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Legal, Legislative and Washington DC

A directory and index of articles that review what is happening in the courts, U.S. legislature and Washington DC.

    

Supreme Court Declines KeyCorp Stock-Drop Case

Summary: The Supreme Court declined to hear an appeal by participants in a class-action lawsuit against Cleveland-based KeyCorp and fiduciaries of the firm's $1.5 billion 401k plan, alleging company stock was an imprudent investment.

Source: Pionline.com, November 2014

ERISA Plan Service Provider Avoids Fiduciary Status - What It Means for Service Providers and Plan Sponsors

Summary: A recent Third Circuit decision (Santomenno v. John Hancock, et. al.) serves as a reminder to plan sponsors about their fiduciary duties and the need to be vigilant in monitoring fees. This article provides a brief summary of the decision and the lessons it offers both to service providers to plans and plan sponsors.

Source: Employeebenefitslawreport.com, November 2014

Harris v. Amgen Decided by Ninth Circuit

Summary: On October 30, 2014, a three-judge panel of the Ninth Circuit handed down its decision in Harris v. Amgen, a "stock drop" case. The decision came after the Ninth Circuit's earlier (2013) decision in favor of participant-plaintiffs had been vacated and remanded by the Supreme Court for reconsideration in light of Fifth Third Bancorp et al. v. Dudenhoeffer. This article reviews the Ninth Circuit's Harris v. Amgen decision, focusing on how that court applied the principles articulated by the Supreme Court in Fifth Third.

Source: Octoberthree.com, November 2014

Supreme Court Declines to Hear Appeal of Tussey v. ABB

Summary: The Supreme Court published an order declining to hear the appeal of the 8th Circuit decision in Tussey v. ABB from earlier this year. The Court does not provide a reason why they decline to hear appeals, but in this instance, there are at least a few speculative guesses which are outlined here.

Source: Fraplantools.com, November 2014

Supreme Court Won't Review Tussey vs. ABB Fiduciary Breach Case

Summary: The U.S. Supreme Court declined a petition that it review Tussey et al. vs. ABB Inc. et al., a fiduciary breach case that has been closely watched by the defined contribution plan community.

Source: Pionline.com, November 2014

Court Opens Door for Disclosure of Investment Guidelines

Summary: An appeals court has opened the door for the requirement that an ERISA plan's investment guidelines be disclosed to participants upon request. The determination comes from the 5th U.S. Circuit Court of Appeals, as part of a case involving thousands of Verizon retirees who say they were involuntarily moved from Verizon's main retirement plans into the pension plan of a now-defunct spinoff company, Idearc Inc.

Source: Plansponsor.com, November 2014

Tibble Appeal to Be Heard by Supreme Court

Summary: The Supreme Court has agreed to hear an appeal from the plaintiffs in Tibble v. Edison International, a 401k fee case. This article briefly reviews the Ninth Circuit's Tibble decision, focusing on: (1) the retail vs. institutional share class issue; and (2) the application of ERISA's statute of limitations to fund menu decisions.

Source: Octoberthree.com, November 2014

MassMutual Settles Excessive Fee Lawsuit

Summary: On Friday, October 31, 2014, the parties in Goldenstar, Inc. v. MassMutual Life Insurance Co. filed a motion seeking the court to approve a settlement agreed to by the parties. It appears that the lawsuit brought by MassMutual's own employees is not affected by this agreement.

Source: Fraplantools.com, November 2014

Lack of Standing Fatal to ERISA Stock Drop Claims

Summary: For plan administrators, the UBS litigation underscores the potential insulating effect of drafting plan documents that require investment in the company's own stock. For practitioners on both sides, the District Court's decision is a reminder always to consider fundamental, threshold issues such as standing when bringing or defending an ERISA case.

Source: Benefitslawinsider.com, November 2014

Edison International Case Highlights a Needed Reform: Share Class Restrictions in 401k Plans

Summary: The author suggests that, although the case is interesting, a more fundamental issue that needs to be addressed. "The use of multiple share classes for mutual funds in 401k plans is confusing the heck out of just about every small business retirement plan sponsor in America."

Source: Employeefiduciary.com, October 2014

Washington Tweaks Retirement Fund Policy to Encourage Annuities

Summary: The U.S. Treasury Department said on Friday it was tweaking its policy for retirement funds to encourage savers to buy annuities, a measure aimed to keep them from outliving their savings. The DOL and the Internal Revenue Service will let retirement funds offer long-term deferred annuities as a default investment in 401k retirement accounts.

Source: Reuters.com, October 2014

Venue Selection Clause in Retirement Plan is Enforceable According to Sixth Circuit

Summary: On October 14, 2014, in Smith v. AEGON Companies Pension Plan, the US Court of Appeals for the Sixth Circuit held that a venue selection clause in a retirement plan governed by ERISA that limited venue to a specific district court was enforceable.

Source: Practicallaw.com, October 2014

Judge Rejects Citigroup Bid to Dismiss 401k Fee Case

Summary: Nearly seven years after their lawsuit was filed, the plaintiffs in a "self-dealing" case against Citigroup will be allowed to move ahead with their claims. On Sept. 30, U.S. District Judge Sidney Stein denied Citigroup's motion for summary judgment, which would have thrown the case out of court based on Citigroup's assertion that the statute of limitations had passed.

Source: Benefitspro.com, October 2014

High Court to Address Statute of Limitations For Suits Challenging Retirement Plan Fees

Summary: The U.S. Supreme Court announced that it will wade into the world of ERISA plan fee litigation. The case presents the question: whether participants in retirement plans can hold plan fiduciaries liable for including higher-cost investment funds in the plan when those funds were initially chosen more than six years before the lawsuit, or whether these types of claims are barred by the six-year statute of limitations found in ERISA.

