Legal, Court and Legislative Items of Interest
A directory and index of articles that review what is happening in the courts and U.S. legislature.
Summary: This is a summary of the Retirement Plan Simplification and Enhancement Act of 2013 which would "simplify and enhance" some of the qualified plan rules surrounding retirement plans.
Source: Americanbenefitscouncil.org 
, May 2013
Summary: Morgan Stanley has been sued by an Alabama medical laboratory that claims it steered retirement plan business to ING U.S. Inc. and others in exchange for extra fees in an illegal "pay-to-play" scheme.
Source: Reuters.com, May 2013
Summary: The U.S. Court of Appeals for the Seventh Circuit has recently decided a case challenging the amount of fees paid by 401k plan participants, Leimkuehler v. Am. United Life Ins. Co. This opinion is likely to have vast implications for that type of litigation specifically and the scope of fiduciary status generally.
Source: Benefitnews.com, May 2013
Summary: Lori Bilewicz, a former employee of Fidelity Investments, has filed a class action lawsuit (Case No. 13-10636) in Boston federal court against Fidelity Investments asserting that Fidelity committed numerous violations of ERISA.
Source: 401khelpcenter.com, May 2013
Summary: Regulatory reforms have recently improved 401k plan participation rates, but recent decisions by certain courts threaten to reverse that trend. These courts have substituted their free market ideology for fiduciary duties under ERISA in dismissing claims against plan sponsors on the ground that the menu offered was so large as to abrogate the sponsors' ERISA duties.
Source: Ssrn.com, May 2013
Summary: A recent appeals court ruling may increase plan sponsors' confidence about including and holding company stock in their retirement plans -- especially those in the financial services industry.
Source: Thompson.com, May 2013
Summary: In Pension Benefit Guaranty Corporation v. Morgan Stanley Investment Management, Inc., Docket No. 10-4497-cv (2nd Cir. 2013), the Court considered the degree of factual detail needed in a complaint in order to establish a claim that a pension plan administrator purchased and continued to hold certain mortgage-backed securities imprudently and in violation of its fiduciary duties under ERISA.
Source: Erisalawyerblog.com, May 2013
Summary: Venturing into what might seem like hostile territory, a top Treasury Department official sat for an on-stage interview at the opening day of the annual general membership meeting of the Investment Company Institute. Mary John Miller, a veteran of the asset-management industry who now serves as Treasury's undersecretary for domestic finance, offered a defense of a number of administration policies that could affect advisors, including the proposed caps on tax-deferred retirement contributions and proposals to strengthen regulation of money market mutual funds.
Source: Onwallstreet.com, May 2013
Summary: The SPARK Institute today submitted a Statement to the U.S. House of Representatives Committee on Ways and Means and the Working Group on Pensions and Retirement, raising concerns about 2014 proposed budget provisions that would cap the total amount of savings any individual can accumulate in tax-favored retirement plans and limit the value of exclusions for employee deferrals in 401k plans.
Source: 401khelpcenter.com, April 2013
Summary: Latest ERISA litigation newsletter focuses largely on plan sponsor issues including a discussion of the Supreme Court’s April 16, 2013 decision in US Airways v. McCutchen with some practical advice that plan sponsors should consider in light of the decision. Also covered are two separate issues that were the subject of the recent decision by the U.S. Ninth Circuit Court of Appeals in Tibble v. Edison International.
Source: Drinkerbiddle.com, April 2013
Summary: In a decision issued last week, the Seventh Circuit made clear that discretion isn't always required for an entity to be a functional fiduciary. But at the same time, the Court reaffirmed that a functional fiduciary is only answerable under ERISA when it is acting as a fiduciary.
Source: Seyfarth Shaw, April 2013
Summary: In Leimkuehler v. American United Life Insurance Co., Nos. 12-1081, 12-1213 & 12-2536 (7th Cir. Apr. 16, 2013), the Seventh Circuit expanded on its prior ruling in Hecker v. Deere, 556 F.3d 575 (7th Cir. 2009), and held that a service provider that offers a menu of investment options to a 401k plan and retains the right to overrule the options chosen by the plan from that menu is a functional fiduciary only to the extent that it actually exercises authority or control over plan assets. Article summarizes the case and identifies important ramifications of the Court's decision, which will be of particular interest to plan service providers.
Source: Jenner & Block LLP , April 2013
Summary: The United States Court of Appeals for the Seventh Circuit for the first time announced that it was adopting the Moench presumption of prudence to evaluate claims alleging that it was imprudent for plan fiduciaries to follow plan terms requiring that company stock be made available as an investment option, and held that the claims asserted did not allege sufficient facts to overcome the presumption.
