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Report Link Supreme Court Unanimously Adopts an "Uncomplicated Rule" - Plan Administrators Should Pay Benefits in Accordance with the Terms of the Plan.Ford & Harrison LLP - January 29, 2009 ERISA typically has been a minefield for fiduciary compliance. This has been particularly true when a plan administrator must decide which of two competing claims should be paid when the plan participant is deceased. This week, the United States Supreme Court issued an "uncomplicated," bright line rule for plan administrators to follow in these situations. The Court held that a plan administrator meets its ERISA duty when it pays benefits according the plan documents. Specifically, the Court approved the payment by a plan administrator to the beneficiary named by the participant, despite the fact that the beneficiary was the former spouse of the participant who had waived her right to the benefits in a divorce decree. Report Link Best Practices for Avoiding Fiduciary Litigation under ERISA (Part I).Ford & Harrison LLP - November 11, 2008 The times are scary. Bailouts, plan failures, layoffs, bankruptcies, corporate takeovers. The market is a bear. In these trying times, allowing your employees to be free to direct their own financial future is not always foolproof. With corporate scandals and collapses in companies such as Enron and Worldcom, employees are angry, and may look to you for guidance – or blame – if their 401k accounts lose money or are depleted.
Report Link Supreme Court’s Anticlimactic Decision in Glenn does not Streamline ERISA Litigation.Ford & Harrison LLP - July 07, 2008 On June 19, 2008, the U.S. Supreme Court issued its decision in Metropolitan Life Ins. Co. v. Glenn, which many had hoped would provide more clarity with regard to a court’s role in reviewing a plan administrator’s decision denying benefits, where the plan administrator also pays benefits under the plan. However, the Court’s decision in Glenn merely "elucidates" the standards announced by the Court in Firestone Tire & Rubber Co. v Bruch, 489 U.S. 101 (1989), which held that a conflict of interest is a factor to be considered in determining whether to affirm a plan administrator’s benefits determination. The Court did clarify that an entity administering an employee benefit plan, which both determines whether an employee is eligible for benefits and pays those benefits out of its own pocket, operates under an inherent conflict of interest, a question that was not specifically addressed by the Court’s earlier decision in Bruch. Report Link Practical Insights - Courts Defer to Fiduciary’s Decision if ERISA Plan Contains Explicit Language.Ford & Harrison LLP - June 03, 2008 Problem: Employees participating in ERISA covered benefit plans have the right to dispute the interpretation of a plan provision or an adverse benefits decision made by a plan fiduciary, which can include the plan administrator. If not resolved on appeal at the plan level, these disputes often result in a lawsuit against the fiduciary. Courts may or may not defer to the fiduciary’s determination. Report Link New DOL Guidance on Qualified Default Investment Alternatives.Ogletree Deakins - May 05, 2008 Employers that have adopted qualified default investment arrangements for their 401(k) plans now have a new resource to help work through potential problems, including issues related to investments that predate the qualified default investment alternative (QDIA) rules, the coordination of QDIA and other plan-related notices, grandfathered stable value funds, and so-called “round trip” restrictions. This resource is in the form of a Q&A released by the Department of Labor (DOL) on April 29 as Field Assistance Bulletin (FAB) 2008-03. That same day, the DOL revised its QDIA regulations to include certain corrective amendments. Report Link DOL Guidance Clarifies Issues Relating to QDIA Regulation.Ford & Harrison LLP - May 02, 2008 The Department of Labor (DOL) has issued guidance providing clarification on certain aspects of its 2007 Qualified Default Investment Alternatives (QDIA) regulation. The QDIA regulation is part of the DOL’s regulation under Section 404(c) of ERISA. Section 404(c) relieves plan fiduciaries from certain responsibilities and liabilities when participants direct the investment of their plan accounts. When a plan participant fails to provide such direction, the fiduciary is still entitled to Section 404(c) relief if the participant’s account is invested in a designated “default” investment, provided that the QDIA regulation is followed. Report Link United States Supreme Court Holds Defined