In a recent 2-1 decision, the Fifth Court vacated the US Department of Labor’s controversial expansion of the ERISA fiduciary regulations (the New Fiduciary Rule). If the DOL does not seek a rehearing, the Fifth Circuit will enter a mandate revoking the New Fiduciary Rule nationwide. However, given recent fiduciary regulations proposed by the Securities and Exchange Commission, the DOL may be less likely to appeal the ruling and no longer seek to enforce the New Fiduciary Rule.
J. Christian (Chris) Nemeth provides legal counsel on complex commercial litigation and government investigations, including ERISA matters, financial and banking cases, business torts and breach of contract actions. Chris is the Co-Chair of the Firm’s ERISA Litigation group and works closely with the Firm’s Employee Benefits department on all types of Litigation matters, Department of Labor investigations and similar issues. Read J. Christian Nemeth's full bio.
Join us for a webinar on Friday, May 4 as McDermott litigation attorney Chris Nemeth joins employee benefit attorney Judith Wethall to discuss what’s new in employee benefits litigation. Chris will give you a peek into a world you hope never to go! Learn about disturbing trends, traps and how to prevent your employee benefit plans from being targeted.
Friday, May 4, 2018
10:00 – 10:45 am PDT
11:00 – 11:45 am MDT
12:00 – 12:45 pm CDT
1:00 – 1:45 pm EDT
A lawsuit against Vanderbilt University is moving forward based on allegations that the university and its fiduciaries mismanaged its retirement plan by paying excessive fees and maintaining poor investment options.
In that lawsuit, Cassell v. Vanderbilt et al., plaintiffs filed a 160-page complaint alleging multiple violations of ERISA. Cassell v. Vanderbilt, No. 3:16-cv-02086 (M.D. Tenn. Jan. 5, 2018). Cassell is one of numerous class action lawsuits that have been filed against prominent universities based on similar allegations. The lawsuits allege that Internal Revenue Code Section 403(b) plan fiduciaries breached duties of prudence and loyalty, and engaged in prohibited transactions. Vanderbilt University, like other schools, filed a motion to dismiss the claims. The court granted part of its motion, but allowed the rest of the lawsuit to proceed.
The US Department of Labor has taken the position that certain indemnification clauses are void against public policy under Section 410 of ERISA. This policy has been adopted by private plaintiff classes; as evident from a recent settlement, a policy that voids indemnity provisions can limit defense budgets, make settlements more likely and potentially create dangerous precedent for ESOPs.
The ESOP industry is paying close attention to a Tenth Circuit appeal that will address the deferral of corporate deductions for certain accrued expenses payable to ESOP-participating employees. This appeal, which pertains to an underlying tax court opinion, Petersen v. Commissioner of Internal Revenue (decided June 13, 2017), is critically important to certain ESOP-owned S corporations for tax planning and other purposes.
Internal Revenue Code (IRC) Section 267(a)(2) defers deductions for expenses paid by a taxpayer to a “related person” until the payments are includible in the related person’s gross income. IRC Section 267(c) sets out constructive ownership rules for purposes of determining if certain persons are “related persons.” Section 267(c) provides that stock owned, directly or indirectly, by a trust shall be considered as being owned proportionately by its shareholders. In Peterson v. Commissioner, the US Tax Court addressed whether an ESOP trust is a “trust” for purposes of IRC Section 267(c).
Joe Urwitz, Todd Solomon and Chris Nemeth discuss provisions of The Employee Retirement Income Security Act of 1974 (ERISA) of particular relevance to tax-exempt entities and their investment managers, as well as ongoing litigation against Section 403(b) plans.
Through a series of recent settlements, the US Department of Labor has outlined the process steps fiduciaries should follow in connection with a transaction involving a purchase from, or sale to, an employee stock ownership plan.