Source: Sidley Austin LLP, April 2013
Summary: U.S. District Judge Catherine C. Blake of the U.S. District Court for the District of Maryland found Cecil Bank's Supplemental Executive Retirement Plan (SERP) is a "top hat" plan under the Employee Retirement Income Security Act and therefore exempt from certain of ERISA's protections intended by Congress to protect workers -- specifically that ERISA plans contain an anti-alienation provision.
Source: Plansponsor.com, April 2013
Summary: There have been two important Supreme Court ERISA Litigation developments in the past two days. The Court issued its much anticipated decision in US Airways v. McCutchen, one day after accepting certiorari in the case of Heimeshoff v. Hartford Life & Accident Insurance Co. Both cases address the fundamental ERISA principle that plan terms control dispute resolution.
Source: Seyfarth Shaw, April 2013
Summary: The American Society of Pension Professionals & Actuaries (ASPPA) submitted these comments to the Tax Reform Working Group on Pensions and Retirement. The letter contains a number of specific suggestions, charts, and details.
Source: ASPPA , April 2013
Summary: This 11 page explanation of certain retirement related provisions of Obama's fiscal year 2014 budget proposal was prepared by the Department of the Treasury.
Source: Sparkinstitute.org , April 2013
Summary: In statements released ahead of its official publication, the White House has noted that the budget will include a new proposal that prohibits individuals from accumulating more than $3 million in individual retirement accounts (IRAs) and other tax-preferred retirement accounts. Analyses from the Employee Benefit Research Institute suggest this could potentially affect up to 5% of retirement plan participants.
Source: Planadviser.com, April 2013
Summary: Throughout the retirement industry, people are talking about the implications of Tussey et al v. ABB. Some fear it will trigger a tsunami of similar cases, creating the kind of legal boondoggle that asbestos and tobacco liability cases once provided. Others say it is headed for the US Supreme Court. Either way, it's widely acknowledged that a new era of fee transparency, fee competition and fee compression has arrived.
Source: Retirementincomejournal.com, April 2013
Summary: The recent Ninth Circuit opinion can assist counsel representing plan fiduciaries to know what evidence to present because had Edison made a showing that HFS the Plan's financial consultant engaged in a prudent process in considering share classes this might have been a different case. The Ninth Circuit found that Edison did not present evidence on this issue and therefore the Edison fiduciaries breached their duty of reasonable reliance upon their consultants' recommendation on class shares.
Source: ERISA & Employee Benefits Litigation Blog, March 2013
Summary: A federal judge in Manhattan dismissed two lawsuits in which participants in Morgan Stanley's retirement plan accused the firm of mismanaging some plans by allowing participants' money to remain in its stock even as its performance faltered in 2008. U.S. District Judge Deborah Batts agreed with Morgan Stanley that continuing to offer its stock in the plans did not violate any duty of prudence.
Source: Reuters.com, March 2013
Summary: In Tibble v. Edison, the US Court of Appeals for the Ninth Circuit held that a company's 401k plan fiduciaries did not violate their duty of prudence under ERISA by including certain investments in the plan, but acted imprudently in including retail-class shares of some mutual funds because they failed to investigate the possibility of institutional-share class alternatives. The Ninth Circuit joined one circuit split by deferring to the DOL's interpretation that the safe harbor from fiduciary liability in Section 404(c) of ERISA does not apply to a fiduciary's selection of investment funds and joined a separate circuit split by applying Firestone deference to breach of fiduciary duty claims.
Source: Practicallaw.com, March 2013
Summary: The Ninth Circuit issued an opinion in Tibble v. Edison International, affirming the Central District of California district court's ruling in a 401k fee case brought under ERISA. The district court had rejected most claims but had entered judgment totaling just over $300,000 for the plaintiff beneficiaries on claims regarding the selection of certain mutual fund investment options, where lower-priced share classes were available in the same funds.
Source: Benefitsbryancave.com, March 2013
Summary: On March 21, the long-awaited Tibble decision was issued by the Ninth Circuit, which affirmed the decisions of the trial court below on numerous important issues. This is a copy of the full decision.
Source: UScourts.gov , March 2013
Summary: Nelson and Enzi introduced the "Shrinking Emergency Account Losses in 401k Savings Act of 2013" (SEAL Act). The bill would allow participants to repay their loans or withdrawals when taxes are due, not within 60 days after they leave employment.
Source: Napa-net.org, March 2013
Summary: This is a statement from Brian H. Graff, Executive Director & CEO of The American Society of Pension Professionals & Actuaries, in support of the Shrinking Emergency Account Losses in 401k Savings Act of 2013 (SEAL Act) filed in the U.S. Senate. The legislation targets 401k plan leakage.
