Court and Legislative Actions
A directory and index of articles that review what is happening in the courts and U.S. legislature.
Summary: The United States Court of Appeals for the Second Circuit vacated a Connecticut federal district court order certifying a class of 401k plan trustees in the long-running Haddock v. Nationwide Life Ins. Co. lawsuit filed against retirement plan service provider, Nationwide, in 2001. The suit alleges violations of Nationwide's purported fiduciary obligations under ERISA.
Source: Jorden Burt LLP 
, February 2012.
Summary: A resolution supporting current tax incentives for 401k plans was signed Thursday by more than 100 members of the House, before federal budget negotiations for fiscal year 2013 begin in earnest.
Source: Pensions & Investments, February 2012.
Summary: As HR/benefits outsourcing becomes a larger part of an employer’s overall business strategy, it is no longer the primary job of the industry professionals working with the employer to put out small fires. Rather, practitioners are blazing trails toward workforce and organizational development.
Source: Employee Benefit News, February 2012.
Summary: A federal appellate court has found income that becomes available to bankrupt debtors after their 401k loans are fully repaid is "projected disposable income" that must be turned over to the trustee for distribution to unsecured creditors.
Source: Plansponsor.com, February 2012.
Summary: This month, we discuss the Fourth Circuit's decision in Plasterers' Local Union No. 96 Pension Plan v. Pepper, 663 F.3d 210 (4th Cir. 2011), wherein the court held that ERISA's duties of prudence and diversification require more than a showing of a failure to investigate or diversify to equate to causation of loss and therefore liability. As discussed below, the court's opinion is significant for several reasons, including its teachings on the importance of procedural prudence. It also is consistent with the Supreme Court's recent ruling in Cigna Corp. v. Amara, 131 S. Ct. 1866 (2011), in that both cases require proof of actual harm and causation to justify findings of fiduciary breach and remedy.
Source: Proskauer Rose LLP, February 2012.
Summary: The Fourth Circuit's LaRue decision went largely unnoticed until the Supreme Court decided to take the case, and the ensuing opinion has had a significant impact on the development of ERISA law. Could the next Supreme Court ERISA decision be brewing in the Fourth Circuit?
Source: Seyfarth Shaw, January 2012.
Summary: A federal appellate court has found that a profit-sharing plan must pay back more than $1 million in assets wrongly transferred from a participant’s account, even thought it has not recovered the misplaced funds.
Source: Planadviser.com, January 2012.
Summary: A look back at the most significant ERISA litigation decisions of the past year and what they portend for 2012. The article addresses the implications of two major Supreme Court decisions, Cigna Corp. v. Amara and Walmart Stores, Inc. v. Dukes, and developments in 401k plan excessive fee and employer stock drop cases.
Source: Proskauer Rose LLP, January 2012.
Summary: Fiduciaries would have to remove retail funds from a 401k plan's investment lineup, under a proposed settlement of the Braden v. Wal-Mart excessive fee litigation. As preliminarily approved Dec. 5 by a federal court in Missouri, the settlement also calls for a $13.5 million cash payment to defray legal fees and plan expenses. This lawsuit contrasts with other recent appellate cases where fiduciaries prevailed on excessive fee claims involving retail funds.
Source: Mercer, December 2011.
Summary: Reviews the following: Third circuit finds "inequitable" the enforceability of a clear ERISA welfare plan reimbursement provision that deprived a participant of a full recovery; District court dismisses ERISA § 502(a)(2) claim based on plaintiffs' failure to make pre-suit demand - and DOL takes notice; and, Application of ERISA section 510 to internal workplace complaints: a review of circuit court decisions.
Source: Proskauer Rose LLP, December 2011.
Summary: To amend the Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 to reduce administrative burdens and encourage retirement plan formation and retention.
Source: American Benefits Council , December 2011.
Summary: Wal-Mart and Merrill Lynch have agreed to pay a total of $13.5 million to settle a long-running class-action lawsuit alleging the world's largest private employer and its retirement plan administrator breached their fiduciary duty toward nearly 2 million past and present Walmart workers in the company's 401k plan.
