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<< Older News  |  August 2, 2021

News

All News > Fiduciary Duties

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Great-West Defendants Prevail in Appeal of Fee Challenge
PLANSPONSOR; free registration may be required Link to more items from this source
Aug. 2, 2021

"Much of the text of the appeals court ruling is spent recounting the factual background of the case, including discussion of many actions taken by Great-West defendants to review and reconsider the investment fees questioned by the plaintiffs. The ruling also considers in close detail the legal analysis of the district court, backing its conclusions time and again[.]" [Obeslo v. Great-West Life & Annuity Ins. Co., No. 20-1310 (10th Cir. Jul. 26, 2021)]

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

Fifth Circuit: Plan Participants Lacked Standing to Bring ERISA Fiduciary Breach Claims
Jackson Lewis P.C. Link to more items from this source
July 30, 2021

"[T]he Fifth Circuit observed that although the plan eventually began offering a stable value fund -- the plaintiffs' preferred type of capital preservation investment -- the participants never invested in this option. For that reason, the appellate court concluded that the participants failed to show that the challenged acts of the defendants caused their injury[.]" [Ortiz v. American Airlines, Inc., No. 20-10817 (5th Cir. Jul. 19, 2021)]

Tags: Fiduciary Duties  •  Retirement Plan Investments

Seventh Circuit Holds ERISA Does Not Preempt Bankruptcy Creditors' State Law Claims Against Corporate Directors and Officers
Roberts Disability Law Link to more items from this source
July 30, 2021

"The court noted the limited precedent in this area but that the Fifth Circuit and several district courts have held that ERISA does not preempt corporation-law claims against dual-hat directors and officers." [Halperin v. Richards, No. 20-2793 (7th Cir. Jul. 28, 2021)]

Tags: ERISA Preemption  •  ESOPs  •  Fiduciary Duties

Enforceability of Arbitration Provisions: There Might Be More to the Analysis
Faegre Drinker Link to more items from this source
July 30, 2021

"When an arbitration provision is found in an ERISA plan document itself, courts have applied state-law principles when evaluating whether the plan document contains a binding agreement to arbitrate between and among the plaintiff, the plan itself and the defendants named in the lawsuit. Yet these courts have either ignored, or not adequately addressed, the fact that ERISA itself contains rules for contract formation. The ERISA rules for contract formation -- and not state-law principles -- might govern whether an agreement to arbitrate exists in an ERISA plan document."

Tags: Fiduciary Duties  •  Retirement Plan Administration  •  Retirement Plan Design

Do You Understand Your Investment Policy Statement?
Verrill Dana LLP Link to more items from this source
July 30, 2021

"Even the most thorough and detailed IPS will be of limited utility unless the plan fiduciaries who are adopting the IPS can understand the document.... For that reason, an IPS should: [1] provide meaningful guidelines that committee members can apply in fulfilling their duties; and [2] be written a way that an intelligent and engaged committee member can understand and implement."

Tags: Fiduciary Duties  •  Retirement Plan Investments

DOL Official Sheds Light on Rollover Recommendations
American Retirement Association [ARA] Link to more items from this source
July 28, 2021

"Key Takeaways [from a discussion with Tim Hauser of EBSA:] [1] Suggesting investments that could occur after a rollover is tantamount to recommending a rollover, and if it meets the rest of the five-part test will constitute fiduciary advice, regardless of how it's phrased. It doesn't require the 'magic words.' [2] Rejection of the Deseret letter was the [DOL's] attempt to 'level the playing field' between advisors outside the plan and plan advisors with regard to rollovers. [3] 'Regular' basis at present isn't a function of frequency, but rather a reasonable expectation of an ongoing relationship. [4] A revisit of the fiduciary rule is on the agenda, but it would follow a notice and comment period."