Contribution Plan Participants Can Sue to Recover Individual Losses Resulting From Fiduciary Misconduct.Baker Hostetler LLP - April 11, 2008 A recent United States Supreme Court decision may increase the incidence of litigation against fiduciaries of defined contribution plans, including 401(k) plans and employee stock ownership plans (ESOPs). On February 20, 2008, the Supreme Court decided in LaRue v. De Wolff, Boberg & Associates, Inc., et al., that a 401(k) plan participant could recover under the Employee Retirement Income Security Act (ERISA) on a claim that his plan's fiduciaries breached their duty by failing to implement the participant's investment instructions. The participant alleged that the fiduciary misconduct lead to a $150,000 loss in his individual plan account. The Court found that the law permits a participant to recover losses caused by a fiduciary breach that "impairs the value of plan assets in a participant's individual account." Report Link Seventh Circuit Permits Plan Participants to Proceed with ERISA Action.Ford & Harrison LLP - April 08, 2008 In one of the first federal appeals court decisions to address the issue following the U.S. Supreme Court decision in LaRue v. DeWolff, Boberg & Associates, Inc., the Seventh Circuit has held that a group of plaintiffs may proceed with their ERISA breach of fiduciary duty claims against the administrator of their defined contribution plan, even though the losses for which they seek recovery were not incurred by the entire plan. See Rogers v. Baxter International, Inc. (7th Cir. April 2, 2008). The Seventh Circuit also rejected the defendants’ argument that the plaintiffs could not use ERISA to circumvent the limitations placed on investor actions by the Private Securities Litigation Reform Act of 1995 (PSLRA). Report Link Ruling Allows Individuals To Recover Individual 401(k) Losses.Ogletree Deakins - April 01, 2008 The U.S. Supreme Court recently disagreed with the Fourth Circuit Court of Appeals' decision that a participant in a 401(k) plan is prohibited from using Section 502(a)(2) of the Employee Retirement Income Security Act (ERISA) to recover losses allegedly caused by his employer's failure to carry out his investment instructions. "Although [Section] 502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries," the majority wrote, "that provision does authorize recovery for fiduciary breaches that impair the value of plan assets in a participant's individual account." Report Link IRS Clarifies When Plan Amendments May be Used to Correct Operational Failures.Ford & Harrison LLP - March 24, 2008 The Internal Revenue Service (IRS) recently explained when a plan amendment can be used to correct a failure to follow plan terms in the operation of a retirement plan. (See Retirement News for Employers, Winter 2008). The Employee Plans Compliance Resolution System (EPCRS) is a voluntary correction program that allows plan sponsors to correct plan mistakes that, if left uncorrected, could result in a retirement plan losing its favorable tax treatment. The EPCRS includes a Self-Correction Program (SCP), under which a correction can be made without paying a fee or contacting the IRS. However, SCP is only available to correct a failure to follow the terms of the plan in its operation (operational failure). Report Link Supreme Court Addresses the Remedies Available for Fiduciary Breach Under ERISA.Littler Mendelson, P.C. - March 04, 2008 For the past 20 years, federal appeals courts have disagreed on whether participants in ERISA-governed individual account pension plans, such as 401(k) plans, may sue fiduciaries who cause losses to their accounts under those plans. The U.S. Supreme Court has now held that these claims are indeed viable under ERISA. The Court's unanimous holding in LaRue v. DeWolff, Boberg & Associates has opened the door to a new category of ERISA lawsuits. Report Link LaRue v. DeWolff, Boberg & Assoc. Supreme Court Establishes Fiduciary Liability in the Context of Individual Account Plans.Phelps Dunbar LLP - March 03, 2008 Last week, the United States Supreme Court expanded the remedies available for fiduciary breach claims brought under ERISA, the Employee Retirement Income Security Act of 1974, as amended. Under a long-standing decision (Massachusetts Mutual Life Ins. Co. v. Russell), any relief granted for fiduciary breach was required to benefit the entire plan, rather than an individual participant. In the context of investment-related breaches, the "entire plan" rule effectively limited fiduciary claims to defined benefit and similar insurance plans, under which all benefits are funded from a common asset pool.
