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COLLECTED WISDOM™ on Court and Legal Actions Related to Retirement Plans

A directory and index of articles that review what is happening in the courts and legal system.

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Northrup Grumman Agrees to Settle 401k Excessive Fee Suit

The long legal battle began in 2006 with a related lawsuit alleging that the plan was paying excessive administrative fees. That case was settled for $16,750,000 in 2017, but it limited the damages period to May 11, 2009. The participants of the 401k plan alleged that they continued to be charged excessive fees after the damages period in the first lawsuit ended and the current class action was brought in 2016 on similar claims. By August 2019, the only claim that remained in the case asserted that Northrop violated its fiduciary duties by choosing an active-management style for the emerging markets fund instead of a low-cost passive-management style. Northrop switched to a passive management style in 2014.

Source: Californiaworkplacelawblog.com, January 2020

Supreme Court Vacates Ruling in IBM ERISA Stock-Drop Suit

The U.S. Supreme Court declined to act on an ERISA stock-drop lawsuit, vacating and remanding an appeals court ruling that had represented a rare victory by participants over 401k plan sponsors. The case involves a plan participant's complaint that fiduciaries should have taken corrective action to protect investors who held IBM stock in an IBM 401k plan.

Source: Pionline.com, January 2020

Northrop Grumman Would Pay $12.4 Million as Part of ERISA Settlement

Northrop Grumman Corp., agreed on a tentative settlement of an ERISA complaint against the company's 401k plan by offering to pay $12.4 million, according to a preliminary settlement notice filed Monday in U.S. District Court in Los Angeles. This is the second part of a long-running ERISA suit against Northrop Grumman. Participants in two company retirement plans sued in 2006 and 2007. The cases were consolidated.

Source: Pionline.com, January 2020

Supreme Court Declines to Consider Putnam Fiduciary Breach Case

The U.S. Supreme Court declined to hear a petition by Putnam Investments asking to rule on the contentious issue of whether plaintiffs must prove a loss in an ERISA fiduciary breach lawsuit or whether sponsors must disprove a loss and that the loss was caused by the fiduciary breach. The Supreme Court provided no explanation for its decision.

Source: Pionline.com, January 2020

Chemical Distributor Faces Excessive Fee Suit Against 401k Plan

An ERISA lawsuit has been filed against chemical distributor Brenntag North America Inc. alleging the company and other fiduciaries of the Brenntag USA Profit Sharing Plan failed to take measures to ensure reasonable investment and recordkeeping fees. The plaintiffs say defendants failed to utilize the lowest cost share class for many of the mutual funds within the plan, and failed to consider collective trusts, commingled accounts, or separate accounts as alternatives to the mutual funds in the plan, despite their lower fees.

Source: Planadviser.com, January 2020

Lawsuit Against Trade Association's 401k Plan Moves Forward

National Rural Electric Cooperative Association is facing a lawsuit regarding excessive fees and prohibited transactions. U.S. District Judge Liam O'Grady of the U.S. District Court for the Eastern District of Virginia has found that a lawsuit alleging prohibited transactions against fiduciaries of a trade association's 401k plan "contains sufficient well-pleaded facts to survive a motion to dismiss."

Source: Plansponsor.com, January 2020

ERISA 403b Litigation Informs Plan Governance Practices

In the past three years, 403b plan sponsors have been subjected to the same ERISA fiduciary breach lawsuits that 401k plans have been fighting. 403b plan sponsors need help understanding their fiduciary duties, reviewing plan investment lineups and benchmarking fees.

Source: Planadviser.com, January 2020

Revenue Sharing, Recordkeeping Fees at Issue in Trader Joe's Lawsuit

The Trader Joe's Company has been named as the defendant in a new ERISA lawsuit filed in the U.S. District Court for the Central District of California. Employees of the grocery chain accuse their employer of acting imprudently in the selection of retirement plan investment options and of failing to monitor the services and fees paid.

Source: Planadviser.com, January 2020

M&T Bank 401k Lawsuit Settlement Agreement Includes Review of Investments

Defendants in a lawsuit alleging self-dealing by fiduciaries of the M&T Bank 401k plan have reached a settlement agreement. Under the terms of the proposed settlement, M&T Bank or its insurers will pay a gross settlement amount of $20,850,000 into a common fund for the benefit of class members. The settlement also includes a number of non-monetary terms.

Source: Planadviser.com, January 2020

Retirement Plan Participants Sue Ardent Health Services

Ardent Health Services is the target of a new ERISA lawsuit. The proposed class action complaint was filed in the U.S. District Court for the Middle District of Tennessee and names as defendants Ardent Health Services, the company's board of directors and more than 30 individual fiduciary defendants both named and unnamed.

Source: Planadviser.com, January 2020

Past Practices Cited in ERISA Lawsuit Against Plan Sponsors

A participant in the Rollins 401k Savings Plan has sued that plan and the Western Industries Retirement Savings Plan, as well as the plans' administrative and investment committees and various John Does, for breaches of ERISA fiduciary duties. Although the complaint notes that the defendants acted to replace higher-cost share classes with lower-cost ones in 2019, it says that action did nothing to repair participants' accounts for past practices.

Source: Plansponsor.com, December 2019

The Year in ERISA Litigation

As have previous years, 2019 brought major settlements and decisions in retirement-plan focused litigation, including some precedent-setting appellate and Supreme Court decisions.

Source: Planadviser.com, December 2019

Plan Sponsors Sued for Investment Menu Practices

With regard to "improper selection and monitoring of plan service providers," the lawsuit specifically names a broker/dealer representative whom it says was terminated in 2014 for "failure to follow firm policies and industry regulations."

Source: Planadviser.com, December 2019

UPenn Petitions Supreme Court to Review 403b Plan Case

The University of Pennsylvania has filed a petition for a writ of certiorari in the U.S. Supreme Court asking whether the pleading standard the court established in its decision in Bell Atlantic Corp. v. Twombly governs breach of fiduciary duty claims under ERISA.

