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Employee Fiduciary Comment Letter to EBSA on Pooled Employer Plans (PDF)

"[The author opposes] creating a regulatory safe harbor that favors PEPs. Instead, [he urges] EBSA to create a safe harbor for small employers that adopt a cost-efficient single-employer 401(k) plan with an all-index fund core menu, no hidden fees, and flat per participant pricing. The RFI frames a potential safe harbor to encourage employer to join PEPs; [these] comments propose a better path for small businesses."

Employee Benefits Liability Coverage vs. Fiduciary Liability

"[S]ome plan sponsors believe that they do not need to spend additional premium dollars to purchase fiduciary liability insurance when they have EBL coverage as part of their commercial package general liability insurance policy. As discussed more fully [in this article], including an analysis of a recent court case, a fiduciary liability insurance policy provides significantly broader coverage than the limited administration coverage in a standard EBL policy to protect employee benefit plans and its fiduciaries. Even the defense of routine benefit claims can be excluded from coverage under an EBL policy, which is why plan sponsors need to protect their plans and plan fiduciaries with quality fiduciary liability insurance coverage."

Employee Concerns Can Befuddle a 401(k) Plan Sponsor/Fiduciary

"[A recent] survey shows, except for people with smaller incomes, there's more interest among employees about their investment selections than about how much they should save to live a comfortable retirement.... By not saving as early as possible, retirement savers miss out on one of the greatest opportunities they have when it comes to, ultimately, retiring in comfort....With or without guidance, more than half of the 401k participants prefer to do their own investment research and make their own decisions."

How (and Why) the 401(k) Fiduciary Should Act to Increase Employee Deferral Rates

"Industry folks sometimes forget regular folks don't use words like 'nomenclature' or 'deferral.' And yet, chances are if participants sit through an entire employee 401k presentation, they'll hear the word 'deferral' a number of times. Only the most astute presenter will remember to define it in terms of an annual contribution."

401(k) Plan Sponsors' Fiduciary Obligation to Former Employees

"Fulfilling the obligations of a plan sponsor can increase administrative costs when it comes to ex-employees ... If the plan absorbs these costs, it means current employees are paying for benefits enjoyed by former employees.... Most 401k plans now provide financial tools to participants.... Former employees also have access to these tools, but it's more difficult for plan sponsors to monitor how those tools are being used ... [which] can increase the fiduciary liability of plan sponsors."

Employee Stock Ownership Plan Participant Cannot Pursue Fiduciary Breach and Bad Faith Claim Against Insurer of Plan Fiduciaries (PDF)

"Applying Mississippi law, a federal district court has held that a participant in an employee stock ownership plan cannot pursue his claims against the insurer of the plan fiduciaries because those claims were previously released in a settlement agreement between the plan fiduciaries and the insurer.... In so deciding, the court explained that the dispute was whether the agreement actually released the plan fiduciaries' claims, whether the agreement constitutes an unenforceable anticipatory release, and whether the agreement is unconscionable." [Sealey v. Beazley Ins. Co., Inc., No. 15-768 (S.D. Miss. Aug. 16, 2016)]

The Hidden Danger of Over-Diversification: Fiduciary Advisers Must Warn Employees

"Plan sponsors might feel their job is done once a robust plan menu is provided to employees, but it's really only the beginning.... Having too many funds can lead to any number of investing mistakes.... This is why it's vitally important for employees to understand more than just the simple objective and class of the mutual funds they own.... [E]mployees may be setting themselves up not only for failure, but for a costly failure."

Fiduciary Could Not Use ERISA 502(a)(3) to Seek Disability Benefits for Employee

"The court determined that the employer was not a plan fiduciary for purposes of making claims determinations, and therefore could not rely on [ERISA section 502(a)(3)] to sue the fiduciary that held such authority (i.e., the insurer). The court noted that even if the employer was considered to be a fiduciary, ERISA does not afford a fiduciary the right to sue if the relief sought can be obtained directly by the participant under 502(a)(1)(B) ... Thus, an employer's leverage, if any, to pressure insurers to pay benefits rests with the power to move the business to a different insurer." [Duda v. Standard Ins. Co., No. 12-1082 (E.D. Penn. Apr. 30, 2015)]

Trap for the Unwary: Employee Benefit Plans and the Fiduciary Exception to the Attorney-Client Privilege

"Both the settlor exception and the liability exception to the fiduciary exception are grounded in the identity of interest between the fiduciary and beneficiary. The attorney-client privilege tends to be preserved where the fiduciary's interest and the beneficiary's interest have sufficiently diverged.... Indicative of divergent interests is the retention of counsel by a beneficiary, the threat of litigation, and the discussion of potential litigation."

Can Employee Agreements Mitigate ERISA Fiduciary Exposure?

"[The district court] opened the door to a few questions, such as how much education and experience does it take for someone to be sophisticated enough to sign a release, the extent to which the release was valid against plan trustees, and whether a shorter timeline for signing would be equally sufficient. Further, the court noted that the employee's release did not bar the plan itself from asserting claims against the plan fiduciaries in the future." [Innis v. Bankers Trust Co. of South Dakota, No. 16-650, (S.D. Ia. Apr. 30, 2019)]