Source: Forbes, December 2011.
Summary: A recent federal appellate court ruling held that a pension plan administrator could not recover benefits distributed to alternate payees under QDROs, despite evidence that the underlying divorces were orchestrated by participants and their spouses solely to enable them to receive lump-sum, in-service distributions not otherwise permitted under the plan.
Source: Benefit Consultants Group, December 2011.
Summary: The recently decided Fifth Circuit decision, Brown v. Continental Airlines, Inc., demonstrates how nine airline pilots and their spouses creatively used qualified domestic relations orders (QDROs) and state domestic relations law to circumvent the early distribution rules in their retirement plan.
Source: Fox Rothschild LLP, November 2011.
Summary: Companies that sponsor 401k, ESOPs and other forms of eligible individual account plans ("EIAPs") that hold company stock often are subjected to class action lawsuits under ERISA when there is a substantial decline in the stock price. One of the key bases for dismissal of these cases at the pre-trial stage is the so-called "Moench" presumption of prudence.
Source: Groom Law Group, November 2011.
Summary: Given the Second Circuit's embrace of the presumption of prudence standard, it is incumbent on all 401k plan fiduciaries to again review their 401k plan's company stock investment language. Properly drafted company stock language may help ensure the presumption of prudence is applied in the event the price of company stock rapidly declines.
Source: Winston & Strawn LLP , October 2011.
Summary: If you are like most 401k or pension plan administrators, you have procedures for participants to request plan documents and forms. They may be as simple as requiring document requests to be sent in writing to a designated employee. Section 104(b)(4) of ERISA requires that certain plan documents, including summary plan descriptions and 5500's, be provided to participants upon request. Failing to comply could result in a $110 per day penalty if a participant does not receive a requested document within 30 days and the plan administrator has no reasonable cause for the delay. But a recent case indicates that your exposure could be even broader.
Source: Pensions & Benefits Law, October 2011.
Summary: Over the past several years, more than two dozen lawsuits have been filed relating to 401k plan fees and, more specifically, "revenue sharing" arrangements with plan service providers. The focus of these lawsuits against the plan sponsors has evolved over time to include broader challenges to, among other things, the plan sponsors' selection of actively managed mutual funds as plan investment options.
Source: Groom Law Group, October 2011.
Summary: The U.S. Supreme Court ruling in Cigna Corp v. Amara (No. 09-804, May 16, 2011) could have a major impact on employers who sponsor qualified retirement plans subject to ERISA.
Source: Kravitz , October 2011.
Summary: Administrators of a 401k plan did not breach fiduciary duties under ERISA by including retail mutual funds among the plan's investment options or requiring participants to pay fund expenses, the U.S. Court of Appeals in Chicago has ruled.
Source: CCH, October 2011.
Summary: U.S. Senator Johnny Isakson (R-Georgia) and U.S. Representative Tom Graves (R-Georgia) last week introduced the HOME Act, a bill to allow Americans to make withdrawals from their retirement accounts to pay timely mortgage payments.
Source: Plansponsor.com, October 2011.
Summary: The U.S. Court of Appeals for the Seventh Circuit has issued another important decision in favor of plans and plan administrators in a case involving allegations of excessive fees and expenses. In Loomis, et al. v. Exelon Corporation, Judge Easterbrook, writing for the three-judge panel, affirmed the district court's dismissal of all claims. The case represents a defeat for plaintiffs alleging that retirement plans paid excessive fees to investment advisors and otherwise failed to uphold the fiduciary duties imposed under ERISA.
Source: Williams Mullen, October 2011.
Summary: In March 2010, the Supreme Court in Jones v. Harris Associates L.P. clarified the standard for determining whether a mutual fund investment adviser has breached its fiduciary duty under the 1940 Act in connection with its receipt of fees from the funds that it manages. The attached article examines whether the Supreme Court’s ruling in Jones could be instructive to courts in deciding the 401k fee lawsuits that have been brought under ERISA.
