Imagine if you were playing on a baseball team and the opposing players argue that you are violating the rules of soccer. That’s what it’s like when private parties and the Department of Labor (DOL) challenge Employee Stock Ownership Plan (ESOP) valuations. Plaintiffs play a very different valuation ballgame, which confounds experts who go up against them in a dispute involving allegations that an ESOP paid more than “fair market value” for stock of the sponsor company. In a recent webinar, McDermott attorney Richard Pearl discussed valuation concepts and some fundamental issues under the Employee Retirement Income Security Act. Read more.
Earlier this year, the US Pension Benefit Guaranty Corporation (PBGC) issued a final rule, modifying PBGC regulations that apply to defined benefit pension plans. Among those changes were revisions to: (i) the reportable event notification requirements; (ii) annual financial and actuarial information (Form 4010) reporting; (iii) single-employer plan termination rules; and (iv) the premium rate calculation rules. The rule was generally effective on March 5, 2020, but some provisions have different applicability dates. Access the article.
The most obvious potential conflict of interest for advisers setting up or serving pooled employer plans is if their practice is affiliated with the investments being selected—but there are other potential pitfalls to acknowledge. In a recent article, Erin Turley, a partner with McDermott Will & Emery, said a potential conflict of interest for advisers to PEPs would be if they were acting as either a 3(21) or 3(38) fiduciary to help select investments and were paid from plan assets. Access the article.
The Employee Retirement Income Security Act of 1974 (ERISA) requires plan fiduciaries to act prudently and loyally when making decisions about the plan. In Martin v. CareerBuilder, LLC, a federal district court held that the complaint’s allegations about expensive recordkeeping costs and imprudent investment options failed to give rise to an inference that the defendants violated their ERISA obligations. Access the article.
In recognition of the difficulties faced by retirement plan sponsors, participants and beneficiaries due to the COVID-19 pandemic, new guidance extends the deadlines for notices and disclosures required by Title I of ERISA and extends deadlines for retirement plan participants and beneficiaries to submit benefit claims and benefit appeals. The new guidance also provides some welcome fiduciary relief for electronic disclosures, incomplete plan loan or distribution documentation, as well as delayed participant contributions and loan repayments. Access the full article.
The US Supreme Court handed workers a big win by preserving a six-year deadline to file ERISA class actions as the standard, but employers have already seized on language in Justice Samuel Alito's opinion as a road map for how to impose a shorter deadline. Justice Alito ended the unanimous opinion—which affirmed the Ninth Circuit's ruling that ERISA grants workers six years to sue except under special circumstances—by listing several tactics employers can use to invoke a three-year statute of limitations. McDermott’s Richard Pearl contributes to a Law360 article discussing the decision, including how employers should respond. Access the full article. Originally published on Law360, February 2020 See Richard Pearl's January 2019 On the Subject on this case: Ninth Circuit Clarifies 'Actual Knowledge' for ERISA’s Statute of Limitations
One of the big questions for the employee ownership field is, why has the number of US employee-owned firms failed to grow significantly over the last couple of decades? An upcoming paper from Fifty by Fifty proposes that the barrier to growth is a lack of agency. Employees don’t have the knowledge, skills or capital to pursue a buyout of their employer; and employers, knowing little about the benefits of selling to employees, are more likely to respond to an opportunity that knocks on their door, such as an offer from a private equity firm or a strategic buyer. McDermott’s Ted Becker and Erin Turley share their thoughts on the guidelines in a recent article published on Medium. Access the full article. Originally published on Fifty by Fifty, January 29, 2020
In a relatively slow year for benefits rulings, multimillion-dollar settlements were the star of the show. And amid the slew of settlements this year, two court rulings stood out. McDermott’s Richard J. Pearl contributes to a Law360 article that breaks down the Ninth Circuit ruling allowing benefit plan managers to force fiduciary-breach suits into solo arbitration and the Tenth Circuit holding that insurers who determine workers’ profits from 401(k) investments aren’t fiduciaries. Access the full article. Originally published by Law360, December 2019
The Ninth Circuit signaled that it might rehear Dorman v. The Charles Schwab Corp., where earlier this year it held that a mandatory arbitration provision required arbitration of an ERISA fiduciary-breach claim. Access the full article.
A US Supreme Court case pitting pensioners against US Bank could have a wide-ranging impact on who can bring suit under ERISA, whether they participate in a defined benefit pension plan or a 401(k) plan. Recently, on Law360, McDermott’s Richard J. Pearl weighed in on the impact of Thole v. US Bank, one of three ERISA cases that the US Supreme Court will decide this term. The case, discussed in greater detail in our On the Subject, will address whether defined benefit pension plan participants have standing to bring suit under ERISA if their plan is fully funded. Although the case focuses on participants’ ability to bring suit on behalf of defined benefit pension plans, according to Pearl, the case seems to ask the high court to answer a question that often crops up in defined contribution plan litigation, as well: Whose injury matters, the plan’s or the person’s? As a result, the court’s decision could impact not only litigation involving defined benefit...