] A plan enrollment brochure stating that participants should consider saving a certain percentage of their pay. [2] A targeted email suggesting that a participant increase his or her contributions by a certain percentage to reach a specific savings goal. [3] A targeted email sent during a participant's birth month suggesting that a participant contribute a certain amount based on the amount that the participant has already saved in the plan." (Thomson Reuters Practical Law)
[Guidance Overview] The Final Rule: DOL Issues Fourth Set of FAQs
"The FAQs leave open the possibility that, if service providers update 408b-2 disclosures currently to describe service or other changes, they may need to update those disclosures again after January 1 to expressly use the 'fiduciary' term ... The FAQs do not appear to address the case of a service provider that was an unintended 'functional' fiduciary under prior law." (Eversheds Sutherland, via Lexology)
DOL Notifies District Court of Intent to Extend Transition Period and Delay Applicability Dates for Fiduciary Rule and PTEs (PDF)
"[DOL hereby notifies] the Court that on August 9, 2017, the Department submitted to [OMB] proposed amendments to three exemptions, entitled: Extension of Transition Period and Delay of Applicability Dates From January 1, 2018, to July 1, 2019; Best Interest Contract Exemption (PTE 2016-01); Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs (PTE 2016-02); Prohibited Transaction Exemption 84-24 for Certain Transactions Involving Insurance Agents an d Brokers, Pension Consultants, Insurance Companies, and Investment Company Principal Underwriters (PTE 84-24). Notification of the submission becomes publicly available the morning after submission." (U.S. Department of Labor [DOL], via U.S. District Court for the District of Minnesota)
[Opinion] SPARK Comment Letter to DOL on Fiduciary Rule and PTEs (PDF)
14 pages. "[M]any plan sponsors, participants, and IRA owners have been cut off from beneficial products and services that were previously made available to them.... The overall reduced access to important products and services is a direct result of the steps our members have been forced to take in order to comply with the Department's overly broad and poorly tailored definition of fiduciary investment advice. Unless changes are made ... we are concerned that this reduced access to information, products, and services could become permanent." (The SPARK Institute)
[Guidance Overview] Interesting Angles on the DOL's Fiduciary Rule, Part 57
"[If] an adviser (or his or her supervisory entity) was a fiduciary, functional or acknowledged, before June 9th, but did not give a 408(b)(2) notice of fiduciary status, that is not covered.... The] relief does not cover new relationships with retirement plans after June 9th.... [If] the adviser's prior 408(b)(2) disclosures, or agreement, stated that the adviser (and his or her supervisory entity) is not a fiduciary, then relief is not provided and a disclosure must be given." (
[Guidance Overview] DOL Issues FAQ Addressing Key Concerns Over Fiduciary Rule
"[T]he DOL has clarified that it does not consider service providers to have been informed of a change in fiduciary status on June 9, 2017, the date the fiduciary rules became applicable. In addition, the DOL recognizes the uncertainty caused by its past decisions to delay the fiduciary rules and considers the current circumstances to be beyond the control of service providers. Therefore, service providers who must update their disclosures for the fiduciary element of the service provider disclosure must simply do so as soon as it is practicable. In addition, the DOL FAQ reminds service providers that such amendments may be provided to plans electronically. A chart summarizing these disclosure rules is provided[.]" (Ascensus)
New DOL Guidance in Connection with the Fiduciary Rule
"If a service provider will continue to provide only nonfiduciary services to ERISA plans post-Fiduciary Rule, or has already effectively disclosed investment advice fiduciary status, no additional disclosure would be required under Section 408(b)(2) of ERISA. In the case of a service provider who does not 'reasonably and in good faith believe' that it will be providing services to an ERISA plan that would make it an investment advice fiduciary under the Fiduciary Rule, then the service provider would not be required to disclose its newfound fiduciary status under Section 408(b)(2) of ERISA." (Stradley Ronon)
[Opinion] EPI Comment Letter to DOL on the Fiduciary Rule and PT Exemptions