Source: Bna.com, October 2014

High Court to Hear ERISA Fiduciary Breach Case

Summary: Lower courts have held that Edison International employees could not sue their 401k plan administrator for breach of fiduciary duty because their claims were time-barred under ERISA. Now the U.S. Supreme Court has agreed to consider the case.

Source: Cfo.com, October 2014

Supreme Court Grants Cert in Tibble v. Edison

Summary: On October 2, 2014, the United States Supreme Court granted the Plaintiffs' Petition for Writ of Certiorari in Tibble v. Edison International. Oral arguments in Tibble have not yet been set but currently the Court has availability in January. If heard that late, we can expect a decision sometime between late spring and the end of June when the term ends.

Source: 401kfeedisclosure.com, October 2014

Third Circuit Affirms Dismissal of Excessive Fee Claims Against John Hancock

Summary: The plaintiffs alleged that the insurer acted as an ERISA fiduciary and violated ERISA by charging excessive fees, including fund advisory fees, sales & service fees, 12b-1 fees, and revenue sharing. The U. S. Court of Appeals for the Third Circuit affirmed dismissal of all claims against the defendant insurance company in a case challenging 401k plan fees.

Source: Jdsupra.com, October 2014

Third Circuit Serves Up Big Win for Retirement Plan Service Providers

Summary: The U.S. Court of Appeals for the Third Circuit recently issued an important decision in one of the many cases alleging that financial services companies breached fiduciary duties under ERISA by charging allegedly excessive fees. This type of litigation has grown more prevalent in recent years. However, most appellate courts, including now the Third Circuit, have found these claims unmeritorious.

Source: Alston.com, September 2014

Companies With Stock Funds in 401k Plan Should Review Compliance in Light of Recent SEC Enforcement Actions

Summary: Most public companies offer a company stock fund investment option under their 401k plans and non-qualified excess 401k plans. On September 10, the SEC announced enforcement actions against 34 companies and insiders (directors, officers, and 10% owners) for failing to file timely reports for stock transactions. The enforcement actions came without warning, after more than a decade of little or no SEC enforcement in this area.

Source: Winston.com, September 2014

GOP Public Pension Reform Gets a Surprise Boost

Summary: Republican Sen. Orrin Hatch introduced the Secure Annuities for Employee (SAFE) Retirement Act (S. 1270) last year to reform the public and private pension systems and, amid recent retirement reform hearings on Capitol Hill, his public pension reform idea is now getting noteworthy support from an otherwise unlikely place.

Source: Ntsa-net.org, September 2014

Auto-IRA Architects Size Up Landscape

Summary: Three key players in the formulation and design of the auto-IRA concept came together at a Sept. 17th policy forum in Washington, DC, to offer perspective and an assessment of the road ahead.

Source: Asppa.org, September 2014

The Ambushed Fiduciary: Does Authority Over a Corporate Account Cross the Line?

Summary: Corporate officers can wear two hats under ERISA: the corporate officer hat or the ERISA fiduciary hat. Actions taken wearing the corporate officer hat are traditionally not fiduciary functions. However, a recent decision from Florida, Perez v. Geopharma, Inc., crafted an interesting but flawed argument that mere authorization to sign on a corporate bank account could make an officer a fiduciary.

Source: Pensionsbenefitslaw.com, September 2014

American Retirement Policy Shifts to Tax Incentives

Summary: Despite great strides in retirement security, some lawmakers and benefit leaders see an opportunity to revisit tax policies that could help incentivize all Americans to save more as they plan their exits from the workforce. In turn, many in the employee retirement world fear that any politically motivated efforts to modify or eliminate tax advantages for worksite-sponsored retirement savings plans could seriously impair the success of the existing system.

Source: Benefitnews.com, September 2014

Fiduciaries Held to Higher Standard in Proving Plan Loss Was Not Caused by Procedural Imprudence

Summary: In determining whether fiduciaries who breached duties of procedural prudence in divesting a plan of company stock actually were liable for causing the resultant loss, courts must ascertain whether another fiduciary acting prudently would have made the same decision, the U.S. Court of Appeals in Richmond has held. Accordingly, a lower court erred in focusing on whether a prudent fiduciary could have made the same decision.

Source: Wolterskluwerlb.com, September 2014

Signature Authority Can Trigger ERISA Fiduciary Responsibility

Summary: One of the most sensitive, and often misunderstood, aspects of being an executive of a company with a retirement plan is knowing when senior leaders are fiduciaries for the plan. A recent federal case added some clarity when it determined that a chief executive with signature authority over the company's finances was indeed a fiduciary.

Source: Thompson.com, September 2014

Oregon Task Force Recommends Creation of State-Sponsored Retirement Plan

Summary: Oregon's Retirement Security Task Force issued a report that recommends a structure for a state-sponsored retirement plan.

Source: 401khelpcenter.com, September 2014

Retirement Reform Bills Seek More 'Open' Plans

Summary: Retirement reform bills in Congress loosen restrictions around multiple-employer benefit plans, making it easier for employers to transfer many of the fiduciary responsibilities and liabilities associated with such plans.

Source: Insurancenewsnet.com, September 2014

The Case of the Accidental Fiduciary: When a Signature is More Than Just a Name

Summary: The issue of fiduciary status is often cumbersome, because while a fiduciary can be directly named by a plan, someone can also be deemed to be a fiduciary by virtue of just having some discretionary authority. Perez v. Geopharma seems to suggest that at least some argument can be made that even company officers could be liable for fiduciary breaches.