In LaRue v. DeWolff, Boberg & Assoc., the Supreme Court for the first time acknowledged the current preponderance of defined contribution or individual account plans, such as 401(k) plans. The Court concluded that the "entire plan" rule should not be construed to preclude relief for fiduciary breach when a participant's "plan" is effectively an account balance. Citing ERISA Section 404(c) as support, the Court noted that Congress must have intended fiduciaries of individual account plans to be liable for breach in the investment context. Report Link Supreme Court Permits Employees to Sue Retirement Plan Fiduciaries for Losses to Individual Account Balances.Buchanan Ingersoll & Rooney PC - February 27, 2008 In a decision on February 20, 2008, the Supreme Court effectively removed a major defense that had, until now, been routinely used to overcome claims by retirement plan participants seeking to recover for losses to their individual account balances allegedly caused by the actions or inactions of plan fiduciaries. In doing so, however, the Supreme Court may have created some new questions and more uncertainties. Report Link Supreme Court Allows Individual Fiduciary Claim for 401(k) Losses.Vedder Price - February 27, 2008 The Supreme Court has unanimously ruled (although in three separate opinions) that a participant in a 401(k) plan may sue for recovery arising from a breach of fi duciary duty, reversing lower court rulings that dismissed the participant’s lawsuit. Report Link Supreme Court Addresses the Remedies Available for Fiduciary Breach Under ERISA.Littler Mendelson, P.C. - February 27, 2008 For the past twenty years, the federal circuits have parted ways on whether participants in ERISA-governed individual account pension plans, such as 401(k) plans, may sue fiduciaries who cause losses to their accounts under those plans. The U.S. Supreme Court has now held that these claims are indeed viable under ERISA. The Court's unanimous holding in LaRue v. DeWolff, Boberg & Associates has closed a significant gap in ERISA's available remedies and opened the door to a new category of ERISA lawsuits. Report Link Supreme Court Permits Plan Participants to Sue for Fiduciary Breach.Ford & Harrison LLP - February 21, 2008 The U.S. Supreme Court issued a decision today (February 20, 2008) that will allow individual participants to sue for fiduciary breaches related to their 401(k) plans. In a unanimous ruling in LaRue v. DeWolff, Boberg & Associates, Inc., No. 06-856, the Supreme Court held that while ERISA §502(a)(2) does not allow a remedy for individual injuries apart from plan injuries, it does permit individuals to recover for harm to their plan assets due to a breach of fiduciary duty. Report Link Supreme Court ERISA Decision Could Open Doors to Broader Claims and Relief.Jackson Lewis LLP - February 21, 2008 The United States Supreme Court has opened the door to broader claims and remedies for alleged breaches of fiduciary duty relating to certain pension plans. The Court on February 20 held that § 502(a)(2) of the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132(a)(2), which authorizes recovery of "any losses to the plan" and "other equitable or remedial relief," could be invoked in the context of a defined contribution (401(k)) pension plan to sue for damages to an individual plan account. LaRue v. DeWolff, Boberg & Associates, Inc., 06-856. Report Link Final Default Investment Rules Provide Additional Protection (pdf).Ogletree Deakins - February 20, 2008 The US Department of Labor recently issued final regulations providing fiduciary relief to plan fiduciaries. Report Link Practical Insights: Individual Account Pension Plans - Shifting Fiduciary Risk of Loss.Ford & Harrison LLP - February 12, 2008 Fiduciaries of individual account pension plans, such as §401(k) plans, can be held liable for losses in an individual participant’s or beneficiary’s account. This potential liability presents an unacceptable risk to the trustees and plan administrators of these plans, especially when the plan is “self-directed,” i.e., the individual account holder exercises control over the assets. Report Link Final Regulation Issued Concerning Protection of Trustees and Other Plan Fiduciaries in Connection with Default Investment Funds.Fredrikson & Byron, P.A. - November 26, 2007 The Department of Labor has issued a final regulation, effective on December 24, 2007, that offers important protection to fiduciaries with respect to default investment funds. Report Link Department of Labor Issues Final Regulations on Default Investment Alternatives (pdf).Vedder Price - November 15, 2007 The Pension Protection Act of 2006 (“PPA”) amended