"[W]hether or not most retirement savers who currently rely on a broker's conflicted 'advice' will actually hire financial advisers instead -- a doubtful assertion -- 'advice' from brokers is not comparable to advice from disinterested experts. Similarly, even if the industry's prediction that the rule could cause investors to lose access to some investment products is borne out, it does not follow that investors will be harmed since these products are unlikely to be in savers' best interests." (Economic Policy Institute)
[Opinion] Investors Will Win If SEC Swiftly Adopts -- and DOL Recognizes -- Best-Interest Standard for Brokers
"ICI advocates that the SEC take the lead by adopting a new, clearly defined best-interest standard of conduct for SEC-registered brokers that enhances the current 'suitability' standard and other obligations that apply to brokers under federal securities laws and FINRA rules.... The new SEC standard that ICI recommends ... enhances the suitability standard to provide an explicit duty of care and duty of loyalty[.]" (Investment Company Institute [ICI])
Seven Ways a Fiduciary Can Follow Procedural Prudence
"[1] Appoint an individual or committee as Plan Administrator.... [2] Prepare a Fiduciary Roster.... [3] Carefully review the principal policy provisions of fiduciary liability insurance you have/are considering.... [4] Be aware of the scope of indemnification coverage.... [5] Make sure investment responsibility has been properly delegated.... [6] Understand that selection of service providers is a fiduciary decision.... [7] Assume your plan will be audited." (The Retirement Plan Blog)
[Guidance Overview] Plans Must Comply with Rules of U.S. Treasury�s Office of Foreign Asset Control (PDF)
"Under OFAC guidance, both governmental and private employee benefit plans are required to comply with OFAC compliance programs. Failure to comply can lead to reputational damage and/or civil and criminal penalties.... Many ERISA and governmental benefit plans may view trade sanctions as something that applies to banks but that doesn't impact our retirement system. This view is wrong....[This article provides] a high level overview of things that a plan would want to consider in evaluating/developing an OFAC compliance program." (Groom Law Group)
[Opinion] IRI Comment Letter to DOL on Fiduciary Rule and PT Exemptions (PDF)
43 pages. "[IRI appreciates] the opportunity to provide these comments to the [DOL] in response to [its recent] request for information ... 71 percent of advisers are planning to stop providing advice to at least some of their current small accounts due to the risk and increased costs of the Rule; 35 percent will stop serving accounts under $25,000, and 25 percent will raise their minimum account thresholds.... [D]istributor members reported that approximately 155,000 of their clients have already been 'orphaned,' with far more accounts expected to be impacted as implementation of the Rule proceeds.... More than 60 percent of the participating distribution firms have, are planning to, or are considering exiting or deemphasizing target markets such as small IRA holders and small retirement plan sponsors." (Insured Retirement Institute [IRI])
Arch Coal Beats ERISA Lawsuit Over Company Stock in 401(k) Plan
"Allegations of Arch Coal's 'serious deteriorating condition' and 'overwhelming debt' are evidence of the company's impending slide into bankruptcy but don't establish a special circumstance sufficient to survive dismissal, Jackson said in dismissing the lawsuit." [Roe v. Arch Coal, Inc., No. 15-910 (E.D. Mo. Aug. 4, 2017)] (Bloomberg BNA)
The Fiduciary Duty (And Challenge) of Cost-Consciousness
"The investment industry and even some courts have been quick to reference that fact that ERISA does not require an ERISA fiduciary to always select the least expensive investment option, which is true. However, neither ERISA nor the [Restatement (Third) Trusts] gives an ERISA fiduciary carte blanch power to just select any investment option without consideration of the corresponding benefit derived from any additional costs and/or risks associated with the more expensive investment option. The absurdity of such an argument is obvious, as it would essentially nullify the basic fiduciary duties of loyalty and prudence." (The Prudent Investment Adviser Rules)
QDIAs: a Recipe for Fiduciary Protection (And a Better Retirement Plan)