Source: Planadviser.com, December 2019

Third Party Sued for Alleged Fiduciary Breach Involving Retirement Plans

A recent lawsuit, Chavez, et al. v. Plan Benefits Services, Inc., et al., focuses on a dispute regarding two benefit plans, a retirement plan, and a health and welfare plan sponsored by Training, Rehabilitation & Development Institute. The plan participants did not sue TRDI, the plan sponsor, but rather third-party entities responsible for marketing and supporting these plans.

Source: Hallbenefitslaw.com, December 2019

Cintas Corporation Accused of ERISA Fiduciary Breaches

A new ERISA lawsuit filed in the U.S. District Court for the Southern District of Ohio names as defendants the Cintas Corporation, its board of directors, its retirement plan investment committee, and some 30 John Does. Among other allegations, the national work uniform provider is accused of permitting high-cost mutual funds to persist on the retirement plan menu while cheaper but otherwise identical funds were available.

Source: Planadviser.com, December 2019

Cyberfraud: Must a Plan's Security Policies Meet the Duty of Prudence?

Criminals attempting to steal employees' benefits is not a new issue. However, the means by which they commit such crimes have changed with the advancement of technology and how benefits are paid. Two recent cases alleging breach of fiduciary duty under ERISA in connection with the distribution of participant account balances in DC plans highlight the compliance and litigation risks associated with plan losses. This article provides an in-depth analysis of these cases.

Source: Groom.com, December 2019

Putnam Says Feds Biased in ERISA Burden of Proof Case

The feds said the Supreme Court didn't need to bother with a case involving the burden of proof in an ERISA case, but the petitioners in the case say they have a bias. The petitioners in this case are Putnam Investments and they had asked for a Supreme Court review of the case to resolve two issues: which party bears the burden of proof on the issue of causation once a plaintiff has established a breach of fiduciary duty under ERISA and related plan losses, and to address whether passively managed index funds can be appropriate benchmarks for establishing losses from the improper monitoring of actively managed funds.

Source: Napa-net.org, December 2019

Supreme Court Ruling in Intel ERISA Statute of Limitations Suit Could Have Far-Reaching Implications

The "actual knowledge" question is an important one because it concerns a critical threshold issue in ERISA fiduciary duty claims. Of the near 80,000 ERISA cases filed in the past decade, a major share of the litigation has included suits against plan fiduciaries for allegedly breaching their fiduciary duties, and the statute of limitations is potentially implicated in many such cases. Given the importance of this issue, Groom attorneys attended oral argument, which are summarized here.

Source: Groom.com, December 2019

Top Five ERISA Litigation Developments of 2019

As 2019 draws to a close, it is a good time to reflect on the biggest developments in ERISA litigation this past year. If this year is any indication, we expect 2020 to include landmark Supreme Court opinions and more.

Source: Icemiller.com, December 2019

Supreme Court Hears Polarized Arguments in Intel ERISA Case

While not divided across political lines, the parties in Sulyma v. Intel Corporation Investment Policy Committee view the question of what establishes "actual knowledge" of an alleged fiduciary breach under ERISA very differently.

Source: Planadviser.com, December 2019

MFS Excessive Fee Settlement Gets Judicial OK

A federal judge says the terms are a "fair, reasonable, and adequate settlement and compromise of the claims asserted in the Class Action." The terms of the settlement (approved on Dec. 5th) were announced in mid-June, and news of the settlement itself just before the parties were slated to go to trial. The parties had announced having come to terms last month, just days before the case was set to go to trial.

Source: Napa-net.org, December 2019

Mandatory Individual Arbitration Clauses in 401k Plans, a Good Idea?

The dispute resolution landscape for ERISA fiduciary breach claims may be shifting. The Ninth Circuit's decision in Dorman v. Charles Schwab Corp. upheld a provision in Charles Schwab's 401k plan mandating individual arbitration, and waiving class actions, for certain types of fiduciary breach claims. Should employers add a similar mandatory individual arbitration clause to their own plans? The answer requires a careful balancing of potential pros and cons of mandatory individual arbitration clauses.

Source: Troutman.com, December 2019

Court Provides Guidance on Monitoring ERISA Investment Fiduciaries

The U.S. District Court for the Western District of Pennsylvania in Scalia v. WPN Corporation wrote regarding the duty to monitor investment fiduciaries. Given the potential risk related to a breach this fiduciary duty, the WPN opinion is likely to be an important one for Appointing Fiduciaries. In its opinion, the WPN court provided the guidance for assessing the extent to which an Appointing Fiduciary has a duty to monitor and, if so, for determining whether the Appointing Fiduciary has fulfilled that duty.

Source: Financialservicesemploymentlaw.com, December 2019

Justices Wary of Intel Committee Position in 401k Dispute

A majority of justices on the Supreme Court seem to think posting 401k plan documents online isn't enough for companies to shorten the amount of time participants have to sue plan managers for mishandling investments. The case, which stems from a dispute over hedge fund and private equity investments in Intel Corp.'s 401k plan, has the potential to set a standard for determining how long employees have to file a lawsuit under ERISA.

Source: Bloomberglaw.com, December 2019

Arbitrator to Decide Whether ERISA Fiduciary Claims Should Be Arbitrated

A federal district court in Texas referred to arbitration a 401k plan participant's ERISA breach of fiduciary duty action based on allegations that certain plan investment options charged excessive fees.

Source: Erisapracticecenter.com, December 2019

Court Upholds ERISA Plan's Forum Selection Clause

Citing ERISA 502(e)(2), which provides that an action may be brought in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found, the employee argued that, despite the plan's forum selection clause, ERISA gave her the right to litigate in her choice of the three venues. The court found, however, that while ERISA sets forth three possible venue options, it does not expressly invalidate forum selection clauses in employee benefit plans.

