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Will the DOL Fiduciary Rule Be the End of Solicitor Arrangements?

"IRA assets held by a Broker-Dealer (B-D) range between 40 and 80% of B-D total assets. However, many of these [financial advisors] know very little about ERISA fiduciary standard of conduct. This lack of knowledge increases B-D litigation risk as tens of thousands of misguided fiduciary missiles seek to secure new engagements or service existing clients. B-Ds will have to establish new training protocols in conjunction with compliance oversight to mitigate this risk."

Fiduciary Case Against Novant Health Settles Early for $32 Million

"Defendants have agreed to pay $32 million and have agreed to very significant affirmative relief. Counsel for the plaintiff's will seek no more than $10,666,666 in attorney's fees and $95,000 in costs.... [T]he early settlement of this case suggests that the plan fiduciaries were engaging in conduct that did not meet the stringent standards of ERISA. While the allegations of real estate deals and money payments are dramatic, the fiduciary of the average plan can look to this lawsuit and settlement as an example that ERISA requires you to act in the best interest of plan participants at all times."

Fiduciary Education Isn't a Best Practice, It's a Requirement

"[D]oes the adviser fully understand the risk associated with the recommendation and has the adviser fully educated the investor of all risks so s/he can make an informed decision? Furthermore, is the adviser educated on the role a recommendation might fill under an ERISA standard of care? In other words, the adviser not only needs to be educated about the products they recommend but also why the products recommended are prudent and meet the best interest standard of care."

The Latest Tussey v. ABB Decision: Fiduciary Lessons Aplenty

"If you are faced with the opportunity to reduce costs by using proprietary investments, consider documenting your reasons to adopt proprietary funds by answering the following questions: [1] Are we using proprietary funds? [2] Are we replacing an existing fund with a proprietary fund? [3] Have we selected proprietary funds based on the standards and criteria established in the [investment policy statement (IPS)]? [4] If an exception is necessary to use a proprietary fund, should we change the IPS standards and criteria permanently? [5] Are we using a proprietary fund because it is in the best interests of participants or because it reduces the cost to the Plan Sponsor? [6] How are we accounting for any additional revenue sharing from the use of the proprietary funds?" [Tussey v. ABB Inc., No. 2:06-CV-04305 (W.D. Mo. July 9, 2015)]

Supreme Court Declines to Hear 'Would Have' vs. 'Could Have' ERISA Case

"The 4th Circuit concluded that the defendants failed to have a prudent process because they failed to consider the best interests of the participants. The question then becomes, once you've shown a failure of procedural prudence, what can the fiduciary prove to show they still made the right substantive choice? The defendants wanted a standard that would have allowed them to put on evidence that a prudent fiduciary COULD have made the same decision. The plaintiffs, and ultimately the 4th Circuit, supported a standard where the defendant must show that a prudent fiduciary WOULD have made the same decision." [Tatum v. RJR Pension Investment Comm., No. 13-1360 (4th Cir. Aug. 4, 2014; cert. denied June 29, 2015)]

Oracle Sued by Schlichter After Recent Cases Against Anthem, Reliance Trust, and BB&T

"[T]here has been a significant uptick in the number of ERISA fiduciary breach lawsuits filed in the last couple of months.... The most recent case filed was just last week against Oracle. The case against Anthem has received a lot of attention. But one that has slipped through the cracks a bit is against Reliance Trust and one its clients. This case may the first of its kind on this scale to go after an outsourced fiduciary who is not related to the plan sponsor. Finally, the case against BB&T will be familiar to readers as involving claims of a providers own in-house plan."

Spano v. Boeing Excessive Fee Case Settles for $57 Million

"The following are some selected terms of the settlement: ... Boeing agreed to hire an independent fiduciary to approve the settlement ... If a technology sector strategy fund remains as a core option in the Plan, Boeing shall obtain an opinion and recommendation of an Independent Investment Consultant on the question of whether and how to provide participants access to a technology sector strategy as a core option.... The agreement acknowledged that Boeing has a cash target for their company stock fund, and have hired a fiduciary to monitor the cash levels."

Lockheed Martin Settles Excessive Fee Lawsuit for $62 Million

"The last of the first wave of excessive fee lawsuits filed on September 11, 2006 in what many dubbed the 'Schlichter Blitzkrieg' has been settled.... Lockheed Martin has agreed to pay $62 million and implement extensive affirmative relief. According to the settlement agreement, Schlichter, Bogard & Denton will request up to $20,666,666 in attorneys' fees and reimbursement of up to $1,850,000 in costs, all to come out of the settlement amount ... The plaintiffs had alleged that the fiduciaries to the Lockheed Martin 401(k) plans cause the plans to pay excessive administrative fees and that the fiduciaries had imprudently managed the money market fund and company stock fund."

On Remand, Tussey v. ABB Defendants Found to Breach ERISA But Win on Procedural Technicality

"Without a doubt, the outcome of this decision has been driven by the unique procedural aspects of the case, rather than substantive ones. For ERISA fiduciaries that might take comfort, don't. The plaintiffs bar will adapt and the proper damages calculations as required by the court will be presented in all cases in the future. But even these plaintiffs may still get another bite at the apple, as they have every right to appeal the case again to the 8th Circuit, which must hear it[.]" [Tussey v. ABB Inc., No. 2:06-CV-04305 (W.D. Mo. July 9, 2015)]

Plaintiffs Fail to Float Claim Past Federal District Court

"Unless Congress legislates new law, the [DOL] addresses the question raised by the courts, or the losing plaintiffs appeal to a higher court, it is looking like in most circumstances, float earnings are not considered plan assets.... At this point, a fiduciary must now determine whether it is important to continue the same governance activities of the past or abandon those activities as a waste of time. Of course, under the current short-term interest rate environment float earnings do not amount to much especially for small plans, so the question is where do we go from here?" [In re Fidelity ERISA Float Litig., No. 13-10222 (D. Mass. March 11, 2015)]