Source: Foxrothschild.com, September 2014

Tatum v. RJR Tobacco: Circuit Court Reverses District, Holds for Plaintiffs

Summary: On August 4, 2014, the 4th Circuit handed down its decision in Tatum v. R.J. Reynolds Tobacco Company. The court reversed the district court's decision in favor of defendant-fiduciaries and remanded the case for further proceedings. The case is interesting in several respects covered in this article.

Source: Octoberthree.com, September 2014

Would've, Could've, Should've: Tatum v. RJR Nabisco Investment Committee

Summary: Had the RJR fiduciaries simply (i) performed a thorough investigation of the alternatives, (ii) made a reasoned decision based on their investigation, and (iii) documented the basis for their decision, no breach of duty would have occurred in the first place even though, with hindsight, the decision may have been different.

Source: Benefitsbryancave.com, September 2014

Supreme Court Urged to Hear Fiduciary Case

Summary: The U.S. Solicitor General has produced a brief at the request of the U.S. Supreme Court that recommends the justices hear part of the original claims in Tibble v. Edison International. The Solicitor General's brief was split on the two questions the plaintiffs are asking the court to review.

Source: Benefitspro.com, August 2014

Divided Fourth Circuit Panel Rules On Burden of Proving Loss Causation in ERISA Fiduciary Breach Case

Summary: The Fourth Circuit's decision makes a number of significant statements and rulings on the burdens of proof related to loss causation, the meaning of "objective prudence," and the standards for reviewing decisions pertaining to stock funds in the wake of the Supreme Court's ruling in Fifth Third v. Dudenhoeffer. Some of the Court's pronouncements are difficult to reconcile with existing case law.

Source: Jdsupra.com, August 2014

Oregon Looks to Establish State-Run Retirement Plan for Private Sector Workers

Summary: Oregon's Retirement Savings Task Force is calling on the state to create a retirement fund that would be available to all employed state residents that will follow Oregonians as they transition between jobs.

Source: Benefitnews.com, August 2014

The Reckless Fiduciary: When Are Imprudent Fiduciaries Liable for Plan Losses?

Summary: A recent Fourth Circuit Court of Appeals case has established its own gloss on the ERISA rules to determine when fiduciaries who follow imprudent procedures will have to make up plan losses. The Fourth Circuit rule is based on what a hypothetical prudent fiduciary, who I will call the "prudent shadow," would have done in the same situation.

Source: Pensionsbenefitslaw.com, August 2014

Fidelity Settles Lawsuit With Own Employees Over 401k ERISA Allegations - See more at: #sthash.6ss3Pqip.dpuf

Summary: Fidelity has settled two lawsuits filed last year by its own employees over allegations that they violated ERISA in the administration of their own 401k plan by charging excessive fees and committing prohibited transactions. Settlement agreement provides for $12 million to be paid to the class and for certain other affirmative relief to be taken.

Source: Fraplantools.com, August 2014

Lawsuit Against Financial Engines a Red Flag for Plan Sponsors

Summary: A new lawsuit against Financial Engines for alleged patent infringement is in its early stages, but plan sponsors who work with the 401k service provider ought to be vigilant and ready to reassure plan participants.

Source: Investmentnews.com (free registration may be required), August 2014

Litigators Call for Supreme Court Review of Tussey Case

Summary: A well-known 401k fee litigation firm has asked the U.S. Supreme Court to review key pieces of an appellate court's decision in Tussey v. ABB, Inc.

Source: Plansponsor.com, August 2014

Appellate Court Sends RJR Stock Drop Suit Back for Review

Summary: A lower court applied the wrong standard when determining that R.J. Reynolds Tobacco Company proved its fiduciary breach did not cause losses to retirement plan participants, an appellate court ruled.

Source: Planadviser.com, August 2014

Lockheed Martin Retirement Plan Case Gets Trial Date

Summary: A long-fought legal battle between Lockheed Martin Corp. and a group of its retirement plan participants will finally go to trial in December after the plaintiffs were granted class action status.

Source: Investmentnews.com (free registration may be required), August 2014

GAO to Look at TDFs, Other QDIAs

Summary: Following up on its calls for stricter oversight of managed account providers to 401k plans, the Government Accountability Office is undertaking a review of qualified default investment alternatives in 401k plans.

Source: Benefitspro.com, August 2014

Fifth Third Bancorp et al. v. Dudenhoeffer decided by Supreme Court

Summary: The Supreme Court rejected the rule applied by many courts that ESOP fiduciaries had a "presumption of prudence" with respect to company stock investments. More importantly, however, it instructed the 6th Circuit to reconsider its rejection of the defendants' motion to dismiss, on the principles that (oversimplifying somewhat) (1) fiduciaries with respect to publicly traded ESOP stock may generally rely on market prices, and (2) issues with respect to insider information may generally be better dealt with under the securities laws. This article reviews the Court's decision.

Source: Octoberthree.com, July 2014

Supreme Court Rules on Employer Stock Funds -- Fiduciary Responsibility After the Presumption of Prudence

Summary: The death of the Moench presumption means that fiduciaries responsible for employer stock funds should revisit their plan documents, plan governance structures and fiduciary procedures in light of the Supreme Court's articulation of the prudence standard that applies to employer stock. Article reviews what plan fiduciaries and sponsors should do now.

Source: Ajg.com, July 2014

How State Auto-IRA Legislation May Affect Employers

Summary: Several states are considering adopting legislation that would require private employers that do not provide a retirement plan for their employees to adopt some sort of retirement program, typically, an "auto-IRA." This article reviews three such initiatives, focusing mainly on issues that directly affect employers.