Source: Groom Law Group , September 2011.
Summary: A pair of US Senators have introduced legislation they claim will “dramatically increase retirement savings."
Source: Plansponsor.com, September 2011.
Summary: The U.S. District Court for Northern District of California denied the motion to dismiss two employees' claims that their employer violated the Employee Retirement Income Security Act (ERISA) by failing to keep a record of the hours they worked.
Source: Plansponsor.com, September 2011.
Summary: The U.S. District Court for the District of Rhode Island has given a mixed ruling to participants alleging breaches of Employee Retirement Income Security Act (ERISA) fiduciary duties in relation to company stock investments in Textron Inc.'s retirement plan.
Source: Plansponsor.com, September 2011.
Summary: It is hard to resist concluding from the court's analysis that increasing the number of investment options tends to reduce selection liability risk. The court's repeated references to the “mix and range” of options, however, indicate that volume alone may not be enough. Plan fiduciaries and their advisors—even in plans with similar amounts of investment choice—may still want to consider fee issues as a high priority when they perform periodic reviews of the profile and soundness of their plans' investment options.
Source: Thomson Reuters/EBIA, September 2011.
Summary: In a move that might open the door to more lawsuits, the U.S. Supreme Court decided on May 16 in CIGNA Corp. et al. v. Amara et al. that a summary plan description is not the plan document and therefore not legally binding. This article provides a summary of the case and highlights some key issues the courts raised.
Source: ERISAdiagnostics.com , July 2011.
Summary: In a "good news, bad news" opinion for plan sponsors, the U.S. Supreme Court, in CIGNA v. Amara, has addressed participants’ ability under the Employee Retirement Income Security Act (ERISA) to sue employers for allegedly incomplete, inaccurate and misleading communications.
Source: Towers Watson, June 2011.
Summary: The Sixth Circuit recently affirmed the decision of a trial court. The case appears to serve as a cautionary tale for participants to choose and monitor their investment advisors more carefully given the protections that the 404(c) safe harbor provides for plan fiduciaries. A closer look at the trial court's decision sheds light on this as the trial court specifically notes that while a plan fiduciary cannot conceal material nonpublic facts from plan participants, ERISA does not require a fiduciary to guarantee that all material facts are shared with participants.
Source: Fi360.com, June 2011.
Summary: The litigation was brought by participants of a 401k plan against the plan’s sponsor and various individuals affiliated with the plan sponsor, as well as the relevant corporate committee that was responsible for overseeing the plan. After earlier having certified the case as a class action, the district court thereafter ended the case in its entirety by granting summary judgment to all defendants. An appeal followed. A panel of the Seventh Circuit reversed the decision, in part, thereby setting the case on track for trial, unless further appeals are allowed or the case is resolved by the parties.
Source: Goodwin Procter LLP, June 2011.
Summary: Leads with an article addressing the Supreme Court's decision in CIGNA Corp. v. Amara. The opinion provides useful guidance with respect to the content of plan documents, but the eventual impact of this decision on the scope of available ERISA equitable remedies remains uncertain. Also has article on a recent Seventh Circuit decision, Peabody v. Davis, that exposes potential risks for the fiduciaries of eligible individual account plans.
Source: Proskauer Rose LLP, June 2011.
Summary: A Senate bill with bi-partisan support was recently introduced to minimize the leakage from 401(k) plans occurring as a result of plan loans and hardship withdrawals.
Source: Benefitslink.com, June 2011.
Summary: A retired Pennsylvania nurse was very upset that her former employer had never kept track of the extra, unpaid hours during which she had worked. She believed they should have been included in hours worked for the purposes of her retirement benefits. So she sued her former employer in federal court for ERISA violations and in state court for violations of two state wage laws.
Source: Compensation.blr.com, June 2011.