Source: Thomsonreuters.com, November 2019

Podcast: Supreme Court May Resolve Key ERISA Statute of Limitations and Proprietary Fund Litigation Questions

In this Ropes & Gray podcast, litigation & enforcement partners Amy Roy and Dan Ward, and ERISA and benefits partner Josh Lichtenstein, discuss 401k litigation risk assessment and management. They review current trends in proprietary funds litigation, the key legal issues surrounding the statute of limitations for claims arising under ERISA, and the upcoming Intel case before the Supreme Court that could have significant ramifications for 401k plan sponsors and employers.

Source: Ropesgray.com, November 2019

Lawsuit Raises Tough Questions About ERISA Remedies for 401k Account Thefts

A recently filed ERISA action raises troubling questions about the safety of 401k plan participant account assets and the proper allocation of financial responsibility when account assets are stolen. The case alleges that the Estee Lauder 401k Plan, acting through its recordkeeper, Alight Solutions LLC (formerly Hewitt Associates, LLC), processed a series of three unauthorized distributions from the plaintiff's account in the amounts of $12,000, $37,000 and $50,000, respectively, over the course of approximately three weeks.

Source: Psca.org, November 2019

Settlement Announced in Invesco Self-Dealing Suit

Parties in a lawsuit accusing Invesco of self-dealing in its 401k plan have filed a Notice of Settlement. It may seem strange that Invesco has agreed to settle the case since a U.S. District Court Judge previously granted summary judgment in favor of Invesco. However, in that opinion, the court also allowed the plaintiffs 20 days to file an amended complaint and the plaintiff was in the process of doing so.

Source: Plansponsor.com, November 2019

DOL Sues Ben Shinn Trucking Over Handling of 401k

The DOL has filed a lawsuit against Iowa trucking company Ben Shinn Trucking for allegedly failing to remit about $465,000 in employee salary deferral contributions to the company's retirement plan. The lawsuit against Ben Shinn Trucking and owner Roger Shinn was filed in U.S. District Court in Des Moines on Nov. 18.

Source: Landline.media, November 2019

Retirement Plan Committee's Prudent Process Defeats DOL

A recently released case highlights the protection afforded by a retirement plan committee that takes its role seriously. In Scalia v. WPN Corp., a Pennsylvania federal court ruled that the U.S. Department of Labor was wrong in its insistence that retirement committee members were liable under ERISA for failing to monitor the committee's investment manager.

Source: Carltonfields.com, November 2019

Supreme Court Considering Three ERISA Cases in October Term 2019

The Employee Retirement Income Security Act has generated numerous U.S. Supreme Court decisions since its enactment, and this year's term is no exception. The Court is currently considering three ERISA cases involving a range of significant issues.

Source: Truckerhuss.com, November 2019

Sutherland Global Services Accused of ERISA Fiduciary Breaches

A group of participants in the Sutherland Global Services Inc. 401(k) Plan has filed a proposed class action ERISA lawsuit against their employer in the U.S. District Court for the Western District of New York. The lawsuit names as defendants Sutherland Global Services Inc. and CVGAS LLC, doing business as Clearview Group. The complaint also directly names as defendants several Sutherland’s senior leaders who are plan fiduciaries, along with some 20 John and Jane Doe defendants.

Source: Planadviser.com, November 2019

Is Mandatory Individual Arbitration Another Tool for the Plan Design Toolbox?

Recent decisions by the US Court of Appeals for the Ninth Circuit have reinvigorated the debate over whether mandatory individual arbitration provisions are enforceable with respect to ERISA claims and, if so, whether these provisions are worth including in your ERISA plan document.

Source: Morganlewis.com, November 2019

Prudential's GoalMaker Offering Targeted in New Excessive Fee Suit

A new participant lawsuit claims that an asset allocation program "was not a model of asset allocation but a model of plan mismanagement." The plaintiffs in the case are participants in the AutoZone 401k plan, which has some $545 million in assets and approximately 15,000 participants, according to the suit. While they raise a number of issues in common with this genre of excessive fee lawsuits, they devote most of their focus on Prudential's GoalMaker offering, which had been established as the plan's default investment option.

Source: Napa-net.org, November 2019

Ninth Circuit Passes on Rehearing of ERISA Arbitration Case

A plaintiff's request for a rehearing by the full court of an appellate court decision backing an arbitration clause in an ERISA claim has been rejected. The Ninth Circuit's decision supporting the application of the arbitration clause before filing suit stands, at least in the Ninth Circuit.

Source: Napa-net.org, November 2019

Prudential Latest Recordkeeper to Face Self-Dealing ERISA Lawsuit

Prudential faces a self-dealing lawsuit filed by participants in its defined contribution retirement plan. Plaintiffs challenge the use of proprietary products in Prudential's defined contribution retirement plans, an arrangement they say impermissibly benefitted the company at the expense of plan performance.

Source: Planadviser.com, November 2019

Goldman Sachs Sued Over 401k Plan

The Goldman Sachs Group is facing a lawsuit that accuses the company of breaching its fiduciary duty by filling its 401k plan with underperforming proprietary mutual funds. The lawsuit, which is led by one of its 401k plan participants, alleges that Goldman Sachs "engaged in unlawful self-dealing with respect to the plan in violation of ERISA, to the detriment of the plan and its participants and beneficiaries."

Source: Ai-cio.com, November 2019

Attorneys Argue for Stricter Reading of "Actual Knowledge" in ERISA Cases

Responding to a case against Intel 401k plan fiduciaries, U.S. attorneys say just because retirement plan participants receive investment disclosures doesn't mean they have actual knowledge that a fiduciary breach occurred.

Source: Planadviser.com, November 2019

CenturyLink's Investment Management Company Faces ERISA Claim

On the third try in a lawsuit against CenturyLink and its investment management company, a judge has recommended all but one claim by participants in the firm's Dollars & Sense 401k Plan be dismissed.

Source: Planadviser.com, October 2019

Individual Arbitration Ordered in Greystar ERISA Lawsuit

The order comes after an important appellate ruling in the 9th Circuit endorsing the forced arbitration of ERISA claims, but notably, the lawsuit in question here was filed outside the 9th Circuit.