Source: Octoberthree.com, July 2014

Suit Highlights Potential Fiduciary Risks for 401k Plan Sponsors

Summary: If you haven't been paying close attention to the administration of your company's 401k plan, the case of Tussey v. ABB Inc. should make you sit up and take notice. How can plan sponsors minimize fiduciary risk and avoid litigation? Experts advise following these seven tips.

Source: Cfo.com, July 2014

2014 Mid-Year Supreme Court Case Review

Summary: The 2013-2014 term of the Supreme Court of the United States produced opinions that will have substantial effects on the design and administration of most employee benefits plans. This summary highlights three key decisions, one significant procedural ruling, and an emerging issue likely headed for Supreme Court review, all of which deserve the attention of employee benefits professionals.

Source: Employeebenefitsupdate.com, July 2014

BP Workers Can Sue Over Retirement Losses Tied to Gulf Spill

Summary: BP employees can sue managers of the company's retirement savings plan over losses related to the 2010 Gulf of Mexico oil spill, a U.S. appeals court said. The New Orleans-based appellate court today, citing a recent Supreme Court ruling, rejected Houston U.S. District Judge Keith Ellison's 2012 decision denying claims for millions of dollars in losses suffered by the plans.

Source: Benefitspro.com, July 2014

An Eye on 401k Fees - Jerry Schlichter and Fee Litigation

Summary: Ensuring reasonableness and transparency of fees in 401k plans has been a hot topic for the past number of years. Jerry Schlichter was the first attorney in the U.S. to challenge 401k fee reasonability directly at the source. This is a summary of a discussion with Mr. Schlichter.

Source: Ekonbenefits.com , July 2014

New Case Tests the Retroactive Reach of Windsor

Summary: Following a spate of district court cases in response to United States v. Windsor, some same-sex surviving spouses are asking retirement plan sponsors to review previously denied death benefit claims. Among them has emerged Passaro v. Bayer Corp. Pension Plan in which the key issue will be the retroactive application of Windsor to qualified retirement plans.

Source: Benefitsbryancave.com, July 2014

Seismic Shift for Employer Stock in ERISA Account Plans: Supreme Court Voids Presumption of Prudence

Summary: The Supreme Court's rejection of a 'presumption of prudence' switches out the well-developed jurisprudence supporting the Moench presumption for defenses that will inevitably be tested and illuminated over time. Further, it will require plan sponsors and fiduciaries to redo their defensive paradigm for offering employer stock, which was constructed around this presumption. This article provides context for the decision and notes additional detail on the case, the key takeaways and practical next steps.

Source: Kilpatricktownsend.com, July 2014

Some Additional Thoughts on Fifth Third v. Dudenhoeffer

Summary: What the Supreme Court clearly did not appreciate was the argument that the fiduciaries are supposed to be clairvoyant and know the stock price is overvalued when the entirety of the investing public did not or has yet to adjust. In the same vein, the Supreme Court did not appreciate the idea that the fiduciary was supposed to use insider information, again, presumably, when the stock price was at its highest.

Source: Fraplantools.com, July 2014

Election to Make Plan Contributions in Company Stock Did Not Subject Sponsor to Fiduciary Liability

Summary: An employer did not breach fiduciary duties under ERISA by electing to make required contributions to a 401k plan in employer stock, rather than cash, according to the U.S. Court of Appeals in New York City. The decision to fund plan contributions in company stock is not a fiduciary act, the court explained, even if the decision has a detrimental impact on the plan.

Source: Wolterskluwerlb.com, July 2014

Supreme Court Rejects Presumption of Prudence in Fifth Third Bancorp v. Dudenhoeffer

Summary: The Supreme Court concluded that ERISA fiduciaries are no longer entitled to a presumption that they acted prudently in investing in employer stock. While the Supreme Court struck the presumption entirely, the Court provided new guidance regarding the duties of plan fiduciaries, particularly those of publicly traded companies.

Source: Groom.com , July 2014

Supreme Court Rejects 'Presumption of Prudence' in ERISA Employer Stock Cases

Summary: On June 25, the U.S. Supreme Court issued its unanimous decision in Fifth Third Bancorp v. Dudenhoeffer, holding that fiduciaries of employee stock ownership plans are not entitled to a “presumption of prudence” when their decisions to buy or hold employer stock are challenged as violations of the fiduciary duty of prudence imposed under ERISA. In rejecting the presumption, the Court disagreed not only with the defendants, but also with all seven U.S. Courts of Appeals.

Source: Morganlewis.com, June 2014

Supreme Court Nixes "Presumption of Prudence" in Employer Stock Cases

Summary: Although Dudenhoeffer involved a 401k plan that offered an employer stock fund as an investment option, and that employer stock fund was set up to be an ESOP as defined in ERISA, the rationale would appear to apply more broadly to any eligible individual account plan that holds employer stock. Dudenhoeffer is a mixed bag for the fiduciaries and sponsors of plans that hold employer stock.

Source: Faegrebd.com, June 2014

Moench-ing on a Bunch of Presumptions -- What's Left After Fifth Third v. Dudenhoeffer?

Summary: The so-called "Moench presumption" has been applied over and over at various stages of the litigation by circuit court after circuit court. It almost seemed as though the question was not whether there was a presumption, but, rather, only what the contours of the presumption might be. Notwithstanding that background, the Court in Dudenhoeffer, faced with a statute that does not set forth an explicit presumption in favor of ESOP fiduciaries, unanimously declined to recognize one.

Source: Bna.com, June 2014

Supreme Court Rejects Special "Presumption of Prudence" for Employer Stock

Summary: The U.S. Supreme Court held that there is no special presumption of prudence applicable to fiduciaries with respect to employer stock. The Court has, however, provided a roadmap to the lower courts to use in evaluating whether a claim can proceed, the threshold for which may not be particularly easy for plaintiffs to meet. This roadmap also serves as guidance to plan fiduciaries in connection with employer stock investments.