Summary: On May 16, 2011, the U.S. Supreme Court issued an important decision in CIGNA Corp. v. Amara, holding: (a) that a summary plan description (SPD) is not a "plan" document under the Employee Retirement Income Security Act (ERISA); (b) that participants and beneficiaries may not sue under section 502(A)(1)(B) of ERISA to recover for a deficient SPD; and (c) that "appropriate equitable relief" under section 502(a)(3) of ERISA may be available to plan participants who are harmed by alleged misrepresentations made about upcoming changes to their pension plan benefits.
Source: Littler Mendelson PC, May 2011.
Summary: The U.S. Supreme Court this week issued a decision that closes the door on benefit claims based on the language of summary plan descriptions (SPDs), but opens up the possibility of a much less restrictive judicial approach to the type of equitable relief available under ERISA Section 502(a)(3).
Source: Ballard Spahr LLP, May 2011.
Summary: The Supreme Court on May 16, 2011, issued a major ERISA remedies decision in CIGNA Corp. v. Amara holding that ERISA's authorization of suits by pension plan participants "to recover benefits due" or to "enforce [their] rights" under the terms of the plan is not authority for courts to enforce the terms of a summary plan description or to revise the plan to conform it to representations made in the SPD. More importantly, however, the Court appeared to use the case to signal that it has rethought the scope of "other appropriate equitable relief" available under ERISA's catch-all remedial provision.
Source: Trucker Huss, May 2011.
Summary: Bill is designed to help stop "leakage" in the retirement system. Among other things, bill would allow for a greater period of time for a plan loan to be paid back after an employee terminates employment thereby helping families pay back the loan and allowing the funds to be put back into their retirement savings and avoid the tax penalty.
Source: 401khelpcenter.com, May 2011.
Summary: On May 16, 2011, the Supreme Court clarified how much harm a participant must demonstrate in order to win damages on a lawsuit involving a Summary Plan Description (SPD) that conflicts with the terms of its underlying plan document. The Supreme Court explained that the requisite level of harm for a particular case will be dependent upon the applicable equitable theory of relief.
Source: Employee Benefit News, May 2011.
Summary: A federal appeals court has ruled that UMB Bank is not responsible for losses to retirement plan accounts from investments directed by participants’ investment adviser.
Source: Plansponsor.com, May 2011.
Summary: In this newsletter two articles highlight the unique limitations contained in ERISA's civil enforcement mechanism. First, article discusses the evolution of case law addressing the ability of ERISA plans to recover mistaken payments from participants pursuant to a plan's reimbursement or offset provisions, or in circumstances involving errors or participant wrongdoing. A second article examines the viability of a different category of claims under 502(a)(3) – those seeking monetary relief where a participant claims to have incurred expenses due to mistaken advice from plan representatives.
Source: Proskauer Rose LLP, May 2011.
Summary: In the UBS case the Court found that one of the UBS plans expressly provided that the employer stock fund would be included in the fund line up. The other UBS plan did not include explicit language mandating the inclusion of the fund, but references to the stock fund appear throughout the document and effectively presupposed that the fiduciaries would make the fund available to participants. These provisions were sufficient, in the Court's view, to warrant applying the Moench presumption because the fiduciaries lacked the effective ability to remove the funds as a matter of discretion. Put another way, at least in the case of one UBS plan, a plan amendment would be necessary to remove the fund.
Source: Verrill Dana LLP, April 2011.
Summary: In Peabody v. Davis, a trial court granted judgment in favor of a former employee of a closely?held securities trading firm on his claims that the firm's owners breached ERISA's standard of prudent care by not disposing of company stock held through the firm's ERISA?covered savings plan before the firm collapsed. Earlier this month, the United States Court of Appeals for the Seventh Circuit affirmed the trial court's judgment on that point. In doing so, however, the Court of Appeals emphasized both the narrowness of its ruling as well as the unique circumstances involving Peabody's former employer and their plan.
Source: Groom Law Group , April 2011.
Summary: The U.S. Seventh Circuit Court of Appeals issued its opinion in George v. Kraft Foods Global Inc. earlier this week impacting fiduciaries to defined contribution retirement plans such as 401k plans and other defined contribution plans. Each of the issues is summarized in this article along with what the court decided.