Tags: Fiduciary Duties  •  Retirement Plan Investments

Cybersecurity: Another Responsibility for Retirement Plan Sponsors and Fiduciaries
Enterprise Iron Link to more items from this source
July 27, 2021

"Besides the specter of a DOL enforcement action, this guidance should remind plan sponsors that if a cybersecurity breach ever impacts their plan, they need to be prepared. Class action lawsuits that argue that they chose the wrong service provider or that PII was misused or not protected are possible. Service Providers like recordkeepers, TPAs, and advisors will likely be inundated with requests to divulge the precise details of their cybersecurity and information security practices."

Tags: Cybersecurity  •  Fiduciary Duties  •  Retirement Plan Administration

Best Interest Standard, Part 60: Compliance with PTE 2020-02
FredReish.com Link to more items from this source
[Guidance Overview]
July 27, 2021

"[Some small firms] have opted for an educational (that is, no recommendations) approach to rollovers (because of the cost and effort to build compliant systems). Larger firms are adopting compliance approaches that can be automated. In addition, they will need to train hundreds or thousands of investment professionals on the new requirements by December 21."

Tags: Fiduciary Duties  •  Retirement Plan Investments

District Court: Plaintiff Lacks Standing to Challenge Retirement Plan Investment Options and Fees
Jackson Lewis P.C. Link to more items from this source
July 27, 2021

"The court found that plaintiff lacked standing to assert her ERISA claims for two main reasons. First, plaintiff included a list of the allegedly imprudent funds in her complaint, but Infinity provided evidence that all of her retirement assets were invested in a fund that was not included on the list.... Second, with respect to plaintiff's excessive fee argument, Infinity provided evidence that the one fund in which plaintiff invested did not pay any recordkeeping fees." [Lange v. Infinity Healthcare Physicians, S.C., No. 20-737 (W.D. Wis. Jul. 16, 2021)]

Tags: 401(k) Plans  •  Fiduciary Duties  •  Retirement Plan Investment Costs  •  Retirement Plan Investments

Another Blow to Cross-Plan Offsetting: Employers Should Take Note
HUB International Link to more items from this source
July 22, 2021

"Plan sponsors should recognize that 'opting out' eliminates an overpayment recovery tool. As a result, your plan may have a tougher time recovering future overpayments. More importantly though, proactively squelching the practice should avoid a costly ERISA lawsuit down the road." [Lutz Surgical Partners PLLC v. Aetna, Inc., No. 15-2595 (D.N.J. Jun. 21, 2021)]

Tags: Fiduciary Duties  •  Health Plan Administration  •  Health Plan Costs

Mitigating Fiduciary Risk: Lessons Learned About the Prudent Person Rule After 15 Years of Fee Litigation
Trucker Huss Link to more items from this source
July 21, 2021

"Many of the complaints in these cases are now formulaic, and plaintiffs have attacked fiduciaries of participant-directed retirement plans (401(k) or 403(b) plans) which range in size from tens of millions to multiple billions in assets.... As courts have grappled with questions of fiduciary responsibility, a body of case law has developed that provides valuable guidance on methods plan fiduciaries may use to mitigate their risk if faced with a lawsuit or government investigation. This article addresses the duty of prudence in monitoring plan investments, thereby mitigating fiduciary risk through the lens of that body of case law."

Tags: Fiduciary Duties  •  Retirement Plan Investments

Fifth Circuit Affirms Dismissal of Putative Class Action Against American Airlines for Allegedly Imprudent 401(k) Plan Investment Options
Roberts Disability Law Link to more items from this source
July 21, 2021

"[The appellate court] disagreed with the district court that Plaintiffs had standing to sue FCU because they incurred a cognizable injury by receiving a lower interest rate in the FCU Option.... Lastly, the court found that the district court did not abuse its discretion in denying preliminary approval of the settlement. Even if the terms of the settlement agreement did not provide for further appellate review of the district court's decision, the court found that Plaintiffs cannot now challenge the district court's assessment of the settlement itself." [Ortiz v. American Airlines, Inc., No. 20-10817 (5th Cir. Jul. 19, 2021)]

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

Best Interest Standard of Care for Advisors, Part 59
FredReish.com Link to more items from this source
[Guidance Overview]
July 21, 2021

"PTE 2020-02 offers relief from prohibited transactions resulting from recommendations to participants to rollover their accounts into IRAs. However, it does not provide relief from the fiduciary/best interest standard of care. In that case, financial institutions and investment professionals must engage in a prudent process to gather and assess the relevant information. That fiduciary requirement already applies and is not delayed until December 21."