Source: Drinkerbiddle.com, June 2014

Court Delivers Win to 401k Plaintiffs

Summary: Rejecting the analysis of virtually every circuit that has reviewed the issue, the Supreme Court unanimously rejected the Moench presumption of prudence.

Source: Benefitspro.com, June 2014

Supreme Court Rejects Moench Presumption

Summary: Rejecting the analysis of virtually every circuit that has reviewed the issue, the Supreme Court unanimously rejected the Moench presumption of prudence.

Source: Benefitsforward.com, June 2014

Supreme Court Rejects the Moench Presumption, Vacates and Remands Fifth Third Case

Summary: The Supreme Court ruled on June 25, 2014 that there is no presumption of prudence for fiduciaries of ESOPs or Employee Stock Ownership Plans. In other words, the "Moench Presumption" which has been adopted nearly unanimously by every Circuit Court in the country has been unequivocally rejected. The decision was unanimous.

Source: Fraplantools.com, June 2014

Same-Sex Marriages and Retirement Plans -- Turning Back Time to June 26, 2013

Summary: This advisory answers several important questions about the practical effects of the U.S. Supreme Court's decision in United States v. Windsor (delivered June 26, 2013, and sometimes called the "DOMA Decision") for qualified retirement plans.

Source: Alston.com , June 2014

ABB: Affirmed, Reversed, and Vacated

Summary: In the continuing saga of class action lawsuits filed against 401k plan sponsors alleging excessive recordkeeping fees, the Court of Appeals for the Eighth Circuit recently issued a significant ruling in the case of Tussey v. ABB which affirmed in part, reversed in part, and vacated in part, the district court's previous findings. Here is a review.

Source: Wagnerlawgroup.com , June 2014

How Tax Reform for Retirement Plans Can Affect Risk and Compliance

Summary: It is likely that tax reform will influence the retirement benefits industry in ways large and small just as much as direct attempts at systemic transformation. In this article we will examine both types of change. Any such proposals must balance the goals of increasing revenue and limiting expenditures with maintaining a retirement benefits system that provides effective incentives to save for retirement without undue administrative complexity.

Source: Wagnerlawgroup.com , June 2014

The Inadvertent Fiduciary: Mass Mutual Crosses the Line

Summary: The ruling in Golden Star, Inc. v. Mass Mutual Life Insurance Company makes a clear case for establishing more consistent standards so that plan service providers know in advance whether they have fiduciary responsibilities and exposure.

Source: Pensionsbenefitslaw.com, June 2014

Ninth Circuit Limiting Plaintiffs' Rights to Recover for Breach of Fiduciary Duty under ERISA

Summary: In 2011, the U.S. Supreme Court recognized that some forms of equitable relief could lead to an award of a monetary payment for breach of fiduciary duty under section 502(a)(3) of ERISA. The U.S. Court of Appeals for the Ninth Circuit recently ruled in Gabriel v. Alaska Elec. Pension Fund, that none of these theories was available to a retiree who was incorrectly informed that he was eligible for an annuity. The court was unanimous concerning the remedies of estoppel and reformation, but divided concerning the antiquated remedy of surcharge.

Source: Littler.com, June 2014

Congress Urged to Force Notice on 401k Plan Changes

Summary: Massachusetts' chief securities regulator called on Congress and the U.S. Department of Labor to force companies to disclose any changes to the timing of 401k plan contributions to workers.

Source: Benefitspro.com, June 2014

The ERISA Uncertainty Principle: Edmonson V. Lincoln National Life Insurance Company and ERISA's Unanswered Questions

Summary: In this article, Jenner & Block Partners examine the future of the 40-year-old Employee Retirement Income Security Act (ERISA). The authors analyze the implications of the recent petition for a writ of certiorari in Edmonson v. Lincoln National Life Insurance Company, a case that "underscores the substantial uncertainty that continues to surround the statute despite the significant judicial interpretation the federal courts have applied to its provisions over the last 40 years." They explain the issues in Edmonson, the lower court's ruling and what is at stake if the Supreme Court intervenes.

Source: Jenner.com , June 2014

Center for American Progress on Fee Disclosure

Summary: On April 11, 2014 the Center for American Progress (CAP) released a report "Fixing the Drain on Retirement Savings -- How Retirement Fees Are Straining the Middle Class and What We Can Do about Them." The report is important for a couple of reasons. First, CAP is a fairly important voice in the progressive wing of the Democratic Party. And second, the policy proposals in this report are innovative and may get traction with some policymakers.

Source: Octoberthree.com, June 2014

Properly-Delegated Fiduciary Responsibility Protects Plan Sponsors

Summary: In Coulter v. Morgan Stanley & Co., the Second Circuit Court of Appeals dismissed ERISA breach of fiduciary duty claims against Morgan Stanley. Coulter is yet another reminder of the importance of proper delegation of fiduciary authority. Proper delegation is a Board of Directors' best defense against ERISA liability.

Source: Winston.com, June 2014

Second Circuit Tosses Stock Drop Claim Because Funding a Plan is Not a Fiduciary Act

Summary: Participants in the Morgan Stanley 401k and Employee Stock Ownership Plans sued after the great recession caused the value of 2007 and 2008 contributions to the Plans in Morgan Stanley stock to crater. The first question to ask in any ERISA breach of fiduciary duty case is whether the acts in question are even fiduciary acts. On appeal in this ERISA "stock drop" case, the Second Circuit focused on that basic question, resulting in a clean win for the defendants.