Source: ASPPA, March 2013
Summary: In this long-running litigation, participants in a 401k plan claimed that their plan's sponsor and its holding company did not act prudently when, following a corporate spin-off, they eliminated the stock funds holding shares of their former parent company and one of its subsidiaries. While these plan fiduciaries may have escaped liability for their failure, this litigation might have ended much sooner if they could have shown that they used a prudent decisionmaking process.
Source: Thomson Reuters/EBIA, March 2013
Summary: The presumption dictates that, where applicable, a fiduciary's decision to invest an employer's retirement plan in the employer's own stock, or to offer plan participants the option to so invest, is a presumptively prudent decision in compliance with ERISA, and thus the decision to invest in the employer's stock is reviewed only for an abuse of discretion.
Source: ERISAlawyerblog.com, March 2013
Summary: Stock drop claims alleging imprudence on the part of plan sponsors and other fiduciaries in maintaining employer stock as a plan investment option have become a common type of litigation involving 401k plans. Relying on the leading case of Moench v. Robertson, a number of courts have held that a fiduciary investing in company stock is entitled to a presumption that it acted consistently with ERISA. Two recent Circuit Court of Appeals cases, decided one day apart last September, apply this presumption in contradictory ways.
Source: Wagner Law Group , March 2013
Summary: Three Massachusetts residents accused Boston-based Fidelity on Thursday of using income generated from retirement fund assets to offset Fidelity's own operating expenses. Their lawsuit, filed in U.S. District Court in Massachusetts, seeks class-action status for participants in 401k plans sponsored by EMC Corp, Bank of America Corp and Safety Insurance Company. Fidelity denied any wrongdoing.
Source: Reuters.com, March 2013
Summary: A recent Federal Appeals Court decision out of Florida confirmed prior court decisions that plan fiduciaries are not subject to fiduciary liability for failing to make employer required contributions to the plan.
Source: Bcgbenefits.com, March 2013
Summary: If you think Washington's struggle with the fiscal cliff back in December and the sequester brouhaha in recent weeks has derailed efforts on Capitol Hill to tackle tax reform, think again Brian Graff warns.
Source: Napa-Net.org, March 2013
Summary: Current and former 401k plan participants have sued Fidelity Investments on behalf of thousands of other plan participants and retirees to recoup account losses they say resulted from self-dealing by the huge asset manager. The case is worth plan sponsors' attention because it closely resembles a widely watched 2012 ruling against Fidelity, Tussey v. ABB Inc., which displayed a federal court's dim view of investment transactions that violate the ERISA fiduciary obligations.
Source: Thompson.com, February 2013
Summary: The first part of 2013 is shaping up to involve a series of political crises related to the budget and the budget deficit. This article reviews the key dates (when, in effect, the crises become "critical") and whether and which retirement plan issues may be part of any related Congressional action.
Source: Octoberthree.com, February 2013
Summary: Float income is money earned from interest-bearing accounts used temporarily by 401k plans before plan assets are disbursed when participants move assets among investment options. A lawsuit filed against Fidelity Investments by participants in several 401k plans might lead to other lawsuits over some recordkeepers' use of float income.
Source: Pensions & Investments, February 2013
Summary: An appellate court has ruled that a pension plan participant can pursue her claims in court because the plan document does not provide administrative remedies for her to exhaust.
Source: Plansponsor.com, February 2013
Summary: Participants in three 401k plans have sued Fidelity Investments, alleging the record keeper engaged in "fiduciary self-dealing," thus violating the Employee Retirement Income Securities Act, according to the lawsuit filed in U.S. District Court in Boston.
Source: PIonline.com (free registration may be required), February 2013
Summary: District Court requires evidence that alleged breach of fiduciary duty caused plaintiffs' loss at pleading stage. This decision further signals a general skepticism among the courts with respect to ERISA stock drop claims.
Source: Seyfarth Shaw LLP, February 2013
Summary: Fourth Circuit holds that the limitations period for ERISA claims of imprudent plan investments commences with initial fund selection and does not continue with ongoing monitoring of funds, absent material change in circumstances.
Source: Haynesboone.com, February 2013
Summary: Provides a summary of policy related to human resources and employee benefits. The report discusses priorities facing the 113th Congress and also includes an overview of key health care and retirement issues for 2013.
Source: Aon Hewitt , January 2013
Summary: If you think that the retirement industry suddenly fell off the radar with the end of the first round of fiscal cliff fixes, think again - substantial reform, courtesy of the second-term Obama administration, is likely on the way.
Source: Benefitspro.com, January 2013
Summary: Bank of America has won a lawsuit alleging it violated the Employee Retirement Income Security Act (ERISA) by investing retirement plan assets in bank-affiliated funds.
Source: Planadviser.com, January 2013
Summary: A federal appellate court ruled employer contributions owed to a 401k plan are not plan assets, so an employer did not breach its fiduciary duties by not contributing.
