ERISA Archives - Page 12 of 48 - EMPLOYEE BENEFITS BLOG

Court of Appeals Affirms “Paternalistic” Breach of Fiduciary Duties

by Elizabeth M. Rowe and J. Christian Nemeth | Sep 13, 2018 | Benefit Controversies, Employee Benefits, Fiduciary and Investment Issues, Retirement Plans

The US Court of Appeals for the Eighth Circuit recently affirmed a Minnesota district court’s dismissal of a claim against Wells Fargo & Company (Wells Fargo) under ERISA. A former employee had alleged Wells Fargo breached fiduciary duties by retaining Wells Fargo’s own investment funds as a 401(k) option, and defaulting to those funds when plan participants failed to elect another option.

In holding that the former employee failed to state a claim, the court in Meiners v. Wells Fargo & Co. reasoned that the plaintiff failed to plead facts showing the Wells Fargo investment funds were an imprudent choice. Specifically, the court found that the plaintiff’s allegations that an allegedly comparable fund performed better was not sufficient, especially given the other fund’s differing investment strategy. The court’s prior decision in Braden v. Wal-Mart Stores, Inc. established that plaintiffs could show that “a prudent fiduciary in like circumstances” would have selected a different fund by providing a basis for comparison–in other words, a benchmark. However, the Eighth Circuit declined the plaintiff’s invitation to extend the rationale of Braden by allowing a plaintiff to demonstrate imprudence with a benchmark that only possesses some similarities to the fund at issue.

The Eighth Circuit’s decision is in line with other courts’ rejection of ERISA claims based on the plaintiffs’ subjective views of which funds are the best overall investment. A US district court judge for the Northern District of Illinois recently labeled such breach of fiduciary duty claims “paternalistic” while dismissing a class action against Northwestern University.

Webinar | Non-Compete Reform Comes to the Commonwealth

by Anthony A. Bongiorno, Andrew Liazos, Evan A. Belosa and Rachel B. Cowen | Sep 5, 2018 | Employee Benefits, Employment, Executive Compensation

Join us on Thursday, September 6 at 1:00 PM EDT for a webinar designed to address questions around the Massachusetts Noncompetition Agreement Act (the Act), signed into law by Governor Baker on Friday, August 10. The Act, which takes effect on October 1, requires all employers doing business in Massachusetts to change the way they establish and structure noncompetition agreements and related forfeiture provisions under compensation arrangements.

Our panel of lawyers focused on litigation, employment and employee benefits law from Massachusetts and other states, will discuss key aspects of this legislation, strategies and best practices. Questions that will be addressed by the panel include:

What changes should be made to support noncompetition agreements going forward?
How can a noncompetition agreement be used in connection with providing severance benefits?
What is the status for existing non-competition agreements? When is grandfathering available?
Are there other available types of agreements that can adequately protect employers’ interests?
Might ERISA preempt the new Massachusetts noncompetition law as related to benefit plans?
How will the changes to Massachusetts law impact corporate transactions?
How will the changes in Massachusetts law affect restrictive covenant litigation in Massachusetts courts?
What approaches to address the Massachusetts changes will make sense for multi-state employers?

Register now.

IRS Issues “Snapshot” Guidance on Qualified Retirement Plan Issues

by Jeffrey Holdvogt and Sarah L. Engle | Aug 16, 2018 | Employee Benefits, Retirement Plans

The Internal Revenue Service (IRS) recently released “Issue Snapshots” on a number of topics related to tax-qualified retirement plans, including both pension and savings plans. Historically, the snapshots have explained new(er) laws and guidance, and have often included audit tips for IRS examiners. As a result, although the IRS has indicated that the snapshots are not official pronouncements of law or directives, the snapshots provide helpful insight into issues that the IRS thinks merit further discussion or clarification. Therefore, the snapshots can be instructive for plan sponsors and plan administrators.

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Universal Health Bill Faces Steep Obstacles in New York

by Andrew Liazos | Aug 7, 2018 | Employee Benefits, Health and Welfare Plans

While momentum may be building for a single-payer health care system in New York, such a dramatic shift in the way health care is financed will have to overcome a number of significant obstacles. With ERISA preemption being one of those hurdles, Andrew Liazos comments, “There will be a challenge from somewhere. I don’t know who will lead the challenge, but I don’t think employer groups will just sit by idly.”