"After the sponsor has selected a permissible default, employees must be notified of the QDIA, as well as its objectives and fees.... The notification must be timely: 30 days prior to eligible participation, recurring annually. The retirement plan's Investment Policy Statement must also be updated to reflect selection and monitoring criteria for the qualified default." (Alliant Wealth Advisors)
Federal Judge Certifies Class Against ILWU-PMA Welfare Plan in Lawsuit Alleging ERISA Violations
"The original complaint alleged Zenith, and its agent TC3, failed to properly process member medical claims leading to many claims going unpaid, and members having to foot the medical bills out of pocket.... The suit also alleged Zenith and the PMA Trustees' breach of their fiduciary duty harmed the Plan as a whole by, among other things, causing doctors to stop providing services the the employees and their beneficiaries." [Armijo v. ILWU-PMA Welfare Plan, No. 15-1403 (C.D. Cal. Aug. 1, 2017)] (AVYM Healthcare Revenue Consultants)
The Board of Directors Responsibility in Addressing ESOP Repurchase Liability
"In order to plan for ESOP repurchase liability, the corporation must quantify the liability and implement a strategy to fund it. These functions are the responsibilities of the board of directors of the corporate sponsor of the ESOP. This article [summarizes] director duties in determining and funding ESOP repurchase liability." (Principal Financial Group)
Benefits Litigation Update, July 2017 (PDF)
Articles include: [1] The importance and difficulty of controlling venue in ERISA litigation; [2] What's with GICs? Is any plan investment reasonable? [3] Fourth Circuit finally finds in favor of 401(k) plans' fiduciaries; [4] The parameters of the church plan exemption under ERISA; [5] Is an SPD enough to enforce subrogation after a medical liability settlement? [6] Support for plan service providers and sponsors in setting plan costs. (Epstein Becker Green)
[Official Guidance] Text of DOL Conflict of Interest FAQs: 408(b)(2) Disclosure Transition Period, Recommendations to Increase Contributions and Plan Participation (PDF)
"[Three] FAQs provide information on [1] a 'fiduciary status disclosure' issue under the [DOL's] ERISA section 408(b)(2) service provider disclosure regulation ... [2] whether recommendations to plan participants and IRA owners to contribute to or increase contributions to a plan or IRA constitute fiduciary investment advice under the Fiduciary Rule, and [3] whether recommendations to employers and other plan fiduciaries on plan design changes intended to increase plan participation and contribution rates constitute fiduciary investment advice under the Fiduciary Rule." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
RFP for Target Date Funds Is a Good Idea
"Participants are suing plan fiduciaries over their selection of these funds, so how can fiduciaries protect themselves? One way is to conduct a separate RFP for target date funds.... [An] RFP can make sense even if a potential recordkeeper limits fund choices because fiduciaries should reject a recordkeeper whose only fund offerings are sub par or have excessive fees. How would this RFP work?" (401kTV)
Exhaustion of Plan Administrative Remedies: Important Considerations for Plan Fiduciaries
"[T]he Sixth Circuit joined the majority of circuit courts in holding that claims alleging statutory violations of ERISA do not impose the same administrative exhaustion requirements that are applicable to claims seeking to enforce contractual rights under the terms of a plan. By deepening the current split on this issue among the circuit courts, the ruling could have a significant impact ... To address this concern, plan fiduciaries should consider taking several steps[.]" [Hitchcock v. Cumberland Univ. 403(b) DC Plan, No. 16-5942 (6th Cir. Mar. 14, 2017)] (Proskauer's ERISA Practice Center)
Fiduciary Rule May Force Plan Advisers Away from Portfolio Management
"The latest research from Cerulli Associates suggests most executives in the advisory industry believe that home-office discretion over clients' investment exposures will increase significantly under the [DOL] fiduciary rule and other competitive pressures." (PLANSPONSOR)
I'm Not a Fiduciary -- It's That Other Guy
"A 2017 [DC] plan survey ... indicates that there has been no improvement in this percentage of corporate plan decision-makers who don't understand that they are fiduciaries. 17% even thought that they could pass on all of their fiduciary responsibilities to third parties such as their provider, recordkeeper or investment adviser." (Cohen & Buckmann, P.C.)