Source: Erisa-employeebenefitslitigationblog.com, June 2014

MassMutual Is Functional Fiduciary; But Ability to Remove Funds Doesn't Confer Status

Summary: Mass Mutual Life Insurance Co. is a functional fiduciary of two Section 401k plans because of its ability to set its own compensation as a service provider, but not because of its authority to substitute funds from the plans' investment lineups, a federal court concluded (Golden Star, Inc. v. Mass Mut. Life Ins. Co.

Source: Bna.com, June 2014

Debate Continues Over the Fiduciary Status of 401k Plan Service Providers

Summary: MassMutual illustrates the current unsettled state of the law in this area, including how that law applies to various practices commonly followed by insurance providers to 401k plans. The DOL is taking very aggressive positions in this area, including arguing in several cases that the ability to change plan investment options can make a provider a fiduciary, even if that power was never exercised.

Source: Natlawreview.com, May 2014

MassMutual Is Found to Be a Fiduciary in ERISA Suit by Proposed Class of Client Plans

Summary: In a long running lawsuit brought by a proposed class of client DC plans, MassMutual Life Insurance Company has been found to be a functional fiduciary under ERISA § 3(21)(i) and (iii) when it determines its own compensation for services provided in the MassMutual Separate Investment Accounts. The plaintiffs allege that MassMutual violated ERISA when it received revenue sharing payments from third-party mutual funds, further alleging that these payments were essentially "kickbacks" that constituted prohibited transactions under ERISA § 406(b), and violated the fiduciary duties imposed by ERISA § 404.

Source: Fraplantools.com, May 2014

Alternate Payee Subject to Income Tax on 401k Distribution Received Under QDRO

Summary: An alternate payee was subject to income tax on a distribution from her former spouse's 401(k) plan that was made pursuant to a qualified domestic relations order (QDRO), according to the U.S. Tax Court. The payee could not avoid income tax liability because she failed to roll over the distribution and had no basis in the participant's 401k account.

Source: Wolterskluwerlb.com, May 2014

Eighth Circuit Denies Both Rehearing Petitions in Tussey v. ABB -- Next Up is the Supreme Court

Summary: On Tuesday, May 20, 2014, the 8th Circuit Court of Appeals denied both the plaintiffs' and ABB's petitions for rehearing in Tussey v. ABB, Inc. Without explanation, both the original panel of three judges and the court en banc, meaning all active judges of the 8th Circuit, declined to rehear the case.

Source: Fraplantools.com, May 2014

U.S. Senator Rubio Unveils Proposal to Reform Retirement Policy

Summary: U.S. Senator Marco Rubio, a likely Republican candidate for the White House, on Tuesday unveiled plans to give more Americans a way to save for retirement while raising the retirement age for younger workers.

Source: Reuters.com, May 2014

Tussey Appeal Decided by Eighth Circuit

Summary: The Eighth Circuit Court of Appeals recently decided the appeal in Tussey v. ABB. Summarizing its conclusions with respect to the ABB defendant fiduciaries, the court stated: "We affirm the district court's judgment and award against the ABB fiduciaries with respect to recordkeeping, but vacate the judgment and award on the participants' investment selection and mapping claims." This article begins with a brief summary of the facts and the lower court decision and then discusses the Eighth Circuit's holdings with respect to ABB.

Source: Octoberthree.com, May 2014

Delta Air Lines Wins Stop Drop Suit Appeal

Summary: The 11th U.S. Circuit Court of Appeals used its own case history to dismiss a lawsuit brought by participants in Delta Air Lines employee stock ownership plan. The appellate court said the highly deferential abuse of discretion standard as set forth in Lanfear v. Home Depot applied to the allegations set forth in the complaint against Delta.

Source: Plansponsor.com, May 2014

Proprietary Fund Litigation Chart

Summary: The use of "proprietary" (also referred to as "affiliated") products and services raises a series of issues under ERISA's prohibited transaction rules and fiduciary standards. Compliance with these rules and standards is under increased scrutiny by the Department of Labor and the plaintiffs' class action bar, which has filed more than a dozen lawsuits against the fiduciaries of in-house plans. This chart identifies the lawsuits that have been filed to date, describes the claims that have been asserted in the lawsuits, and summarizes the substantive court rulings and the procedural status of the cases.

Source: Groom.com , May 2014

ERISA Suit Challenging Failure to Remove Proprietary Investment Funds Time-barred

Summary: A breach of fiduciary duty suit brought later than six years after the initial selection of allegedly improper proprietary investment funds was time-barred, according to the U.S. Court of Appeals in Atlanta, because no intervening events occurred that would qualify the fiduciaries' failure to remedy the breach as a separate cognizable ERISA violation.

Source: Wolterskluwerlb.com, May 2014

Don't Get Cute When Documents Are Requested: ERISA Penalty Provisions for "Hiding" Plan Documents

Summary: ERISA generally requires that plan participants get copies of summary plan descriptions, plan documents and annual reports when requested. For administrators, this obligation can even apply if the participant is not specific in their request for documentation. Such was the case in Cultrona v. Nationwide Life Insurance Company, a recent case out of the 6th Circuit Court of Appeals.

Source: Foxrothschild.com, May 2014

Are 401k Fees Too High? The High Court May Have an Opinion

Summary: Jerry Schlichter is a 401k hunter. He's a litigator who sues retirement plan sponsors for charging excessive fees to participants, and he goes after big game. Schlichter has brought lawsuits against 14 large corporations since 2006 aimed at forcing them to change practices he contends cost retirement savers dearly. Now, one of Schlichter's pending cases may be taken up by the U.S. Supreme Court.

