Emily Rickard presented “ESOP Fiduciary Responsibility for Value Determination” at the National Center for Employee Ownership National Conference addressing the fiduciary duties involved in the selection of an ESOP appraiser and the review of a valuation report.

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A federal judge in the Northern District of Illinois recently dismissed a lawsuit against Northwestern University alleging that the University and its fiduciaries mismanaged its retirement and voluntary savings plans. This is the latest decision in a series of class action lawsuits against prominent universities in which plaintiffs allege fiduciary violations of the Employee Retirement Income Security Act of 1974, as amended (ERISA) for retirement plans governed by Internal Revenue Code Section 403(b). Northwestern is the second university to obtain a complete victory on a motion to dismiss in a 403(b) university case; the first university to do so was the University of Pennsylvania in Sweda v. University of Pennsylvania.

In Divane v. Northwestern University et al., No. 16 C 8157 (N.D. Ill. May 25, 2018), plaintiffs alleged that Northwestern University and its fiduciaries breached fiduciary duties, engaged in prohibited transactions under ERISA and failed to monitor other fiduciaries. Specifically, fiduciaries allegedly mandated the inclusion of particular stock accounts in the plans, imposing excessive record-keeping fees, improperly allowed payment for record-keeping expenses through revenue sharing, and included too many investment options. The Court rejected all of plaintiffs’ fiduciary duty claims.

The Court also rejected plaintiffs’ claims that defendants engaged in prohibited transactions. Namely, the Court held that there was no transfer of plan assets that would substantiate a prohibited transaction claim under ERISA Section 1106(a)(1)(D) and similarly rejected plaintiffs’ Section 1106(a)(1)(C) argument that fiduciaries engaged in transactions that resulted in “furnishing of goods, services, or facilities between the plan and a party in interest” as a “circular “argument.

The Court denied plaintiffs’ motion for leave to amend, amounting in a complete victory for Northwestern.

The Department of Labor’s fiduciary rule has recently been rendered unenforceable following a recent 5th Circuit Court of Appeals decision. In an article published by the Society for Human Resource Management, McDermott partner Brian Tiemann weighs in on what this means for plan sponsors. “As a result of the Fifth Circuit’s ruling, the suitability standard is effectively restored” for advising plan participants on investments, distributions and rollovers, Tiemann observed. He also points out that advisors may want to revise service agreements with plan fiduciaries to clarify the scope of advice that fiduciaries will provide participants.

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Originally published by the Society for Human Resource Management, May 2018.

ESOP transactions continue to grow in sophistication as sellers, plan sponsors and fiduciaries seek to meet certain goals and regulatory requirements. Allison Wilkerson, and other panelists for this presentation, reviewed a number of advanced transaction structures that are being utilized more and more to address specific needs identified by one or more of the parties involved in the arrangement. Such structures include the use of warrants in a financing structure, implementation of clawback and/or earn out requirements, use of incentive plans for successive management, and provisions that may be impactful with respect to future transaction or planning.

This presentation provides information to those companies/sellers/ESOP fiduciaries who are pursuing an ESOP transaction with alternatives that may provide an opportunity to better address the goals and objectives of the shareholders, ESOP, Company, employees and other stakeholders.

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Last month, Alexander Lee and Maureen O’Brien joined with Rob Wellner from Velocity Global to discuss the tax and employee benefits complications that arise in cross-border transactions. Key points discussed:

  • Complex tax structures must be considered and understood
  • Transfers of employment may be governed by different statutes in each affected jurisdiction
  • Purchasers may not be ready to provide employment, payroll and benefits on the closing date without significant pre-closing work

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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.

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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

Register now.

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.

Continue Reading 403(b) University Cases Move Forward: Cassell v. Vanderbilt University

The PBGC’s missing participants program, which previously applied only to single-employer defined benefit pension plans, has been expanded to defined contribution plans, multiemployer defined benefit plans and small professional service defined benefit plans that end on or after January 1, 2018. The revised program provides a helpful alternative for plan administrators of terminating defined contribution plans, and also includes welcome clarifications that enhance the program available to defined benefit pension plans.

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Avoid the culture wars and legal issues post-transaction. Join our lawyers Kristin E. Michaels, Maureen O’Brien and moderator Judith Wethall for a discussion of how to best integrate employees and employee benefit plans after a transaction.

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