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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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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

Supreme Court Agrees to Hear Intel Case With Potentially Significant Implications for 401k Plan Fiduciaries

The issue to be decided by the Supreme Court is whether the receipt by a plan participant of investment disclosures is enough for that participant to have "actual knowledge" of a potential claim, which would start the statute of limitations. In light of such a pending decision, retirement plan fiduciaries may be left wondering what actions need to be taken to ensure plan participants have "actual knowledge" of information contained in the various ERISA required disclosures.

Source: Jdsupra.com, June 2019

Supreme Court Will Take Another Look at Its ERISA Stock-Drop Pleading Standard

ERISA stock-drop litigation has diminished in recent years due to the Supreme Court's Dudenhoeffer decision (and a rising stock market). Now, the Court will have another chance to weigh in on whether federal ERISA litigation in this space should breathe new signs of life.

Source: Erisa-employeebenefitslitigationblog.com, June 2019

Gucci Plaintiffs Bag Settlement in Excessive Fee Suit

A relatively small plan has settled claims that fiduciaries had "imprudently incorporating funds on its menu that were excessively expensive." The defendant plan in question is the $96.5 million 401k plan of Gucci America Inc. and the settlement is for $1.2 million.

Source: Napa-net.org, June 2019

Eighth Circuit Invokes Dudenhoeffer to Reject Fiduciary Claims in Stock Drop Case

Another federal appellate court has relied on the U.S. Supreme Court's Dudenhoeffer decision to affirm the dismissal of a stock drop case alleging breach of fiduciary duty based on publicly available information.

Source: Thomsonreuters.com, June 2019

Index Fund Rise Coincides With 401k Suits

More 401k lawsuits were filed in 2016 and 2017 than during the 2008 financial crisis, and the steady drumbeat of litigation could be affecting how workers save and invest. For one thing, the suits have coincided with a dramatic increase in equity index funds, according to a report by the Center for Retirement Research. Last year, nearly one out of three U.S. stock funds were index funds, double the share 10 years ago.

Source: Bc.edu, June 2019

MFS Settles 401k Lawsuit for $6.9 Million

Investment manager Massachusetts Financial Services Co. has reached a settlement of nearly $7 million in a lawsuit alleging the company enriched itself at the expense of employees' retirement savings by loading its 401k plans with costly, underperforming in-house funds.

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

Do Your Participants Read Their Plan Documents? Why It May Matter

How long do participants have to sue for fiduciary breaches? Sometimes procedural cases can have a big impact on employee benefit plans. The Supreme Court has just agreed to review another case on the length of time participants have to sue for fiduciary breaches. This new case may also have a significant impact on fiduciary liability.

Source: Cohenbuckmann.com, June 2019

Appellate Court Affirms Award of 401k Benefits Under QDRO Issued After Participant's Death

A federal appellate court has upheld a trial court's determination that a deceased plan participant's former spouse is entitled to part of the participant's 401k plan benefit, even though the participant had remarried and the qualified domestic relations order (QDRO) assigning benefits to the former spouse was issued after the participant's death.

Source: Thomsonreuters.com, June 2019

Judge Greenlights Nationwide Class Suing Over JPmorgan's 401k Fees

Five former JPMorgan's employees accusing the bank of loading its employee 401k retirement plan with funds that had excessive fees can pursue their lawsuit against the bank on behalf of a nationwide class, a federal judge in Manhattan ruled.

Source: Reuters.com, June 2019

Supreme Court Will Again Review the Pleading Standard for Retirement Plan "Stock Drop" Claims

The justices will review the Second Circuit's unexpected holding that a complaint, which alleged that plan fiduciaries violated ERISA by failing to disclose information about overvalued employer stock held in a 401k plan, satisfied the high "more harm than good" pleading standard enunciated in Fifth Third Bancorp v. Dudenhoeffer. If upheld, this ruling -- which runs contrary to the recent trend in employer stock drop cases -- likely would lead to an increase in filings of such cases and in the number of such cases that survive early motions to dismiss.

Source: Eversheds-Sutherland.com, June 2019

Supreme Court Will Again Review the Pleading Standard for Retirement Plan "Stock Drop" Claims

The Supreme Court granted certiorari in a case from the 9th Circuit Court of Appeals involving the statute of limitations applicable to claims under ERISA. The issue to be decided by the Supreme Court is, what does it mean for a plan participant to have "actual knowledge" of a potential claim to start the running of the statute of limitations?

Source: Blankromeworkplace.com, June 2019

Ninth Circuit Rules That a Domestic Partner Under California State Law Was a Spouse for an ERISA Plan

In an unpublished decision dated May 16, 2019, the Ninth Circuit held that a plan administrator abused its discretion by denying surviving spouse benefits under an ERISA retirement benefit plan to a participant's domestic partner.

Source: Seyfarth.com, June 2019

Plan's Investment in Flailing SunEdison Stock Did Not Violate ERISA

A U.S. appeals court on Tuesday tossed out claims that a former SunEdison Inc subsidiary violated federal law by failing to dump the renewable energy company's stock from an employee retirement plan before it declared bankruptcy.

Source: Reuters.com, June 2019

IBM's Surprise Loss in 401k Stock Fight Heads to Supreme Court

IBM convinced the U.S. Supreme Court to wade into a fight over IBM stock in the company's 401k plan. The justices agreed June 3rd to review a surprise decision from the U.S. Court of Appeals for the Second Circuit that allowed employees participating in the company's 401k retirement plan to move forward with a proposed class action lawsuit they filed in 2015 after IBM's stock dropped by seven percent.

Source: Bloomberglaw.com, June 2019

Excessive Fee Suit Appeal Runs Out of Time

There's that old caution about being a day late, and a dollar short -- well, the plaintiffs in an excessive fee suit were two days late -- and missed a key date. Judge Collyer noted that the plaintiffs "...filed too late to comply with Federal Rule of Civil Procedure 59(e), which governs motions to amend or alter a judgment."

Source: Ntsa-net.org, June 2019

Supreme Court to Hear 401k Stock-Drop Case

The Supreme Court accepted a 401k lawsuit Monday that could reframe how employers think about company stock in their retirement plans. Plaintiffs in the case, Retirement Plans Committee of IBM v. Larry W. Jander, allege that plan fiduciaries acted imprudently by continuing to offer IBM stock as an investment option to retirement plan participants despite knowledge of "undisclosed troubles" relating to the company's microelectronics business.

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

Can Employees Release ERISA Fiduciary Breach Claims?

Plan fiduciaries looking to avoid protracted court cases filed by their plan participants are trying to develop the best fiduciary practices. They are also considering other options to control or restrict litigation, including trying to require mandatory arbitration of ERISA claims, seeking to designate a specific court to hear cases, and setting shorter periods to file claims for benefits in their plan documents. The courts are still trying to define the extent to which there are limits on these practices. However, a recent court case highlights an additional option, obtaining releases from terminating employees that cover ERISA fiduciary breach claims.

Source: Cohenbuckmann.com, May 2019

An ERISA Litigation Conversation With Jerry Schlichter

Jerry Schlichter's firm has remained highly active in the space, representing a variety of classes of plaintiffs suing their employers for alleged mismanagement of retirement plan assets. In this interview, Schlichter reflected on changes he has seen in the industry over the last five years. In his estimation, a lot of good has come from the significant amount of litigation that has occurred under ERISA. At the very least, he said, many participants in defined contribution (DC) retirement plans today pay lower fees for investments and recordkeeping.

Source: Plansponsor.com, May 2019

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