Source: Reuters.com, May 2014

Supreme Court Considering Fiduciary Responsibility for 401k Plan Company Stock Funds

Summary: The Supreme Court of the United States is poised to enter the debate over the standards of prudence and loyalty that an ERISA plan fiduciary must satisfy when a defined contribution plan offers participants a fund dedicated to company stock as one of the plan's investment options. This is a summary and overview of the issue and what's at stake for fiduciaries.

Source: Ajg.com , April 2014

Fiduciaries Evades Liability for Use of Float Income

Summary: The U.S. Court of Appeals in St. Louis has affirmed a trial court ruling that plan fiduciaries violated their duties under ERISA by failing to monitor excessive fees remitted to a recordkeeper that was paid through revenue sharing. In addition, the court absolved the recordkeeper of liability for its use of float income retained on plan investments.

Source: Wolterskluwerlb.com, April 2014

'Bipartisan Policy Center' Launches New Retirement Savings Initiative

Summary: As fewer Americans accumulate sufficient savings and the solvency of Social Security is threatened, how Americans adequately prepare for retirement has become a critical question. To address this long-term challenge, the Bipartisan Policy Center announced the launch of a new Personal Savings Initiative.

Source: 401khelpcenter.com, April 2014

President Obama's 2015 Budget Proposes Changes to Employer Benefits

Summary: President Obama's budget proposal for fiscal 2015 includes items from the State of the Union address, such as the new myRA retirement savings accounts and a minimum wage hike. The budget also includes proposals from earlier budgets, including limits on savings and benefits in tax-preferred retirement plans, a cap on tax preferences for employer-provided health and retirement benefits, and calls for higher Pension Benefit Guaranty Corporation premiums.

Source: Towerswatson.com, April 2014

When It's Time to Hire an ERISA Attorney

Summary: ERISA attorneys are an excellent resource and there are many reasons why a plan sponsor should hire one. This article will inform you on when it's the best time to call an ERISA attorney.

Source: Jdsupra.com, April 2014

Questions Remain After Decision in Float Income Case

Summary: A recent federal appeals court decision favoring Fidelity Investments, Boston, has produced more uncertainty than finality about the use of float income in record keepers' administration of defined contribution plans.

Source: Pionline.com, April 2014

ING Settles ERISA Class Action Lawsuit Over Revenue Sharing Practices

Summary: the parties in Healthcare Strategies v. ING Life Insurance and Annuity Co. filed a motion indicating they have settled their lawsuit and are now seeking approval of the district court. In total, ILIAC agreed to pay $14,950,000 in damages and agreed to significant changes to its business practices regarding fees and revenue sharing.

Source: Fraplantools.com, April 2014

Industry Group Defends Retirement Tax Incentives

Summary: The Coalition to Preserve Retirement sent an open letter to Representative David Camp, chairman of the House Ways and Means Committee, expressing the hope that as tax reform discussions continue, Congress will consider the success of the current retirement tax structure as it weighs comprehensive tax reform legislation, but also pushing back on certain tax reforms floated by the lawmaker.

Source: Plansponsor.com, April 2014

Attorneys Make Predictions on Fee Litigation, Questions of Constitutional Standing

Summary: Plan fee litigation, questions of constitutional standing and the fate of the pro-fiduciary presumption of prudence are the big issues currently driving fiduciary litigation under the Employee Retirement Income Security Act, practitioners said during a webcast.

Source: Bna.com, April 2014

Eighth Circuit Upholds Fiduciary Liability for Excessive Recordkeeping Fees but Not for Investment Mapping

Summary: This decision serves as a reminder that fiduciaries overseeing plans with revenue sharing arrangements must understand these arrangements and determine whether their service providers are receiving more than “reasonable” compensation for their services. Recordkeepers subject to the service provider disclosures are required to provide plan fiduciaries with a separate disclosure of recordkeeping costs. Plan fiduciaries will want to carefully review these disclosures.

Source: Ebia.com, April 2014

Battle Over Presumption of Prudence Heats Up Ahead of High Court Arguments

Summary: The question of whether a judge-made presumption of prudence should protect fiduciaries of employer stock plans from liability for declining stock prices will be front and center at the U.S. Supreme Court next week, with the court receiving nine amicus briefs in the months leading up to oral arguments.

Source: Bna.com, April 2014

Post-Windsor Guidance for Qualified Retirement Plans in Pipeline, Treasury Official Predicts

Summary: More guidance for qualified plans on same-sex marriage post-Windsor, is in the pipeline, a senior Treasury official told tax professionals at the 38th Annual Tax Law Conference of the Federal Bar Association in Washington, DC. Robert Neis, deputy benefits counsel, Office of Benefits Tax Counsel, Treasury Department, indicated that this guidance is expected to be issued shortly.

Source: Wolterskluwerlb.com, April 2014

Eighth Circuit Finds That Float Generated by 401k Plan Contributions Is Not a Plan Asset

Summary: The Court concluded that, since neither the float or float income was a Plan assets, Fidelity could not have breached its ERISA fiduciary duties based on the way it handled the float.

Source: Erisalawyerblog.com, March 2014

Court: Investment Representative Was Not ERISA Fiduciary

Summary: A registered investment advisor representative who recommended the investment of plan assets in a risky start-up venture that eventually failed was not subject to suit as a fiduciary under ERISA, according to U.S. Court of Appeals in New Orleans. The registered representative did not actually exercise discretionary authority with respect to the transaction at issue, the court stressed.

Source: Wolterskluwerlb.com, March 2014

Supreme Court Signals Interest in 401k Plan Fiduciary Case

Summary: The U.S. Supreme Court signaled its interest in deciding whether 401k plan fiduciaries can be in breach of their duties over investment choices. The justices asked lawyers for the Labor Department and Justice Department to weigh in on Glenn Tibble et al. vs. Edison International et al. That request, announced Monday, is considered a strong indicator that the high court will take the case.