Source: Plansponsor.com, January 2013
Summary: While the legislation's most significant provisions include higher tax rates for high-income taxpayers and a payroll tax increase for working Americans, the law also includes important provisions affecting benefit and compensation programs ranging from Roth retirement plans to health care and qualified transportation benefits.
Source: Towerswatson.com, January 2013
Summary: The legislation extends permanently a number of tax provisions that had already expired at the end of 2011 and 2012, revises tax rates on income for married couples filing jointly at $450,000 and single $400,000 of taxable income, modifies the estate tax and extends unemployment benefits, Medicare payments and farm subsidies. Additionally, the bill delays the sequestration provisions established by Congress in 2011 until March 27, 2013. Specifically, H.R. 8 contains a number of provisions of importance to the HR profession.
Source: SHRM.org, January 2013
Summary: Ameriprise Financial Inc. will be kicking off the new year in court as the company prepares to face employees who claim that it breached its fiduciary duty with allegedly imprudent and costly 401k options.
Source: Investmentnews.com (free registration may be required), December 2012
Summary: The Bipartisan Policy Center's Debt Reduction Task Force has one way to help fix the deficit: reduce 401k contributions by 64% using a 20/20 Cap. Under the 20/20 Cap, contributions would be limited to the lesser of 20% of pay or $20,000 a year. All those pretax dollars designated for retirement will now be taxable income and Treasury will fill with additional tax revenues.
Source: Foxbusiness.com, December 2012
Summary: This month's edition explores the arguments asserted by the parties in US Airways v. McCutchen as to whether, and under what circumstances, plans may enforce provisions entitling them to reimbursement of previously paid medical benefits where the participant obtains a recovery from another source. The central issue presented by the parties is whether unambiguous written plan provisions may be altered based on the argument that enforcement of these provisions would not constitute ''appropriate equitable relief'' under Seciton 502(a)(3) of ERISA.
Source: Proskauer Rose LLP, December 2012
Summary: In denying Ameriprise's motion to dismiss, Judge Susan Richard Nelson of the U.S. District Court for the District of Minnesota found the plaintiffs plausibly alleged Ameriprise selected affiliated funds, such as RiverSource mutual funds and nonmutual funds managed by Ameriprise Trust Company, to benefit themselves at the expense of participants.
Source: Plansponsor.com, December 2012
Summary: In National Security Systems, Inc. v. Iola, No. 10-4154, 2012 WL 5440113 (3d Cir. Nov. 8, 2012), the U.S. Court of Appeals for the Third Circuit held that a nonfiduciary who knowingly participates in a fiduciary's breach of ERISA's anti-kickback provision, Section 406(b)(3), may be subject to appropriate equitable relief under ERISA Section 502(a)(3), even though that nonfiduciary is not a "party in interest" under the statute's prohibited transaction rules.
Source: Goodwin Procter LLP, December 2012
Summary: A new report has found that curtailing the current tax treatment of contributions that workers and their employers make to 401k plans will "significantly reduce" employers' willingness to sponsor plans. The survey comes after 11 senators signed onto a resoultion calling for the protection of retirement benefits in the tax code in any deal to avoid the fiscal cliff.
Source: Advisorone.com, December 2012
Summary: The American Society of Pension Professionals & Actuaries recently launched a campaign, called Save My 401k, which intends to defend retirement plans from congressional budget cuts that could come from the ongoing "fiscal cliff" negotiations or plans for reforms to the tax code in 2013.
Source: Benefitnews.com, December 2012
Summary: The U.S. Supreme Court announced Dec. 3 that it will not review the U.S. Court of Appeals for the Sixth Circuit's decision on the extent to which Section 404(c) of the Employee Retirement Income Security Actshields plan fiduciaries from claims of imprudent investment in employer stock.
Source: BNA.com, December 2012
Summary: As congressional leaders and President Obama attempt to hammer out a deal to prevent the nation from going over the "fiscal cliff," HR/benefits professionals can prepare now, write benefit attorneys Diane Morgenthaler and Ruth Wimer, partners at law firm McDermott Will & Emery. Just in case we go over the "fiscal cliff," Morganthaler and Wimer's report outlines four benefit and payroll areas that should be top of mind for practitioners.
Source: Benefitnews.com, December 2012
Summary: Two of the articles in this edition address cases demonstrating why plan sponsors need to keep an eye on the fees that their service providers charge and ask questions of those service providers if they don't understand the compensation they are receiving. Our third article focuses on a soon-to-be decided case by the United States Supreme Court that may determine whether and how much health plans can recover when their participants are injured by third persons.
Source: Drinkerbiddle.com , November 2012
Summary: A federal judge has refused to dismiss a lawsuit in which employees of Ameriprise Financial Inc. accuse it of loading up the company 401(k) plan with its own expensive, underperforming mutual funds and charging employees excessive fees.