Source: Pensions & Benefits Blog, April 2011.
Summary: In a 2-1 split, the 7th Circuit voted to revive a class action by Kraft employees alleging that mismanagement of the company's 401k plan caused them to miss out on $83.7 million in investment gains between 2000 and 2007.
Source: Courthousenews.com, April 2011.
Summary: Highlights the Renfro v. Unisys class action pending before the Third Circuit. The Renfro plaintiffs challenged the reasonableness of retail mutual funds as 401k plan investment options, as well as the applicability of the Section 404(c) defense to fiduciary breach claims. A second article examines the viability of "hybrid" lawsuits in which plaintiffs seek relief for alleged violations of the Fair Labor Standards Act, while also asserting that the alleged compensation errors deprived them of the full value of ERISA plan benefits, thus giving rise to an ERISA claim for breach of fiduciary duty.
Source: Proskauer Rose LLP, April 2011.
Summary: A retiree has sued SunTrust Banks, alleging that it favored investment plans operated by SunTrust or its subsidiaries that performed poorly and charged higher fees than plans offered by independent investment companies.
Source: Planadviser.com, March 2011.
Summary: A U.S. District Court judge has granted final approval of an $18.5-million settlement in an excessive 401k fee suit. The agreement ends proceedings in Kanawai v. Bechtel Corp. in which two former Bechtel employees alleged the company violated its ERISA fiduciary responsibilities by not using its size to get lower fees from vendors.
Source: Plansponsor.com, March 2011.
Summary: Healthcare Strategies Inc., a retirement plan administrator, has filed a class action against ING Life Insurance and Annuity Co., charging that the insurer received kickbacks from the mutual funds it offered to its 401k plan clients.
Source: Investmentnews.com, February 2011.
Summary: On January 21, 2011, the 7th Circuit Court of Appeals handed down two ERISA opinions, both by Judge Diane Wood, covering four cases and dealing with three significant issues. This review discusses these issues individually. Each is of considerable importance to plans that allow participants to direct the investment of their accounts, particularly when the possible choices include investment in employer stock.
Source: Steptoe & Johnson LLP, February 2011.
Summary: The ERISA Industry Committee (ERIC) on February 15 filed with the U.S. Court of Appeals for the Eleventh Circuit an amicus curiae ("friend of the court") brief, urging the Court to affirm a lower court's dismissal of an employer "stock-drop" lawsuit. The case is Sewright v. ING Groep, NV, et al.
Source: ERISA Industry Committee, February 2011.
Summary: A federal judge in Texas has given final approval to a $2.4-million settlement of a class-action suit alleging RadioShack used Putnam mutual funds in its 401k plan even though they were overpriced and underperforming.
Source: Plansponsor.com, February 2011.
Summary: This is the text of the proposed Lifetime Income Disclosure Act (S. 267) that would amend ERISA to require a lifetime income disclosure.
Source: SPARK Institute , February 2011.
Summary: Improving retirement security for 401k plan participants was the major focus of a Senate HELP committee hearing Feb. 3. Witnesses suggested ways to enhance access to investment advice and annuity-like payout options. Committee member Jeff Bingaman, D-NM, said he and others will push legislation (S 267) requiring benefit statements to show the monthly income participants can expect if their total account balance is used to provide a lifetime income stream.
Source: Mercer, February 2011.
Summary: This article will recap some of the retirement-related legislative changes that went into effect in 2010, then review a number of items that shared the spotlight in 2010 and the prospects for further developments in 2011.
Source: Center for Due Diligence , February 2011.
Summary: The Seventh Circuit Court of Appeals issued two important decisions for all employers who offer defined contribution retirement plans (commonly known as 401k plans). These two decisions, which arise from four cases, severely undermine plaintiffs’ ability to challenge fiduciary decisions related to 401k plans on a class-wide basis.
Source: Seyfarth Shaw LLP, February 2011.