Access the full article.

Originally published in Bloomberg Law, August 2018.

ERISA Preempts State Regulation of PBM–Pharmacy Pricing Agreements

by McDermott Will & Emery and Sarah P. Hogarth | Jul 31, 2018 | Benefit Controversies, Employee Benefits, Health and Welfare Plans

ERISA broadly preempts state laws that “relate to” ERISA-governed employee benefit plans to ensure a uniform federal regulatory scheme and to relieve ERISA plans from the burdens of satisfying a patchwork of state laws. Recently, however, several states have enacted legislation designed to regulate the prices that pharmacy benefit managers, as third-party administrators for ERISA-governed plans, agree to reimburse pharmacies for dispensing prescription drugs to ERISA plan members. These regulations run afoul of ERISA, as the US Court of Appeals for the Eighth Circuit has twice held.

Access the full article.

Brown University Only Partially Successful in 403(b) Lawsuit

by J. Christian Nemeth, Joseph K. Urwitz and Mary K. Samsa | Jul 24, 2018 | Benefit Controversies, Fiduciary and Investment Issues, Retirement Plans

A federal judge in Rhode Island recently permitted several claims against Brown University to proceed in a lawsuit alleging that the university and its fiduciaries breached their fiduciary duties under the Employee Retirement Income Security Act of 1974, as amended (ERISA), by mismanaging Brown’s defined contribution plans. This decision follows the recent decision in a similar class action lawsuit against Northwestern University (see blog post here) in which a federal judge granted Northwestern a complete victory in its motion to dismiss.

Unlike in that decision, the court in Short v. Brown University allowed plaintiffs to proceed with claims relating to record-keeping services, including engaging more than one record-keeper, incurring excessive administrative fees and failing to conduct a competitive record-keeping bidding process. Of note, the court indicated that whether particular record-keeping fees are excessive involves questions of fact that cannot be resolved on a motion to dismiss. If other courts were to adopt that line of reasoning, a plaintiff who alleged that any level of fees was excessive could survive a motion to dismiss. The court also permitted plaintiffs to advance claims that Brown chose more expensive funds with poor historical performance, including the CREF Stock Account and the TIAA Real Estate Account.

The court dismissed the plaintiffs’ claims that Brown acted imprudently by offering investment options with multiple layers of fees and using revenue sharing and asset-based fees. Like other courts that have ruled on class action lawsuits against fiduciaries of university defined contribution retirement plans, the Brown court also dismissed the plaintiffs’ claim that Brown acted imprudently by including too many investment choices in its lineup.

Lessons Learned from ESOP-Owned Companies from Recent Litigation

by McDermott Will & Emery | Jul 17, 2018 | Employee Stock Ownership Plans (ESOPs)

Recent litigation and audit activity is focusing on the process undertaken by fiduciaries in connection with a transaction involving an ESOP. Eliot Burriss presented at the 2018 National Center for Employee Ownership Conference summarizing relevant litigation cases, exploring roles and responsibilities, and providing best practices.

View the full presentation.

All Together Now: DOL Finalizes Rule for Association Health Plans

by Jacob Mattinson and Megan Mardy | Jun 26, 2018 | Employee Benefits, Health and Welfare Plans

The US Department of Labor published a final rule that makes it easier for a group or association of employers to act as a single “employer” sponsor of an Association Health Plan under ERISA. By creating an opportunity for small employers and self-employed individuals to take advantage of the economies of scale that are usually enjoyed by large employers, the final rule is intended to expand access to affordable health care.

Access the full article.

ESOP Fiduciary Responsibility for Value Determination

by McDermott Will & Emery | Jun 21, 2018 | Employee Benefits, Employee Stock Ownership Plans (ESOPs), Fiduciary and Investment Issues, Retirement Plans

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.

View the full presentation.

Northwestern University Defeats 403(b) Lawsuit

by J. Christian Nemeth and Joseph K. Urwitz | Jun 12, 2018 | Benefit Controversies, Fiduciary and Investment Issues, Retirement Plans

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.

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