Source: Planadviser.com, October 2019

Goldman Sachs Sued for 'Unlawful' 401k Management

Goldman Sachs has been sued for the alleged "unlawful" management of its company 401k plan related to the plan's use of in-house actively managed mutual funds, which the lawsuit says provided the firm with a financial benefit at the expense of employees' retirement savings.

Source: Investmentnews.com (registration may be required), October 2019

University Faces Setback in 403b Plan Fiduciary Breach Case

The ongoing case, Sweda v. the University of Pennsylvania, is currently before the U.S. Court of Appeals for the Third Circuit. The Third Circuit ruled that the district court erred in granting the University's motion to dismiss. This is a major setback for the University in their current ERISA fee and fiduciary breach case.

Source: Hallbenefitslaw.com, October 2019

401k Participant Files ERISA Lawsuit Against Goldman Sachs

According to the proposed class action complaint, the defendants failed to administer the 401k plan in the best interest of participants and failed to employ a prudent process for managing the plan. Instead, plaintiffs allege, defendants managed the plan in a manner that benefited Goldman Sachs at the expense of participants.

Source: Planadviser.com, October 2019

Judge Recommends Columbia University ERISA Suit Moves Forward

A magistrate judge found that there are genuine issues of material fact as to whether Columbia acted prudently throughout the class period by not consolidating to a single recordkeeper. The lawsuit is now a consolidation of two that have been filed against the university alleging plan fiduciaries allowed the plan to maintain excessively high fees for investments, administration and recordkeeping.

Source: Planadviser.com, October 2019

Cybertheft of 401k Plan Assets - New Case Highlights Fiduciary Exposure

ERISA was enacted before the computer age, and it has never been amended or interpreted to impose a specific duty on plan fiduciaries to maintain appropriate cybersecurity protections. However, fiduciaries should not have their heads in the sand about this issue. The duties of prudence and loyalty will likely be interpreted to include a responsibility to keep plan assets safe from hackers. A lawsuit recently filed against Estee Lauder Inc, its 401k plan committee, recordkeeper and custodian highlights some security flaws in plan distribution procedures and has the potential to make new law in this area.

Source: Cohenbuckmann.com, October 2019

Vanderbilt University Settlement Finally Settled

A federal judge has approved a settlement of another of the 403b university excessive fee suits. Chief Judge Waverly D. Crenshaw Jr. of the U.S. District Court for the Middle District of Tennessee has signed off on the $14.5 million settlement between Vanderbilt University and plaintiffs represented by the law firm of Schlichter Bogard & Dentonon.

Source: Napa-net.org, October 2019

New Case Raises Difficult Questions About ERISA Remedies for 401k Account Thefts

A recently filed ERISA case raises extremely troubling questions about the safety of 401k plan participant account assets and the proper allocation of financial responsibility when account assets are stolen. For the 401k plan industry as a whole, the facts of this case expose some ugly truths about the potential vulnerability of 401k plan assets to theft.

Source: Groom.com, October 2019

How 401k Bankruptcy Exemption Can Be Lost

A recent case decided by the United States District Court for the District of Connecticut discusses some of the issues that can arise when an individual who is the principal owner of a small business files for bankruptcy and seeks the protection of the retirement funds exemption for amounts held for the owner's benefit in the business' qualified retirement plan.

Source: Blankrome.com, October 2019

The Theory of 401k Peak Litigation

What is "peak 401k fee litigation"? It's Ary Rosenbaum's theory that eventually the big money 401k high fee cases will end. Large corporations with 401k plans will eventually fix their plans when it comes to paying high fees and ERISA litigators are going to try to find new ways to target 401k plan sponsors.

Source: Jdsupra.com, October 2019

Recordkeeper, Plan Sponsor Charged in 401k Account Theft

A group of seven Republican senators is urging the Senate Majority Leader to act on one of the most consequential pieces of retirement security legislation in more than a decade. "We encourage the Senate to take action on the SECURE Act as soon as possible. Doing so would demonstrate to our constituents that the Senate can lead in a bipartisan way for workers saving for retirement, for tax fairness, and for family financial security," says the Oct. 15 letter.

Source: Napa-net.org, October 2019

North Carolina Court Awards $41k for Failure to Produce Documents Requested by Plan Participants

A recent decision by the United States District Court for the Western District of North Carolina, Charlotte Division (Kinsinger v. Smartcore LLC, 2019 US Dist. LEXIS 145052 (August 27, 2019)), vividly illustrates the perils in failing to comply with document requests by participants.

Source: Benefitslawadvisor.com, October 2019

CareerBuilder Sued by Former 401k Participant

A former participant in a 401k plan offered by CareerBuilder, Chicago, sued the company and plan fiduciaries, alleging violations of the Employee Retirement Income Security Act. The complaint said the plan contained "excessively expensive" mutual funds, causing participants to pay "excessive fees" to the plan's recordkeeper and investment adviser.

Source: Pionline.com, October 2019

A Fiduciary "Win" -- for Now -- in Excessive Fee Case

A federal judge has given the plaintiff in an excessive fee suit an "incomplete," but left the door open for another shot. This time the defendant is Invesco, a suit filed a little more than a year ago by participant-plaintiff Diego Cervantes in the U.S. District Court for the Northern District of Georgia.

Source: Napa-net.org, October 2019

401k Lawsuits Get More Complex

Lawsuits targeting 401k plan sponsors increasingly involve issues that are complex and granular. It's a trend that's likely to continue as such litigation proliferates and one that some advisers and attorneys fear may leave employers paralyzed when it comes to retirement plan design.

Source: Investmentnews.com (registration may be required), October 2019

401k Plan Participant Cannot Pursue Claims on Behalf of Plans in Which She Did Not Participate

A federal district court in Ohio concluded that a 401k plan participant could assert fiduciary breach and prohibited transaction claims only on behalf of the plan in which she participated, and not on behalf of other plans. In this case, the plaintiff was a participant in Andrus Wagstaff, PC's 401k plan, and she alleged that the plan's recordkeeper charged the plan excessive recordkeeping fees.