Tags: Fiduciary Duties  •  Retirement Plan Investments

PEPs and MEPs: Compliance and Fiduciary Considerations Under the SECURE Act
Greenberg Traurig Link to more items from this source
[Guidance Overview]
July 20, 2021

"Participating employers retain a fiduciary obligation and liability for making sure that the sponsor of the group or association MEP, PEO MEP or PEP has been prudently selected and is operating the plan in a prudent manner and in the best interests of plan participants.... [S]ponsors and participating employers should have in place robust governance practices and comprehensive operational compliance procedures that provide evidence of a thorough investigation and an independent validation of procedural and substantive process standards that demonstrate that the plan fiduciaries and participating employers have acted in a prudent manner."

Tags: Fiduciary Duties  •  MEP/PEP

SEC Extracts $96 Million Settlement from TIAA Subsidiary for Rollover Practices
The Wagner Law Group Link to more items from this source
July 20, 2021

"[The authors] believe that this action by the SEC is meant to be fair warning and that other advisors can expect the SEC to bring charges for their rollover practices.... it is clear that paying different compensation for different advisory products brings conflicts of interest and so does paying more to roll assets outside of an employer-sponsored plan.... It is critical that advisors maintain appropriate policies and procedures, monitor that the procedures are being followed, and keep adequate records of their findings."

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs  •  Retirement Plan Investments

Supreme Court Has Opportunity to Bring Clarity to ERISA Fee Litigation
Michael P. Barry, via American Retirement Association [ARA] Link to more items from this source
[Opinion]
July 20, 2021

"The Supreme Court agreeing to review Hughes v. Northwestern presents the very real possibility that finally someone -- the Supreme Court -- will say something authoritative about exactly what a plan fiduciary's obligations are in building a fund menu. Must the fiduciary inspect every fund to make sure it carries the lowest possible fee? Or is simply giving participants an adequate choice, including low-cost index funds -- the sort of choice an ordinary investor has -- 'good enough?' "

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

Judge Moves Forward Lawsuit Challenging Use of Active TDF Suite
PLANSPONSOR; free registration may be required Link to more items from this source
July 20, 2021

"[The judge] noted that of the 29 Fidelity funds in the active TDF suite, 17 of them trailed their respective benchmarks over their respective lifetimes ... [T]he active suite also had a significantly higher expense ratio than the index suite, despite consistently underperforming the index suite ... The defendants continued to use the active suite as the plan's [QDIA] for as long as it was an option in the plan's investment menu." [In re Prime HealthCare ERISA Litigation, No. 20-1529 (C.D. Cal. Jul. 16, 2021)]

Tags: Fiduciary Duties  •  Retirement Plan Investments

Plan Sponsors: How to Know When It's Time to Update Your Investment Options
PlanPILOT Link to more items from this source
July 16, 2021

"You're seeing lower fees among similar plans ... If something is no longer fulfilling its original role in your plan's menu, consider taking a second look.... Performance has been subpar over the long-term ... [R]eplacing funds from time to time is critical to ensuring your plan participants have access to the best funds possible."

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs  •  Retirement Plan Investments

Best Interest Standard of Care for Advisors, Part 58
FredReish.com Link to more items from this source
[Guidance Overview]
July 13, 2021

"In the past, some financial institutions had taken the position that there could not be a 'mutual understanding' if their agreements with retirement investors disclaimed fiduciary status, or parts of the 5-part test. The DOL has effectively said that approach won't work and the totality of the circumstances will be considered in determining fiduciary status. Obviously, this position will make it more difficult for financial institutions to avoid fiduciary status."