Source: Minneapolis Star Tribune, November 2012
Summary: Retirement plan fiduciaries found to have violated federal law claim some of the plaintiffs that sued them are also liable. A federal district court agreed, in part, and moved forward some of the defendant's claims.
Source: Plansponsor.com, November 2012
Summary: A Massachusetts district court recently validated the long-standing view that ERISA provides limited remedies, and that some wrongs are simply and intentionally under the terms of the statute not actionable. The district court found that although the employer breached its fiduciary duties by failing to timely remit the employee's individual retirement account contributions to the plan, the participant lacked any remedy under ERISA.
Source: Seyfarth Shaw LLP, November 2012
Summary: Examines the implications of Guididas v. Community National Bank Corp. and the growing split among federal courts over whether plan fiduciaries have a right under ERISA to seek contribution or indemnification from co-fiduciaries. This question and the power of courts to develop federal common law under ERISA present significant implications for many strategic and tactical litigation decisions in ERISA cases.
Source: Jenner & Block LLP , November 2012
Summary: Lead article reviews the recent decision in Janese v. Fay, in which the Second Circuit held that the trustees of multiemployer plans act in a non-fiduciary capacity when amending the plans they administer. Authors examine the decision, its implications and concludes by discussing some of the unresolved issues that may arise in the aftermath of the decision.
Source: Proskauer Rose LLP, November 2012
Summary: The 2012 elections mean a status quo for the balance of power in Washington. While this may preclude federal labor and employment legislative action it does not mean a status quo for workplace policy. Employers should recognize that the Obama Administration, emboldened by reelection, will likely pursue its labor and employment agenda with even more vigor through administrative instead of legislative channels. Through rulemaking and enforcement activities, the Administration may well achieve even more dramatic changes to the workplace than Congress would.
Source: Littler Mendelson PC, November 2012
Summary: The wheels have started turning for the first state-run retirement program. The California Secure Choice Retirement Savings Trust Act (SB 1234) was signed by Governor Brown on September 28, 2012. It's not clear that this program will ever be fully implemented, but it's important to understand what this legislation does.
Source: Benefit-Resources.com, November 2012
Summary: The American Society of Pension Professionals and Actuaries said last week that it is launching a lobbying initiative designed to protect tax deferrals for worker contributions to employer-sponsored retirement plans. ASPPA executive director Brian Graff said the organization will begin the campaign Nov. 12. At its heart is a social-media component that includes a website, savemy401k.com, that promotes the benefits of workplace savings, as well as the tax breaks that encourage employees to invest in the programs.
Source: Investmentnews.com (Free Registration May Be Required), November 2012
Summary: The Ninth Circuit held that the fiduciary exception to the attorney-client privilege applies to insurance companies that serve as ERISA fiduciaries and plan sponsors. It also ruled that a district court failed to properly apply the abuse of discretion review by not correctly weighing evidence of the plan administrator's structural conflict of interest.
Source: Seyfarth Shaw LLP, November 2012
Summary: Almost four years after the Joint Expert Panel on Pension Standards (JEPPS) submitted its final report with recommendations to fundamentally reform Alberta and British Columbia's pension systems, the Alberta government has introduced Bill 10, Employment Pension Plans Act.
Source: Pensionsbenefitslaw.com, October 2012
Summary: The U.S. Supreme Court refused on Monday to consider two appeals in a case weighing the ability of tens of millions of Americans to bring lawsuits over their retirement plan fees.
Source: Chicagotribune.com, October 2012
Summary: Plaintiff's attorneys have become much more savvy and emboldened in their attack on 401k fees, and this has set the 401k industry on high alert that slews of additional 401k lawsuits are in the works. But the pitfalls are clear and avoidable.
Source: RIAbiz.com, October 2012
Summary: The Sixth Circuit Court determined that UMC did exercise discretionary control over plan assets as a fiduciary, but did so in compliance with the QDIA safe harbor rules. As a result, UMC did not breach its fiduciary duties and is not liable for the losses.
Source: Fiduciary Risk Assessment , October 2012
Summary: This article explains a recent United States Court of Appeals for the Eleventh Circuit case that adopted the view that ERISA plan fiduciaries do not abuse their discretion by investing in employer stock according to plan terms, as long as it was reasonable to do so under the circumstances.
Source: Jenner & Block , October 2012
Summary: Trustees of the Shelbyville, Kentucky-based Irotas Manufacturing Co. Inc. 401k plan have been sentenced for embezzling $487k from the plan, and have been ordered to pay restitution.
Source: Plansponsor.com, October 2012
Summary: This is a comprehensive chart of more than two dozen lawsuits that have been filed by 401k participants against plan sponsors and related fiduciaries, generally around plan fees and, more specifically, "revenue sharing" arrangements.