Source: Erisapracticecenter.com, October 2019

401k Fiduciary Litigation -- Still Chaotic

Michael Barry, president of O3 Plan Advisory Services LLC, discusses how differing views by courts in various ERISA cases results in no clear guidance.

Source: Plansponsor.com, October 2019

Supreme Court to Hear Three ERISA Cases in Upcoming Term

The upcoming term of the U.S. Supreme Court is shaping up to be a busy one with respect to cases arising under the Employee Retirement Income Security Act of 1974. There have been other terms with multiple ERISA cases -- for example the 2015 term had at least three1 -- and it looks like the upcoming term will again be an extremely eventful one for ERISA in the Court.

Source: Dechert.com, October 2019

Summary Judgement Goes for Invesco in ERISA Lawsuit

The U.S. District Court for the Northern District of Georgia, Atlanta Division, has issued summary judgement in favor of the defense in a broad ERISA lawsuit targeting Invesco. However, the judge voiced concerns about the amount of plan assets invested in proprietary products and has granted the plaintiffs leave to again amend their compliant.

Source: Planadviser.com, September 2019

Financial Engines and Alight Exit Home Depot ERISA Lawsuit

The Court's ruling addresses respective motions to dismiss filed by Alight Financial Advisors, Financial Engines Advisors and the Home Depot defendants. In short, the court has granted the Alight and Financial Engines motions to dismiss, in which the defendants argued they are not, given their contracted roles and inability to set their own compensation levels as service providers, liable for the fiduciary breach claims alleged in the suit.

Source: Planadviser.com, September 2019

2019 Regulatory Update

A regulatory update that features a steady stream of cases from the courts, including multiple cases making their way to the United States Supreme Court for review as well as the lingering cases against colleges and universities that began in 2016. This update also includes new guidance from the regulatory agencies, including the Department of Labor, Internal Revenue Service, and Pension Benefit Guaranty Corporation.

Source: Multnomahgroup.com, September 2019

403b Plan Fiduciary Breach Lawsuits Often Involve Multiple Active Recordkeepers

One of the common threads among the institutions that were sued over their retirement plans is that they had multiple recordkeepers available for active participant contributions. Out of the twenty-three lawsuits involving primarily the 403b plan of healthcare and/or higher education organizations, sixteen of them included the claim that the fiduciaries breached their responsibilities by allowing multiple recordkeepers to be active vendors in the plan. According to the lawsuits, having multiple providers allegedly led to significantly higher recordkeeping fees and subsequently lowered the account accumulations for the plan participants.

Source: Cammackretirement.com, September 2019

Court Rejects Proposed Classes in Nationwide Asset-Based Fee Suit

A federal court judge has rejected proposed classes of defendants and plaintiffs in a lawsuit seeking the return of "excessive and unreasonable asset-based fees" charged by Nationwide for recordkeeping and administrative services. The plaintiff was proposing a defendant class of all sponsors of smaller 401k plans that entered into program agreements with Nationwide through its Retirement Flexible Advantage Retirement Plans Program, and a plaintiff class of participants in those plans.

Source: Plansponsor.com, September 2019

Three Lessons for Advisers From 401k and 403b Class Action Settlements

Retirement plan committees and financial advisers need to pay attention to class-action litigation and settlements to better manage their fiduciary risks. Some of the claims in those lawsuits are obvious; others foreshadow emerging issues that warrant attention and, at the least, an analysis of plan practices.

Source: Natlawreview.com, September 2019

Nineth Circuit OKs Arbitratration for ERISA Fiduciary Breach Cases

ERISA plans can require resolving fiduciary breach cases through arbitration, a three-member panel of the 9th US Circuit Court of Appeals has ruled, citing recent Supreme Court decisions as nullifying the circuit's 35 years of precedent. Some observers are hailing the decision as creating a path for employers to resolve ERISA fiduciary breach claims without going to court. However, employers considering adding mandatory arbitration provisions to their plans should consult with legal counsel to better understand the potential impact of these provisions.

Source: Mercer.com, September 2019

ERISA Fiduciary Acts May Include Failing to Accurately Advise Plan Participants and Beneficiaries

On July 24, 2019, the United States Court of Appeals for the Fourth Circuit held in Dawson-Murdock v. Nat'l Counseling Group that being an ERISA plan's "named fiduciary" is sufficient to allege fiduciary status for virtually any ERISA fiduciary claim. The court also applied an expansive definition of functional fiduciary status that may encompass acts that are carried out by the plan's administrative staff.

Source: Slevinandhart.com, September 2019

The Importance of Implementing Retirement Plan Best Practice Standards

The relevance of fiduciary best practice standards for retirement plan sponsors is rather intuitive, given that legal and performance pressures endured by companies are tremendous, coming from multiple directions and for various reasons. A shift towards heightened awareness of fiduciary responsibilities and "what not to do" can be seen in many recent ERISA lawsuit settlements alleging breaches in fiduciaries duties, but perhaps none more so than that of ATH Holding Company.

Source: Schneiderdowns.com, September 2019

Safeway, Aon Hewitt Settle Excessive Fee Lawsuit for $8.5 Million

Safeway and Aon Hewitt Investment Consulting have reached an agreement to settle a class-action lawsuit claiming participants in Safeway's 401k plan were charged excessive fees. Safeway and Aon Hewitt will pay a combined $8.5 million to settle the lawsuit, according to court documents filed Sept. 13 in U.S. District Court in Oakland, CA.

Source: Pionline.com, September 2019

A Ninth Circuit Ruling Repaves the Intersection of ERISA and Arbitration Law

Breach of fiduciary duty claims that "arise out of" and "relate to" a 401k plan -- including those brought on behalf of the plan itself -- are bound by the plan's arbitration provisions. With its ruling, the court overruled the 1984 Ninth Circuit case, Amaro v. Continental Can Co., which held that claims under ERISA could not be arbitrated.

