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Fiduciaries Get Final Win in Lawsuit Over Disney 401(k) Investment in Sequoia Fund

"[T]he appellate court found that Sequoia's investment and concentration in Valeant was facially consistent with the retirement plan documents, noting that both the plan's summary plan description and Sequoia's 2015 Prospectus note that Sequoia is 'non-diversified' and there are risks associated with Sequoia's investment strategy. To the extent that the plan documents even distinguish between 'value' and 'growth,' the 9th Circuit agreed with the District Court that these words were used simply to 'describe [Sequoia's] investments; not to also convey [its] overall investment strategy.' " [Wilson v. Fidelity Mgmt. Trust Co., No. 17-55726 (9th Cir. Mar. 1, 2019, unpub.)]

401(k) Plan Sponsor Fiduciary Litigation Update: Sequoia Fund Litigation

"Here, what the District Court appears to be saying is that when a plan fiduciary selects a fund that is intended have a higher risk/return profile, including through less diversification, the plan fiduciary should not have an obligation to monitor whether that fund is, in fact, diversified. In other words, as the court stated, 'in the context within which the Plan operated during the relevant time period', plan fiduciaries had no duty to monitor the concentration of any particular investment in the Sequoia Fund." [In Re Disney ERISA Litigation, No. 16-2251 (C.D. Cal. Nov. 14, 2016)]

Disney Faces Another ERISA Lawsuit Over Sequoia Fund

"In a proposed class action filed June 28, Disney workers allege that the company's retirement plan investment committee should have dumped its Sequoia Fund holdings when the fund's increasing stake in the troubled Valeant -- which the workers dub 'the Pharmaceutical Enron' -- caused a substantial drop in stock price that led to lost retirement savings."

Sequoia Firm's Valeant Stake Brings Pain in Retiree Lawsuit

"When Valeant Pharmaceuticals International Inc.'s stock tumbled 51 percent on Tuesday, nobody lost more than fund manager Ruane Cunniff & Goldfarb Inc., which saw $1.26 billion in value wiped out in a day.... On Monday, a retiree whose money was managed by Ruane Cunniff filed a lawsuit accusing the firm of conflict of interest, self-dealing and breach of trust. Those sins, the retiree alleged in a proposed group suit, fueled an environment that gave short shrift to participants of a retirement plan for employees of a company called DST Systems Inc.... A nontransparent fund managed by Ruane Cunniff was packed with shares of Valeant -- as much as 30 percent of its holdings, according to the complaint[.]" [Cooper v. Ruane Cunniff & Goldfarb Inc., No. 1:16-cv-01900-WHP (S.D.N.Y. filed Mar. 14, 2016)]

Valeant Losses Could Hurt Retirement Plans at More Than 50 Companies

"More than 50 companies have offered Sequoia Fund Inc. as an investment option in their employee savings plans, according to 2014 data ... Sequoia's largest holding -- at one point last year more than 30% of its portfolio -- is Valeant Pharmaceuticals International Inc. The drugmaker's stock has tumbled about 70% this year amid questions about its accounting and business practices.... Investment consultants say it is rare for workplace plans to offer mutual funds like Sequoia that have concentrated bets."

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)]

Ninth Circuit Rules Plan Participants Have No Standing to Challenge Alleged Misconduct of Multi-Employer Benefit Manager

"The court noted that RingCentral made all decisions regarding which benefits would be offered to employees, and what contributions would be required for those benefits. Plaintiffs were required to establish a connection between Sequoia's actions and their contributions, but RingCentral's intermediary actions broke that connection ... The Ninth Circuit then turned to plaintiffs' second standing theory, which was that they retained an equitable ownership interest in the Tech Benefits Program's trust fund ... The court held that this argument ran afoul of the Supreme Court's decision in Thole." [Winsor v. Sequoia Benefits & Ins. Servs., LLC, No. 21-16992 (9th Cir. Mar. 8, 2023)]

Beyond Attestation: What Employers Need to Know About Gag Clause Prohibition

"The prohibition of gag clauses is more than an annual attestation; it requires active oversight of all plan-related contracts.... [E]mployers should: [1] Audit contracts with TPAs, PBMs, and carriers ... [2] Verify downstream compliance ... [3] Document efforts to remove any prohibited clauses ... [4] Submit your attestation on time if your carrier or TPA does not handle it on your behalf."

ACA Employer Mandate Penalties: Litigation Update

"The court ruled that the ACA does not authorize HHS to delegate its duty to certify to an employer that an ESRP penalty is owed. As such, HHS exceeded its authority under the ACA by attempting to delegate this function ... [T]here is no nationwide injunction against the agencies regarding the current assessment process; the relief in this decision is applicable solely to this particular set of facts.... If upheld, it may require the IRS and HHS to develop a new process for imposing ESRPs." [Faulk Company, Inc. v. HHS, No. 24-0609 (N.D. Tex. Apr. 10, 2025)]

California Legislative Updates for Group Health Plan Sponsors

"AB 260, effective September 26, 2025, requires California regulated health plans with prescription drug benefits to cover mifepristone even when [FDA] labeling or federal risk evaluation strategies would otherwise limit its use.... AB 144 requires California regulated health plans to cover preventive services without cost-sharing or prior authorization ... as [federal] recommendations existed on January 1, 2025.... California is 'locking in' the federal and professional standards that were in place on that date, regardless of any future changes or litigation at the federal level.... SB 41, effective January 1, 2026 ... bans spread pricing and requires PBMs to use pass-through pricing models so plans pay pharmacies what PBMs reimburse them, plus a transparent administrative fee."