Source: Groom Law Group , September 2012
Summary: This summary tracks relevant portions of federal regulatory developments. This summary is intended to provide you with a basic overview of these developments. While changes undoubtedly bring additional challenges, financial professionals, TPAs and plan sponsors who are informed can make adjustments to retirement plans accordingly.
Source: Principal.com , September 2012
Summary: The Court of Appeals for the Sixth Circuit ruled in Pfeil v. State Street Bank & Trust Co., 671 F.3d 585, 591 (6th Cir. 2012) that the presumption that a fiduciary acted reasonably in retaining company stock cannot be applied at the pleading stage of litigation.
Source: Seyfarth Shaw LLP, September 2012
Summary: A court has ruled that a third-party administrator (TPA) authorized to pay medical claims on behalf of employers is a fiduciary under the Employee Retirement Income Security Act (ERISA).
Source: Plansponsor.com, September 2012
Summary: A federal appellate court has ruled that an employer's failure to keep adequate records shifts the burden of proof to the employer that it does not owe contributions to a multi-employer pension plan.
Source: Plansponsor.com, September 2012
Summary: During a Senate Committee on Health, Education, Labor and Pensions' roundtable, witnesses agreed business owners need incentives to offer retirement plans.
Source: Plansponsor.com, September 2012
Summary: A federal appellate court has ruled trustees of a multi-employer pension plan were not acting as fiduciaries when they amended the plan. The 2nd U.S. Circuit Court of Appeals said its previous decisions to the contrary were abrogated by subsequent decisions of the U.S. Supreme Court.
Source: Plansponsor.com, September 2012
Summary: The Sixth Circuit Court of Appeals found the potential for a breach of ERISA fiduciary duty where a company's summary plan description incorporated by reference certain SEC filings. Thus, the plaintiff's lawyers were able to add ERISA fiduciary duty claims to a lawsuit alleging inaccuracies in a company's SEC filings.
Source: Winston & Strawn LLP, September 2012
Summary: The Sixth Circuit affirmed a district court's decision that a third-party administrator breached its fiduciary duties to a number of employee benefit plan sponsors by paying its own expenses with funds that were supposed to pay participant claims despite language in the relevant contracts that expressly stated that it was not a fiduciary.
Source: Seyfarth Shaw LLP, September 2012
Summary: In Tocker v. Kraft Foods North America, Incorporated Retirement Plan, the Court concluded that Varone was not acting as a fiduciary for ERISA purposes in this case, and it affirmed the district court's summary judgment.
Source: ERISA Lawyer Blog, September 2012
Summary: The 6th U.S. Circuit Court of Appeals has revived a lawsuit against Fifth Third Bank concerning company stock holdings in its employee retirement plan.
Source: Planadviser.com, September 2012
Summary: The US Court of Appeals for the Second Circuit ruled in Tocker v. Kraft Foods North America, Inc. Retirement Plan that an employee whose job duties for an Employee Retirement Income Security Act of 1974 (ERISA) plan were ministerial and non-discretionary does not qualify as a plan fiduciary and cannot be sued for an alleged breach of fiduciary duty.
Source: Practical Law Publishing, September 2012
Summary: Concerns are mounting in the US about the increase in retirement plan "leakage" -- hardship early withdrawals and loans being taken against such plans during tough economic times. As more Americans deplete their retirement savings to meet emergency expenses resulting from long-term unemployment, tightened credit or high medical expenses, policy makers are seeking ways to stem the flow.
Source: Thompson, August 2012
Summary: The petitions for certiorari seek review of Santomenno v. John Hancock Life Insurance Company, decided by the Third Circuit in April. In that case, Ms. Santomenno and her fellow former plan beneficiaries brought claims against John Hancock under ERISA and the Investment Company Act, claiming that John Hancock charged their retirement plans excessive fees on annuity insurance contracts offered to plan participants.
Source: Insurereinsure.com, August 2012
Summary: In January, a bill has been introduced in the House of Representatives that would default certain participants in 401k plans into purchasing credit insurance to cover the balance of their 401k plan loans. The company advocating this insurance says that it is necessary to protect the participant and/or his or her heirs from the loss of retirement funds and payment of income or excise taxes on a defaulted loan repayment. According to this American Benefits Council memorandum, the need for this proposal is not supported by the arguments.
Source: American Benefits Council , August 2012
Summary: With the need to rein in the expanding federal budget deficit, limits on the deductibility of defined contribution plan contributions are among the topics expected to be discussed when Congress begins to debate spending and tax priorities.
Source: Vanguard, August 2012
Summary: A company owner and a supervisor were not ERISA fiduciaries and therefore could not be personally liable for unpaid contributions to a union's pension and welfare funds, the U.S. Court of Appeals in Cincinnati (CA-6) has ruled.