Source: Jdsupra.com, September 2019

Supreme Court Amicus Brief Shows How High the Stakes Really are for the Future of ERISA's "Actual Knowledge" Requirement

Several trade associations filed the amicus brief because the Intel case has the potential to create a paradigm shift for ERISA litigants. Plan fiduciaries routinely employ the statute of limitations "actual knowledge" defense to defeat breach of fiduciary claims that are not brought within three years of such knowledge; therefore, to extend or limit the availability of the defense could have significant implications for the future viability of tardy ERISA suits.

Source: Wagnerlawgroup.com, September 2019

ERISA Litigation as Cottage Industry

There is an ongoing proliferation of lawsuits that continue to be filed under ERISA about fees being too high, about inappropriate investment options being offered by plans, and about conflicts of interests alleged to exist between plans and their service providers. "The plaintiffs' lawyer playbook is the same," says Brian Netter of Mayer Brown. "First, survive a motion to dismiss, and then subject the defendant to a very expensive discovery process. It creates incentive to enter into a sizable settlement."

Source: Planadviser.com, September 2019

Is Mandatory Arbitration Likelier for ERISA Complaints?

The court ruled that the plan expressly said all ERISA claims should be individually arbitrated and that the plan also included a waiver of class action suits. Dorman's original suit accused Schwab of breaching its fiduciary duties by including poorly performing Schwab-affiliated funds in the plan. He brought the suit on his own, seeking class-action remedy for the plan in its entirety. The 9th Circuit's decision is significant because it is the first case in the nation to explicitly permit the implementation of an arbitration provision in a plan document.

Source: Planadviser.com, September 2019

Fiduciaries Invoke Arbitration Clause to Dismiss 401k Suit

Fiduciary defendants in an excessive fee suit have asked for a dismissal based on an arbitration agreement signed by the plaintiff. Greystar Management Services LP has asked a federal court in Texas to dismiss the suit brought by former employee Sonia Torres.

Source: Napa-net.org, September 2019

Ninth Circuit Greenlights Individual Arbitration Provisions in ERISA Plan Documents

In recent years, the proliferation of ERISA class action lawsuits has commanded the attention of retirement plan sponsors and fiduciaries. These lawsuits have raised a wide range of claims against plan fiduciaries. Plan sponsors and fiduciaries mindful of the need to minimize risk in this area may wish to consider the Ninth Circuit's recent decision in Dorman v. Charles Schwab Corp. affirming that provisions in plan documents requiring individual arbitration of ERISA claims can be enforceable.

Source: Groom.com, September 2019

Best Practices for Plan Sponsors - Lessons Learned From Litigation

Plan sponsors should be aware of the latest trends in fiduciary litigation to help manage the risk of being sued and, if sued, the risk of being liable. This article -- about the ABB settlement agreement -- is another example of the importance of using appropriate share classes and the monitoring of compensation of service providers . . . and more.

Source: Fredreish.com, September 2019

Ninth Circuit Answers Some Questions About Arbitration of ERISA Claims

In two opinions -- one published and one unpublished -- the Ninth Circuit overturned prior precedent and held that a Plan amendment requiring arbitration meant that an individual had to arbitrate, on an individual basis, purported class claims alleging imprudent and disloyal management of 401k investments. This decision, although unpublished, provides support for plans wishing to add binding arbitration provisions that apply to ERISA 502(a)(2) claims.

Source: Mwe.com, September 2019

Abigail Johnson of Fidelity Reaches Deal to Avoid Testifying at 401k Trial

Abigail Johnson, chairman and chief executive of Fidelity Investments, will not have to testify at an upcoming trial regarding the Massachusetts Institute of Technology 401(k) plan, marking a stark de-escalation of tensions that had flared in recent weeks amid allegations the executive was engaged in a quid pro quo arrangement with the university's retirement plan.

Source: Investmentnews.com (registration may be required), September 2019

Group Side With Intel in "Actual Knowledge" Case

A group has filed a brief of amici curiae in the case of Intel Corporation Investment Policy Committee v. Sulyma, asking the Supreme Court to reverse a decision made by the 9th U.S. Circuit Court of Appeals. They argue that the appellate court decision undermines the value of retirement plan disclosures.

Source: Planadviser.com, September 2019

The Beginning of the End for 401k Class Actions? Ninth Circuit Enforces Individual Arbitration

This Ninth Circuit decision will likely be the subject of a petition for rehearing and possibly a petition for certiorari at the Supreme Court. Nevertheless, it is an important decision that may lead employers to consider adding arbitration provisions with class waivers to their employee benefit plans. Aside from individual benefit claims, most suits against ERISA plans in the past several years have been filed as class actions. At least in the Ninth Circuit, it appears that employers can combat this trend by requiring plan participants to engage in individual arbitration of their ERISA claims.

Source: Ogletree.com, August 2019

Another TDF Targeted With Fiduciary Suit

Another set of plaintiffs have filed suit about the target-date fund choices on their former employer's investment menu. The suit, filed in the U.S. District Court for the Middle District of Tennessee, was brought by Becky Kirk, Perry Ayoob and Dawn Karzenoski on behalf of the CHS/Community Health Systems, Inc. Retirement Savings Plan, which, as of Dec. 31, 2017, had $3.2 billion in assets and about 112,700 active participants.

Source: Napa-net.org, August 2019

Ninth Circuit Overturns Precedent and Sends ERISA Claims to Individual Arbitration

In a case of first impression, the Ninth Circuit overturned 35 years of precedent and ruled that ERISA class action claims brought on behalf of an ERISA plan are subject to individual arbitration. The Court also enforced the arbitration agreement's class action waiver and sent plaintiff's putative ERISA class action to individual arbitration with relief limited to plaintiff's individual plan losses.

Source: Erisapracticecenter.com, August 2019

Ninth Circuit Rules That ERISA Breach of Fiduciary Duty Claims May Be Arbitrated

The court found that subsequent U.S. Supreme Court decisions mean that Amaro "is no longer good law." Dorman is a shift for the Ninth Circuit. Further, though some courts outside the Ninth Circuit have recognized that ERISA does not prohibit arbitration of breach of fiduciary duty claims under ERISA, breach of fiduciary duty claims are not typically arbitrated. If Dorman becomes a guidepost for general acceptance of arbitrating fiduciary claims, the future of ERISA litigation will be significantly impacted.

