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Fourth Circuit Affirms No Breach of ERISA's Fiduciary Duties for 'Cross-Selling' Efforts

"The Fourth Circuit recently ruled that while providing 'investment advice for a fee' implicates those duties, pitching investment services does not. It also clarified that a fiduciary's self-interest alone, without any action taken on behalf of that self-interest, is not a breach.... While the questions raised by Reetz are simple, the answers likely are not." [Reetz v. Aon Hewitt Investment Consulting Inc., No. 21-2267 (4th Cir., July 17, 2023)]

Splitting with Other Circuit Courts, the Ninth Circuit Revives an ERISA Prohibited Transaction Claim

"The Ninth Circuit reasoned that the amended contract was a prohibited transaction under ERISA Section 406(a)(1)(C) because the recordkeeper was a 'party in interest' and the expansion of that party's role with, and compensation received from, the plan involved 'furnishing of goods, services, or facilities between the plan and a party in interest.' And the Ninth Circuit concluded that it could not enforce the 'reasonable compensation' exemption at this point in the case, because the fiduciaries failed to take into account revenue that the recordkeeper had received from third parties." [Bugielski v. AT&T Servs., Inc., No. 21-56196 (9th Cir. Aug. 4, 2023)]

Wit Is Flipped: The Ninth Circuit Reverses Decision on Standards for Coverage of Behavioral and Mental Health Treatment

"[In] 2019, the [district] court issued a 106-page decision, finding that UBH had violated ERISA by applying 'unreasonable' standards allegedly not consistent with generally accepted standards of care [GASC] ... The Ninth Circuit, however, decided that UBH had properly exercised its discretion ... and that the underlying health plans did not require consistency with the GASC, only that they not be inconsistent.... Many courts have relied upon Wit's reasoning to deny United any deference in benefit decisions, allow broad discovery, and even award benefits. The Ninth Circuit's decision will likely bring an end to that." [Wit, et al. v. United Behavioral Health, Nos. 20-17363, 21-15193, 20-17364, 21-15194 (9th Cir. Mar. 22, 2022; unpub.)]

Government Wields the Stick: DOL Guidance and State-Based IRA Programs

"The state plans have potential to scoop in employees who work for an employer that already sponsors a plan. The employee may not be covered by the plan because they are in a waiting period or because of some other good reason. An employer who has already established a plan might end up needing to comply with ERISA (for its own plan) and state law (for the state savings arrangement).... Employers with big multistate workforces would be well-served to monitor legislation in states like Illinois, California and Oregon to ensure appropriate legislation and administrative rulemaking."

Eighth Circuit's 'Meaningful Benchmark' Requirement for 401(k) 'Excessive Fee' Lawsuits Continues to Generate Dismissals

"As to the excessive-recordkeeping-fees claim, plaintiffs did 'not allege facts plausibly showing that the Plan's recordkeeping fees are unreasonably high.' As to the excessive-management-fees claim, that claim 'fail[ed] largely because as this theory is pleaded, a collective investment trust is not a plausible benchmark for a mutual fund.' As to the under-performance claim, that claim failed 'because the benchmarks alleged to support this theory are implausible.' " [Fritton v. Taylor Corp., No. 22-cv-00415 (ECT/TNL), 2023 U.S. Dist. LEXIS 145940 (D. Minn. Aug. 21, 2023).]

California Court Refuses to Decertify Class Action Based on Ninth Circuit's Decision in Wit

"[The court] rejected Aetna's argument that the named plaintiffs' failure to exhaust contractually required administrative remedies precluded them from representing the class. Aetna had categorically concluded that L-ADR surgery was experimental, and thus exhausting administrative remedies was futile.... [By] refusing to even consider whether L-ADR might be appropriate in any case, Aetna effectively repudiated any contractual right it might have to require exhaustion." [Hendricks v. Aetna Life Ins. Co., No. 19-6840 (C.D. Cal. Jul. 25, 2023)]

Courts Address Participant Standing to Challenge Fees and Payments Received by Group Health Plan Service Providers

"Two recent cases have suggested that plan participants will have a difficult time establishing standing in suits alleging that service providers to group health plans charged excessive fees or otherwise improperly received excessive compensation." [Winsor v. Sequoia Benefits & Ins. Servs., LLC, No. 21-16992 (9th Cir. Mar. 8, 2023); Knudsen v. MetLife Grp., Inc., No. 23-0426 (D.N.J. July 18, 2023)]

Ninth Circuit Dismisses Claim Against Welfare Benefit Plan Service Provider for Lack of Article III Standing

"The complaint failed to sufficiently allege any facts suggesting that [the plaintiffs] individually paid higher fees or insurance premiums as a result of Sequoia's alleged actions. Nor did they allege that they did not receive the benefits promised them under the MEWA. Absent any injury to the plaintiffs themselves, they did not have Article III standing based on allegations that they had an 'equitable ownership' in the assets of the MEWA." [Winsor v. Sequoia Benefits & Ins. Servs., LLC, No. 21-16992 (9th Cir. Mar. 8, 2023)]

Excessive Recordkeeping Fee Claim Squeaks by a Motion to Dismiss

"Courts have started more aggressively requiring plaintiffs to identify similar plans that paid less for the same services -- an apples-to-apples comparison -- to get past a motion to dismiss. Lucero illustrates how plaintiffs might meet or avoid that pleading requirement." [Lucero v. Credit Union Retirement Plan Assoc., No. 22-208 (W.D. Wis. Mar. 9, 2023)]

ESG Investing in Your 401(k) Plan: The Problem Is Choice

"ESG is not a fund category within the risk/return spectrum. It is not specific to equities or bonds or large/mid/small cap stocks or growth or value stocks. Rather, ESG attributes can exist broadly across all investments along the spectrum. There are many more questions here than answers."