Source: Investmentnews.com (free registration may be required), March 2014

Supreme Court Requests DOL Opinion in Tibble v. Edison Petition

Summary: The Supreme Court announced the results of their Friday conference where the plaintiffs' cert petition from the Tibble v. Edison International case was considered. In a surprise move, the Supreme Court has asked the Solicitor General of the United States, working in conjunction with the Secretary of the Department of Labor, to file a brief offering their view on the issues.

Source: Fraplantools.com, March 2014

Eighth Circuit Gives Plan Sponsors a Lot to Like in Tussey Decision

Summary: Despite the fact the Eighth Circuit upheld the $13.4 million judgment against the Plan fiduciaries for failure to control recordkeeping costs, many aspects of the Circuit Court's ruling are favorable for plan sponsors -- the appellate court recognized that the determinations of plan administrators are owed deference by courts, the $21.8 million judgment against the Plan fiduciaries was vacated, and the judgment against the Plan fiduciaries which was undisturbed was based on facts specific to the case.

Source: Benefitsnotes.com, March 2014

Eighth Circuit Issues Widely Anticipated Excessive Fee Decision in Tussey v. ABB

Summary: In Tussey v. ABB, Inc., the US Court of Appeals for the Eighth Circuit upheld, vacated and remanded, and reversed in part a decision from the District Court for the Western District of Missouri regarding breach of fiduciary duty claims for excessive recordkeeping fees and the imprudent selection of plan investment funds.

Source: Practicallaw.com, March 2014

Tussey v. ABB Affirmed, Reversed, and Vacated in Part by 8th Circuit

Summary: On March 19, 2014, the 8th Circuit Court of Appeals affirmed, reverse, and vacated the trial court's decision in Tussey v. ABB. The decision is effectively a mixed bag for plan sponsors, participants, and service providers. Here is a summary.

Source: Fraplantools.com, March 2014

Fifth Circuit: Investment Advisor Paid By a Third Party Is Not an ERISA Fiduciary

Summary: The U.S. Court of Appeals for the Fifth Circuit recently held that an investment advisor was not a fiduciary for purposes of ERISA because he did not receive any fees from the retirement plan for his advice regarding the investment at issue in the case, but received a commission from the third-party broker/dealer used to make the investment recommended by the advisor.

Source: Haynesboone.com, March 2014

Plan Sponsor Sued Over $6 Million Paid to Broker

Summary: Aa class action ERISA lawsuit, Kruger v. Novant Health, Inc., was filed in the Middle District of North Carolina by a group of current and former participants in two 401(k) plans sponsored by Novant Health, Inc., a major hospital system in the southeast. The plaintiffs allege that the plans' fiduciaries violated ERISA by (1) allowing excessive fees to be paid to the plans' broker, D.L. Davis & Company, Inc., (2) allowing excessive fees to be paid to the plans' recordkeeper Great West, and (3) including more expensive share classes for all of the plans' mutual funds.

Source: Fraplantools.com, March 2014

Eleventh Circuit Joins Fourth Circuit in Rejecting Continuing Breach Approach to ERISA's Statute of Limitation

Summary: As the Fourth Circuit Court of Appeals was careful to do in Alphin, the Fuller Court declared that it was declining to decide "whether a fiduciary had an ongoing duty to remove imprudent investment options from a Plan in the absence of a material change in circumstances." Rather, it described its ruling as limited to the prevention of a "continuing violation theory," which could thwart the purpose of ERISA's six-year statute of repose.

Source: Southeastern ERISA Watch, March 2014

Obama Budget Includes MyRAs, Auto IRAs, Would Limit Retirement Savings Tax Breaks

Summary: President Barack Obama's proposed $3.9 trillion fiscal year 2015 budget includes requirements that employers offer individual retirement accounts and provisions that would reduce tax benefits on certain retirement accounts for high-income earners. The tax provisions, part of the budget plan released March 4, would cap how much Americans could accumulate in tax-preferred retirement savings, putting a ceiling of about $200,000 on the annual retirement income that could be generated by such savings.

Source: Bna.com, March 2014

Fiduciary Breach Claims Barred by ERISA's Six-Year Statute of Limitations

Summary: The Eleventh Circuit recently dismissed a participant's fiduciary breach claims against SunTrust's 401k plan fiduciary committee members on the ground that the claims for imprudently selecting certain investment options was time barred by ERISA's six-year statute of limitations.

Source: Erisapracticecenter.com, March 2014

Senator Harkin's USA Retirement Funds Proposal

Summary: On January 30, 2014 Senator Harkin (D-IA) introduced the USA Retirement Funds Act. The bill includes Senator Harkin's USA Retirement Funds proposal and a variety of other proposals. This article focuses on two of the major parts of the Act: the USA Retirement Funds proposal itself and provisions on hybrid plans. It also summarize briefly other provisions of the Act.

Source: Octoberthree.com, March 2014

Morgan Stanley Dodges a Bullet: ERISA Lawsuit Dismissed

Summary: A proposed ERISA class action lawsuit filed against Morgan Stanley was dismissed in the Southern District of New York. Morgan Stanley, the broker to the Skin Pathology Associates, Inc. 401k Profit Sharing Plan, was alleged to have received unreasonable compensation because of a "pay to play" or "kickback" scheme involving the plan's recordkeeper. The court, citing the new ERISA 408(b)(2) regulations, found that although a claim could be brought against a non-fiduciary broker like Morgan Stanley, here the additional compensation had been disclosed to the plaintiffs. Thus, as a consequence, no claim could be brought against Morgan Stanley as a party in interest.

Source: Fraplantools.com, February 2014

 


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