Source: Littler.com, August 2019

Ninth Circuit Changes its Position on the Enforceability of Arbitration of Breach of Fiduciary Duty Claims Under ERISA

The Ninth Circuit, in Dorman v. The Charles Schwab Corporation, modified its position on the enforceability of arbitration agreements to ERISA claims of breach of fiduciary duty on behalf of the plan under ERISA Section 502(a)(2). The Court found an arbitration provision in the plan document was enforceable against the plaintiff. The Dorman decision may encourage plan sponsors to amend plan documents to include arbitration provisions like the one in Dorman.

Source: Wagnerlawgroup.com, August 2019

Transamerica Fails to Get Self-Dealing Suit Dismissed

A federal court judge has denied Transamerica's motion to dismiss a lawsuit accusing it of retaining poorly performing proprietary fund portfolios in it 401k plan. Among other things, a federal judge found Transamerica Asset Management's substitution of its sub-advisers is not a concrete, obvious explanation for the poor performance of the challenged funds.

Source: Planadviser.com, August 2019

403b Retirement Plan Fee Litigation: An Update

Retirement plan litigation continues to plague the retirement plan space, including 403b retirement plans. This chart provides detailed information on each case.

Source: Cammackretirement.com, August 2019

Schwab Wins Reversal on 401k Arbitration

The Ninth Circuit has reversed a lower court decision, based on "intervening Supreme Court case law." As the Ninth Circuit noted in its reversal: "...we must revisit our holding in Amaro v. Continental Can Co., 724 F.2d 747 (9th Cir. 1984), in which we held that ERISA claims were not arbitrable. In light of intervening Supreme Court case law, including American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (2013), we conclude that our holding in Amaro is no longer good law."

Source: Napa-net.org, August 2019

U.S. Attorneys File Brief in IBM Supreme Court Case

Attorneys with the DOL, DOJ and the SEC have filed a brief as amicus curiae supporting neither party in the case of Retirement Plans Committee of IBM v. Larry W. Jander in the U.S. Supreme Court. The U.S. Government concludes in its brief that, because the lower courts did not apply the correct legal standard, the Supreme Court should vacate the judgment and remand the case for further consideration.

Source: Planadviser.com, August 2019

ERISA Complaint Questions Alternatives Use in Custom TDF

As it awaits the results of a Supreme Court appeal on another case scrutinizing its investment decisions, Intel Corporation now faces an additional lawsuit questioning the fees and performance of custom target-date funds offered to its defined contribution retirement plan participants.

Source: Planadviser.com, August 2019

Walgreen Sued for Keeping Underperforming TDFs in 401k

A group of current and former participants in the Walgreen Profit-Sharing Retirement Plan, individually and as representatives of a class of participants and beneficiaries of the plan, have filed a lawsuit on behalf of the plan for breach of fiduciary duties under ERISA. Despite a market "teeming with better-performing alternatives," the plaintiffs say, Walgreen selected the Northern Trust Funds, which already had a history of poor performance.

Source: Planadviser.com, August 2019

Cross-Selling Gaining Prominence in Retirement Plan Lawsuits

Cross-selling by recordkeepers has become a hot-button issue in retirement plan lawsuits, raising broader awareness and questions around how service providers can use participant data.

Source: Investmentnews.com (registration may be required), August 2019

Walgreens Hit With $300 Million 401k Lawsuit Over Target-Date Funds

Walgreen Co. has been hit with a lawsuit alleging its "imprudent" decision to keep certain target-date funds in its 401k plan caused employees to lose $300 million in cumulative retirement savings. Plaintiffs claim the Northern Trust funds led to a "swift and devastating blow" to participants' retirement savings.

Source: Investmentnews.com (registration may be required), August 2019

Are Your Target-Date Funds a Lawsuit Waiting to Happen?

Target-date funds may be the ticking time bomb of ERISA litigation. If fiduciaries have any doubt that these funds are in the crosshairs, they should take a look at the website of litigation firm Cohen Milstein, which has a whole section titled "Investigation of Target-Date Fund Investments." Cohen Milstein says it is looking at four factors.

Source: Cohenbuckmann.com, August 2019

Plan Administrator Deemed an ERISA Fiduciary

The Fourth Circuit Court of Appeals, in Dawson-Murdock v. Nat'l Counseling Group, Inc., has allowed a life insurance beneficiary to sue her husband's employer for breach of fiduciary duties concluding that she had sufficiently alleged that the employer was an ERISA fiduciary.

Source: Wagnerlawgroup.com, August 2019

Court Denies Dismissal of Kaleida Health Excessive Fee Suit

In a case alleging fiduciaries of Kaleida Health's 403b and 401k plans failed to take advantage of the plans' bargaining power by only offering actively managed retail mutual funds as investment options instead of identical investor class mutual funds with lower operating expenses, a federal court judge has denied motions to dismiss.

Source: Planadviser.com, August 2019

Schlichter Says Retirement Savings "Squandered" in Quid Pro Quo

The law firm of Schlichter Bogard & Denton, LLP filed papers opposing a motion by fiduciary defendants of the MIT Supplemental 401k Plan for a summary judgement in the suit initiated in 2016 as one of the first university excessive fee cases. Not only did they file papers, they issued a press release, drawing attention not only to the filing, but to an allegation made in the initial suit -- one that distinguishes it from the nearly two dozen such cases filed and fought over the past three years -- that there was a quid pro quo between MIT and Fidelity, the plan's recordkeeper.

Source: Napa-net.org, August 2019

Another Big University 403b Plan Settles With Schlichter

While disputing allegations and denying liability, plan fiduciaries have announced the second largest monetary settlement to date regarding a university retirement plan. This settlement -- for $14,000,000 -- involves the $4.3 billion Johns Hopkins University 403b Plan, a suit brought by the law firm of Schlichter, Bogard & Denton as part of the first wave of these suits.