Source: CCH, August 2012
Summary: In Herring v. Campbell, a recent case decided by the Fifth Circuit Court of Appeals, a plan participant designated his wife as his primary beneficiary with no secondary beneficiary. His wife died before he did, but he made no other beneficiary designation. When he died, the plan distributed his account balance in accordance with the plan rules, to his surviving siblings. Of course, he happened to have step-children, who sued.
Source: Fox Rothschild LLP, August 2012
Summary: Plan fiduciaries are accorded wide latitude in determining whether to retain company stock on the list of investment options in a 401k or employee stock ownership plan (ESOP), no matter how harshly the stock price fares. That, combined with reliance on the ERISA section 404(c) safe harbor protection in connection with participant-directed accounts, appears to signal a lack of appetite by the courts for new stock-drop cases. The one untested exception to the presumption is a largely undefined "dire situation" that might force a plan fiduciary to abandon a plan option.
Source: FI360.com, August 2012
Summary: Employers should exercise oversight of third-party administrators, to ensure they distribute accurate plan notifications and information about beneficiary distributions. That's because in the case of certain errors, the TPA may end up not being defined as a fiduciary, as Judge James Graham in the U.S. District Court for the Southern District of Ohio, Eastern Division, ruled in Stark v. Mars Inc. And that could leave the employer holding the bag.
Source: Thompson.com, August 2012
Summary: Four groups -- the ERISA Industry Committee, the American Benefits Council, the U.S. Chamber of Commerce and the Business Roundtable -- filed an amicus brief July 26 to urge 2nd Circuit judges to support the principle of deference to plan administrators' decisions over benefit plans.
Source: Thompson.com, August 2012
Summary: Both the trial court and appellate court in the Kensinger case agreed that plan fiduciaries must abide by a deceased participant's beneficiary designation form and pay benefits to that beneficiary. That issue was not disputed on appeal. The issue on appeal was whether a state court lawsuit by the estate of the deceased participant to recover benefits paid to his ex-spouse per a common law agreement is permissible under ERISA.
Source: Benefit Consultants Group, August 2012
Summary: The custody of plan funds and the receipt of fees pursuant to a depository agreement with a third-party administrator (TPA) did not confer fiduciary status on a bank sufficient to allow for suit under ERISA, the U.S. Court of Appeals in Cincinnati (CA-6) has ruled.
Source: CCH, August 2012
Summary: The heart of his plan is a new system of privately-run hybrid pension plans, which incorporate many of the benefits of traditional pensions while substantially reducing the burden on employers. Harkin's proposal requires that individuals who are not covered by an employer-sponsored retirement plan be automatically enrolled in regulated, privately-run retirement funds. This concerns David John, senior research fellow at the Heritage Foundation.
Source: Plansponsor.com, July 2012
Summary: This paper lays out a two-part plan to solve the retirement crisis by making changes to the private retirement system and Social Security. The first part of this proposal would rebuild the private pension system by providing universal access to Universal, Secure, and Adaptable ("USA") Retirement plan, a new type of private pension plan.
Source: US Senate HELP Committee , July 2012
Summary: Bidwell is a good decision for plan administrators because it affirms that they can transfer participant investments to a QDIA under certain circumstances, provided they have given reasonable notice. While the specific holding is relatively narrow, the decision can be read more broadly to reflect a view that participants who fail to take requested action after having been given notice should not be heard to complain of the consequences.
Source: Seyfarth Shaw LLP, July 2012
Summary: Two articles that examine the state of the law on two important areas in employee benefits. Last month, the Supreme Court issued its much anticipated decision regarding the Patient Protection and Affordable Care Act. The lead article examines the impact of that decision on plans and plan fiduciaries. The second article examines deferred-compensation arrangements.
Source: Proskauer Rose LLP, July 2012
Summary: In this case involving a fiduciary's investment of participants' retirement plan accounts in a qualified default investment alternative (QDIA), the appellate court upheld the trial court's decision in favor of the plan fiduciary, holding that the DOL's safe harbor for QDIA investments applied to the fiduciary's actions.
Source: Thomson Reuters/EBIA, July 2012
Summary: A 403(b) plan sponsor did not violate its fiduciary duties when it transferred participants' accounts from a stable value fund to a new qualified default investment alternative (QDIA).
Source: Plansponsor.com, July 2012
Summary: Since its enactment, numerous other laws have amended ERISA and expanded its scope to provide more protections for employees as well as corresponding responsibilities for employers. Aon Hewitt has assembled this summary of major post-ERISA legislation.
Source: Aon Hewitt, July 2012
Summary: The court dealt harshly with this employer, observing that it was not entirely clear whether the employer "ever intended to cure the deficiencies" in its initial disclosure. The case is a good reminder to plan administrators to be diligent about preparing and distributing SPDs or SMMs when plans are amended, and to be ready, with current documents in hand, to respond within 30 days after a participant's request.