Avoid Getting Sheared by Revenue Sharing (PDF)
"Far too often, employers evaluate recordkeeper capabilities and fees through an RFP process, establish new relationships with vendors whose fees and services fit their needs -- and then they put the fee monitoring process on the back burner. It isn't until many years later that someone -- hopefully not a representative of the [DOL] or a plaintiff's attorney -- points out to them that the recordkeeper's fees have become excessive. That's the problem with revenue sharing in a nutshell, because it's 'out of sight,' it often falls 'out of mind.' " (Lockton)
DOL Rule Opponents Have Good Day in Court of Appeals
"The 68-minute hearing was marked by several spirited clashes between government attorney Michael Shih and Judge Edith H. Jones over the DOL's authority to regulate individual retirement accounts and how investment advice works in practice.... After a string of federal court losses last year, DOL rule opponents finally found a friendly court [in the Fifth Circuit Court of Appeals]." (
Broker-Dealers and Investment Advisers: Comment Period Open for New Nevada Fiduciary Law
"Effective July 1, Nevada broker-dealers and investment advisers became subject to the state's financial planner statute ... The statutory fiduciary duty specifically requires financial planners to 'disclose to a client, at the time advice is given, any gain the financial planner may receive, such as profit or commission, if the advice is followed.' The statutory fiduciary duty also requires financial planners, through a 'diligent inquiry of each client,' to make an initial determination of suitability of the advice to be given to each client as well as to evaluate such suitability on an ongoing basis." (Stradley Ronon)
Leading Advisers and 401(k) Plan Sponsors Use Goal-Oriented Targets to Replace Outdated Modern Portfolio Theory Risk Tools
"The [goal-oriented target (GOT)] is a number, but it's a number based not on investment returns, investment risk, or any other of the myriad of MPT-based statistics. It doesn't rely on complex 'Monte Carlo'-type analyses best confined to think tank computers, not the smart phones used by everyday folk. All the numbers required for input represent real numbers specific to each retirement saver. They're easily accessible and just as easy to understand." (Fiduciary News)
Fifth Circuit Hears Latest Round of Fiduciary Rule Arguments
"At least one judge on the three-judge panel that has been assigned to the case seemed to have little sympathy for the basic strokes of the DOL's arguments.... Judge [Edith] Jones asked a number of questions about prohibited transaction exemptions that already existed prior to the ongoing fiduciary standard expansion -- about how these exemptions speak of the difference between sales interactions and investment advice." (PLANSPONSOR)
[Opinion] American Benefits Council Comments to DOL on Unwarranted and Harmful ERISA Breach of Fiduciary Duty Litigation (PDF)
10 pages. "In order to help reduce the negative impacts of unwarranted class-action litigation against employers that sponsor a retirement plan, and the service providers that assist them, we are asking the Solicitor of Labor to direct agency resources in a manner that would slow the proliferation of unwarranted and harmful litigation.... [T]he Office of the Solicitor of Labor could make a significant difference in reducing unwarranted litigation against retirement plan sponsors and service providers by filing amicus briefs where appropriate, including ... in opposition to class-action plaintiffs that do not satisfy the pleading standards necessary to survive a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6)." (American Benefits Council)
Interesting Angles on the DOL's Fiduciary Rule, Part 56
"The benefits of increased contributions are so obvious, and the potential conflict is so small, that the easiest, and most direct, solution would be for the DOL to conclude that a recommendation to make or increase contributions is not fiduciary advice. However, if the DOL doesn't do that, it should follow through with ... a streamlined exemption for contribution recommendations." (
[Discussion] Does a Participant Have a Claim for Getting What He Asked For?
"An individual-account retirement plan that includes a 401(k) arrangement allows a distribution as needed to meet a participant's hardship need. A participant submits a claim for such a distribution. The plan's administrator approves the claim, and instructs the plan's trustee to pay the requested distribution. But had the administrator read the participant's claim, it would have known that the participant was not entitled to a hardship distribution. Assuming the plan is ERISA-governed, does the participant have a viable claim against the administrator for its approval of the participant's claim? If so, why, and what's the measure of the losses that result from the administrator's breach? Can anyone pull together a claim a court would recognize?" (BenefitsLink Message Boards)
Legal Fight to Stop DOL Rule Returns to Court
"Arguments will be heard by a three-judge panel [in the Fifth Circuit Court of Appeals on Monday, July 31].... The industry plaintiffs are consolidated from three lawsuits that were filed last summer in U.S. District Court for the Northern District of Texas. While the plaintiffs lost the federal court decisions, the Dallas court was chosen specifically because appeals would go to the Fifth Circuit. The Fifth Circuit is generally considered the most conservative in the country, with decisions that frequently define the government's role narrowly." (
[Opinion] ECFC Comment Letter to DOL on Application of Fiduciary Rule to HSAs (PDF)
"ECFC members believe that to impose the same fiduciary requirements for HSAs as are imposed on [IRAs] is administrative overreach by the Department. The Department can justify its need to regulate IRAs under the Fiduciary Rule since IRAs frequently are a conduit for ERISA-covered retirement plans. The same cannot be said of HSAs.... If the Department does not agree with ECFC's re commendation that HSAs should not be subject to the Fiduciary Rule, the Department should permit HSAs to be eligible for the platform provider exception in the Prohibited Transaction Exceptions." (Employers Council on Flexible Compensation [ECFC])

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