Source: Napa-net.org, August 2019

Fidelity Dogged Again by 401k Quid-Pro-Quo Allegations

Fidelity Investments has again been accused of engaging in a quid-pro-quo type relationship with a 401k plan sponsor, which allegedly cost employee retirement savers millions of dollars in return for bigger profits. The latest episode involves the Massachusetts Institute of Technology, which has been accused of retaining Fidelity's 401k record-keeping services and investment funds, despite counsel to do otherwise from attorneys and consultants, with the expectation that Fidelity and co-owner Abigail Johnson would make a large donation to the university.

Source: Investmentnews.com (registration may be required), August 2019

Fidelity Ensnared in MIT 401k Quid Pro Quo Allegations

The high-profile managing partner of Schlichter Bogard & Denton filed opposition papers Monday in Massachusetts federal court claiming MIT "ensured that Fidelity received millions of dollars of excessive payments from MIT's 401k Plan." MIT made those payments, the filing says, in part because of an expectation that Abigail Johnson, Fidelity Investment's CEO and co-owner, would donate to MIT.

Source: 401kspecialistmag.com, August 2019

Federal Judge Dismisses ERISA Fiduciary Breach Claim against University for Lack of Standing

A federal district court judge in Washington D.C. dismissed an ERISA fiduciary breach suit brought by a former employee of George Washington University, finding the former employee lacked standing to sue. The plaintiff, Melissa Stanley, participated in two GW administered retirement plans, and brought multiple claims for breach of fiduciary duty against the school. The case's dismissal comes amid increased litigation targeting higher education retirement plans for fiduciary breaches and follows a similar wave of litigation over private sector 401k plans.

Source: Williamsmullen.com, August 2019

Trend of Excessive Fee Suits Against Smaller Plans Continues

When the wave of excessive fee cases began against retirement plan sponsors, most targeted large or mega plans, based on assets. However, a new case against TriHealth Inc. continues a trend of targeting smaller plans.

Source: Planadviser.com, August 2019

Marcia Wagner is Not Tom Clark, Judge Rules

A federal judge has rejected an attempt by the Schlichter law firm to disqualify Marcia Wagner as an expert witness in an excessive fee case.

Source: Napa-net.org, July 2019

Lawsuit Challenges Use of Money Market Fund, Actively Managed Funds in 401k

The complaint accuses BBVA Compass of mismanaging a $100 million money market fund "that was the investment equivalent of stuffing cash into a mattress" and failing to properly monitor investments and remove imprudent ones.

Source: Planadviser.com, July 2019

How Much (Should) a New Retirement Plan Committee Member Know?

A recent federal court decision should remind us all of the importance of plan committee education. The case involved a suit by participants in the SunTrust 401k plan that challenged the initial selection of, and subsequent acquiescence with, an ostensibly imprudent plan investment menu. The court's decision focused on one aspect of the case: the liability of "new" plan committee members for actions that predated their involvement on the committee but continued after their involvement.

Source: Napa-net.org, July 2019

SunTrust Wins Narrow Summary Judgement in Long-Running ERISA Suit

A federal court has rejected the argument that defendants were aware that their predecessor fiduciaries had breached their duties in selecting affiliated funds and thus that they breached their own duties by failing to take adequate steps to remedy the original alleged breaches.

Source: Planadviser.com, July 2019

Is Fiduciary Responsibility Retroactive?

A federal judge has weighed in on a question relevant to new plan committee fiduciaries: When and how does their liability for the decisions of previous committee members begin?

Source: Napa-net.org, July 2019

Adidas Sued Over Excessive Fees for 401k Participants

Participants in the Adidas Group 401k Savings and Retirement Plan have filed a proposed class action lawsuit against Adidas America over the plan's administrative and investment fees. According to the complaint, for every year between 2013 and 2017, the administrative fees charged to plan participants were greater than a minimum of approximately 75% of its comparator fees when fees are calculated as cost per participant. And for every year between 2013 and 2017 but two, the administrative fees charged to plan participants were greater than 80% of its comparator fees when fees are calculated as a percent of total assets.

Source: Planadviser.com, July 2019

ERISA Litigation's Next Big Thing

While there are many prudence and cost-efficiency related issues relating to variable annuities overall, an emerging issue involves the plan sponsor’s ability to carry out its fiduciary duties under ERISA. Variable annuities usually include numerous sub-accounts as investment options. This increases the odds of finding sub-accounts that are not prudent and need to be removed.

Source: Iainsight.wordpress.com, July 2019

Study Finds That Determination of Fiduciary Breach Often Hinges on Whether Fiduciary Followed a Prudent Process

The Center for Retirement Research at Boston College recently released a study outlining the major causes of 401k lawsuits. In particular, the study focuses on the fact that these types of lawsuits often hinge on whether the plan fiduciary was following a "prudent" process and how one would define a process as prudent. With most companies now offering 401k plans as their primary retirement offering, it's wise to pay attention to the major findings and engage ERISA counsel to guide implementation of a fiduciary legal compliance paradigm to mitigate exposure to these costly lawsuits.

Source: Hallbenefitslaw.com, July 2019

Without Infrastructure Fees, Recordkeepers Would Go Out of Business

This was one of Fidelity's arguments in a memorandum to support its motion to dismiss a consolidated lawsuit alleging it is receiving "secret" or "kickback" payments from providers on its FundsNetwork platform. Several lawsuits filed against the firm claim the payments were presented as infrastructure payments, or so-called relationship-level fees, in violation of the prohibited transaction rules of ERISA, as well as the statute's fiduciary rules.

Source: Planadviser.com, July 2019

The Case That Almost Demolished the Retirement Plan Regulatory System

The U.S. Supreme Court has ruled in Kisor v. Wilkie, a case not specifically about retirement plans or the Employee Retirement Income Security Act, but which nonetheless could have resulted in the total upheaval of the retirement plan regulatory system established by the Department of Labor under ERISA.

Source: Napa-net.org, June 2019

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