Summary: On January 21, 2010, a panel of the United States Court of Appeals for the Seventh Circuit issued two important decisions, one in the current wave of 401k fee cases, and another in the long-standing genre of retirement plan stock drop cases. Each decision will likely impact future jurisprudence in these areas.
Source: Goodwin Procter LLP, February 2011.
Summary: The Court concluded that participants in 401k plans do not necessarily share common interests and, in fact, their interests may conflict depending on, among other things, the investment options in which they invested and the timing of those investments.
Source: Groom Law Group , February 2011.
Summary: The Court also held that ERISA § 404(c) precluded plaintiffs from proceeding with claims that (a) the plan fiduciaries did not disclose sufficient information to participants regarding Motorola’s financial condition; and (b) those who appointed the plan fiduciaries did not sufficiently monitor their appointees. But the Court adopted the position long taken by the DOL that § 404(c) does not apply to claims based on the plan fiduciaries’ selection of imprudent investment options.
Source: Groom Law Group , February 2011.
Summary: The pact okayed by Judge of the U.S. District Court for the Eastern District of Pennsylvania not only includes a cash settlement to be paid out to about 36,000 Comcast workers involved in the suit, but calls for the company to make changes in its 401k program.
Source: Plansponsor.com, January 2011.
Summary: The 7th U.S. Circuit Court of Appeals has ruled that it can be appropriate for a class of defined contribution plan participants to sue for relief under the Employee Retirement Income Security Act.
Source: Plansponsor.com, January 2011.
Summary: Much commentary has been generated about Tibble v. Edison International, the first 401k excessive investment fee case to go to trial that resulted in a judgment. The case brings some interesting issues to light.
Source: Morningstar Advisor Magazine, January 2011.
Summary: Employee stock ownership plans, 401ks, and other types of eligible individual account plans are often an effective way to build employee loyalty, especially when the plans invest in the employer's own stock. A potential downfall has always been the possibility of employees bringing a class action lawsuit if the stock drops in value. Even if an employer ultimately wins the case, it could incur major costs defending itself in court. Good news: the 9th Circuit Court of Appeals has stepped in and made it much harder for employees to get these cases to trial.
Source: Business & Legal Resources, January 2011.
Summary: The law firm of Stull, Stull & Brody announced that it has commenced an investigation relating to the 401k defined contribution retirement plan of Wilmington Trust Corporation. Looks like the New Year is going to kick off on a litigious note.
Source: Plansponsor.com, January 2011.
Summary: Lehman Brothers' 401k retirement plan and its participants sued ex-Chief Executive Officer Richard Fuld and other former executives of the defunct firm for failing to disclose Repo 105, a financing method allegedly used to conceal billions of dollars of debt.
Source: Advisorone.com, January 2011.
Summary: A federal judge in Pennsylvania has cleared the way for a 401k participant to pursue his claim that plan trustees violated their fiduciary duties.
Source: Planadviser.com, January 2011.
Summary: A lawyer accused of financial wrongdoing should receive a 401k distribution of his plan savings from his old law firm, but not the employer's contributions, a federal judge in California has ruled.
Source: Plansponsor.com, January 2011.
Summary: A 401k participant claimed Morgan Stanley caused significant losses to his account after his request to move money out of the stock market was not acted upon.
Source: Planadviser.com, January 2011.
Summary: The U.S. Department of Labor recently argued that a three-judge panel of the Ninth Circuit got it wrong when it adopted the "Moench presumption" for assessing whether fiduciaries invested imprudently in employer stock in Quan v. Computer Sciences Corp.
Source: Ballard Spahr LLP, November 2010.
Summary: Under the settlement, the parties will implement certain practices designed to maximize the returns plan participants receive from their 401k Plan investments by continuing to keep the costs of those investments low, including the use of an outside consultant to review certain aspects of the 401k Plans and report to General Dynamics and an independent fiduciary, and enhanced disclosures to participants regarding fees and expense associated with their investments.
Source: 401khelpcenter.com, November 2010.