Source: Thomson Reuters/EBIA, June 2012
Summary: The second excess fee case to be tried recently was Tussey v. ABB, Inc., which not only resulted in a $36.9 million judgment for the plaintiffs, but revealed a mother lode of conflicted dealings that call into question the thesis of the Deere case that the market is capable of policing the relationship between plan sponsors and investment providers.
Source: Wagner Law Group , June 2012
Summary: Plan administrators must distribute funds even when there is a dispute between an estate and an ex-spouse who waived beneficiary rights, says the 3rd U.S. Circuit Court of Appeals. It recently ruled in Kensinger v. URL Pharma, that a decedent's estate could directly sue the recipient of ERISA-governed 401k plan funds after the funds have been distributed.
Source: Thompson Publishing, June 2012
Summary: Zamansky & Associates, LLC filed a class action lawsuit on behalf of all employee and former employee participants in the Chesapeake Energy Corporation's Savings and Incentive Stock Bonus Plan. The lawsuit was filed in the United States District Court for the Western District of Oklahoma and covers all current and former employees of Chesapeake Energy Corporation who purchased or held company stock in the Plan from July 31, 2008, to the present.
Source: Plansponsor.com, June 2012
Summary: The devil is in the details and may bring costly damages to unsuspecting companies. Recent ERISA fee litigation, the new Department of Labor service provider and participant disclosure rules and the development of new revenue sharing and fee allocation models within plans are all resulting in a new focus on three issues.
Source: Warner Norcross & Judd LLP, June 2012
Summary: Congress is considering changing ERISA section 3(2) to counter the DOL's Advisory Opinion 2012-04A -- Multiple Employer Plans. The SAVE Act of 2011 also creates a new type of plan -- the Multiple Small Employer Plan -- effective for years after Dec. 31, 2011.
Source: Pension Protection Act Blog, June 2012
Summary: In this latest development in a lawsuit involving the theft of millions of dollars in plan assets by a TPA, the Sixth Circuit finds that the bank that held plan funds was not an ERISA fiduciary with respect to the plans, and that ERISA preempted state-law claims asserted by the TPA's bankruptcy trustee and former clients.In this latest development in a lawsuit involving the theft of millions of dollars in plan assets by a TPA, the Sixth Circuit finds that the bank that held plan funds was not an ERISA fiduciary with respect to the plans, and that ERISA preempted state-law claims asserted by the TPA's bankruptcy trustee and former clients.
Source: Thomson Reuters/EBIA, June 2012
Summary: Plan fiduciaries did not breach their ERISA duties by retaining company stock as an investment option, despite a significant drop in the value of the stock price, the U.S. Court of Appeals in New York (CA-2) has ruled. The mere decline in the value of the company's stock price did not indicate that the company was in such a dire condition as to rebut the applicable presumption of prudence.
Source: CCH, June 2012
Summary: Tussey v. ABB, which comes following a number of class action cases where plan sponsors and committees enjoyed procedural victories, has broad potential implications for plan sponsors and fiduciaries that the risks associated with a defined contribution plan can be significant and require strong oversight, processes, controls and governance to manage those risks.
Source: PricewaterhouseCoopers LLP , June 2012
Summary: What Tussey v. ABB did not resolve was "whether the record keeping costs of a 401k plan may be borne exclusively by those participants whose investment funds enjoy revenue sharing...while participants whose accounts are invested in investment funds with no revenue sharing pay little or nothing."
Source: Pension Risk Matters, June 2012
Summary: Although more than 15 years have passed since the Third Circuit issued its seminal decision in Moench v. Robertson, 62 F.3d 553 (3d Cir. 1995), courts are still grappling with its application and reach. In Moench, the Third Circuit adopted an abuse-of-discretion standard for reviewing an employee stock ownership plan fiduciary's decision to continue investing in employer securities.
Source: Alston & Bird LLP , June 2012
Summary: The U.S. Court of Appeals for the Sixth Circuit held that a 401(k) plan participant who sued under the Employee Retirement Income Security Act (ERISA) for losses in connection with a company stock fund that suffered a drop must show losses on a "net basis" during the class period to have constitutional standing. This decision has great significance in addressing plaintiffs' standing and class certification in so-called ERISA "stock-drop" cases, often filed after a company's stock price falls.
Source: McDermott Will & Emery, June 2012
Summary: Jeff Robertson, an attorney with Barran Liebman LLP, represents plan sponsors and retirement plan services providers in all areas of benefit planning. We spoke with him recently to find out when it is - and is not - appropriate to hire an attorney to work with your plan; following are some of his comments.
Source: 401khelpcenter.com, June 2012