Tags: Fiduciary Duties  •  Retirement Plan Investments

SEC Announces $97 Million Settlement with TIAA Subsidiary Over Retirement Rollover Recommendations
U.S. Securities and Exchange Commission [SEC] Link to more items from this source
July 13, 2021

"The [SEC] today announced that TIAA-CREF Individual & Institutional Services LLC (TC Services), a subsidiary of Teachers Insurance and Annuity Association of America (TIAA), will pay $97 million to settle charges of inaccurate and misleading statements and a failure to adequately disclose conflicts of interest to thousands of participants in TIAA record-kept employer-sponsored retirement plans. The $97 million will be distributed to investors affected by the misconduct and settles both the SEC's case and a parallel action announced today by the Office of the New York Attorney General (NYAG)."

Tags: Fiduciary Duties  •  Retirement Plan Investments  •  Rollovers

Plan Sponsors Are Failing to Take Full Advantage of These Tactics for 401(k) Plans
Fiduciary News; free registration required Link to more items from this source
July 13, 2021

"Taking full advantage of the Prudent Investor Act ... Taking full advantage of benchmarking tools ... Taking full advantage of DOL's new cybersecurity guidance ... Taking full advantage of Roth-ification ... Taking full advantage of motivated employees."

Tags: Fiduciary Duties  •  Retirement Plan Administration  •  Retirement Plan Design

What the Supreme Court's Decision in a 401(k) Fee Case Could Mean for ESOPs
Faegre Drinker Link to more items from this source
July 13, 2021

"It is difficult, if not impossible, to reconcile the Supreme Court's analysis in the two 'stock drop' cases with the analysis conducted by courts in ESOP cases.... The Supreme Court's analysis, including how it interprets ERISA provisions, what consideration it gives to ERISA's legislative history and what consideration it gives to the context of the fiduciaries' decision, may provide further support for dismissal arguments in ESOP cases."

Tags: ESOPs  •  Fiduciary Duties

Supreme Court Will Hear Northwestern University 403(b) Plan Excessive Fee Case
Verrill Dana LLP Link to more items from this source
July 13, 2021

"According to the Solicitor General, the inclusion of more than 100 retail class mutual funds in the plan is sufficient to support a viable claim of breach of fiduciary duty. Though conceding that cost is not the only appropriate consideration in selecting funds, the Solicitor General argued that where cost is the only difference between funds, it is imprudent to select the higher cost alternative." [Hughes v. Northwestern Univ., No. 18-2569 (7th Cir. Mar. 25, 2020; cert. pet. granted No. 19-1401, Jul. 2, 2020)]

Tags: 403(b) Plans and Annuities  •  Fiduciary Duties  •  Retirement Plan Investment Costs

Supreme Court Set to Tackle Pleading Standard in Northwestern Retirement Plan Lawsuit
Groom Law Group Link to more items from this source
July 12, 2021

"The Supreme Court will likely address at least the two claims in the case identified by the Solicitor General: not using the lowest-cost share class and failing to take steps to attempt to reduce recordkeeping fees. The Supreme Court may also address other issues, including what allegations regarding investment benchmarks must be included, as well as the relevance of the overall mix of investments offered in the plan, the use of index funds, and revenue sharing." [Hughes v. Northwestern Univ., No. 18-2569 (7th Cir. Mar. 25, 2020; cert. pet. granted No. 19-1401, Jul. 2, 2020)]

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs  •  Retirement Plan Investments

Investment Fiduciary Hiring Tips for 401(k) Sponsors and Advisers
Carol Buckmann, via RPA Convergence Link to more items from this source
July 12, 2021

"Schedule meetings with the final candidates ... to get a sense of how hands-on they will be in providing advice.... Ask for references of current clients and ... at least one former client.... Ask to meet everyone who will be on the plan's team, not just the most senior person.... Everyone who will be working with the candidate should have an opportunity to participate in the final decision."

Tags: Fiduciary Duties  •  Retirement Plan Investments


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