ERISA by adding a new section 404(c)(5) to provide
relief for plan fiduciaries who select default investment
options for a participant (or benefi ciary) who fails
to provide investment instruction. After review and
consideration of comments on the proposed regulations
issued in September 2006, the Department of Labor
(“DOL”) published final regulations relating to
“qualifi ed default investment alternatives” (“QDIAs”)
in 401(k) and other defi ned contribution plans on
October 24, 2007. Report Link May a Fiduciary Accept Gifts and Gratuities From Service Providers? (pdf).Vedder Price - June 11, 2007 May a Fiduciary Accept Gifts and Gratuities From Service Providers? Report Link Reducing Fiduciary Exposure Under 401(k) Plans.Jackson Lewis LLP - January 23, 2007 The 401(k) plan has become the primary retirement funding vehicle for the vast majority of employers. 401(k) plans are not only popular with employees, but also can provide employers with reduced exposure to liability under ERISA. However, such plans require ongoing fiduciary attention, and employers often do not take full advantage of the opportunities to reduce ERISA fiduciary liability. The recently enacted Pension Protection Act of 2006 ("PPA") provides employers sponsoring 401(k) plans with new tools that may prove useful in to reducing fiduciary exposure. Retail Industry Leaders Ass'n v. Fielder, 4th Cir., No. 06-1840 (January 17, 2007).Report Link Managing Fiduciay Risk Under ERISA When A Company's Stock Suddenly Drops In Price (pdf).Ford & Harrison LLP - September 28, 2006 The financial collapse of companies where employees' retirement plan assets were heavily invested in their companies’ stock has increased “stock drop” lawsuits under the Employee Retirement Income Security Act (ERISA)'s fiduciary duty rules. Report Link Internal Revenue Service and Department of Labor Update Correction Programs (pdf).Vedder Price - June 01, 2006 Both the Internal Revenue Service (IRS) and the
Department of Labor (DOL) have recently announced
several positive changes to their voluntary correction
programs for retirement plans. On May 5, 2006, the IRS
released Revenue Procedure 2006-27, which updates
and expands its correction program, known as the
Employee Plans Compliance
Resolution System (EPCRS).
On April 19, 2006, the DOL
published an update to its
correction program, known
as the Voluntary Fiduciary
Correction Program (the 2006
VFC Program). Report Link Fiduciary Compliance Program Revised (pdf).Ford & Harrison LLP - May 24, 2006 Under the Employee Retirement Income Security Act of 1974 (“ERISA”), persons who have discretionary
authority over the administration of an employee benefit plan, or any control or authority over the assets of
the plan, may be considered fiduciaries. Report Link Recent Court Decisions Examine Scope of Fiduciary Liability under ERISA.Jackson Lewis LLP - May 23, 2006 An area of ongoing concern for employers with employee benefit plans is fiduciary duty liability and the defense of litigation that can result. Three recent federal court decisions illustrate some of the legal issues that arise regarding the scope of fiduciary duty liability under the Employee Retirement Income Security Act, or ERISA. Report Link Compliance Update: The Voluntary Fiduciary Compliance Program.Littler Mendelson, P.C. - August 01, 2005 The Department of Labor recently revised its Voluntary Fiduciary Correction Program (VFCP). Adopted by the U.S. Department of Labor (DOL) to encourage plan fiduciaries to comply with the provisions of ERISA by providing relief from certain penalties and enforcement actions, VFCP permits employers to proactively remedy fiduciary violations under ERISA by taking prescribed remedial actions. Report Link Know Your Current Plan Fees (pdf).Vedder Price - July 05, 2005 Two recent developments highlight and re-emphasize
the duties of plan fiduciaries to maintain their vigilance
in understanding and evaluating all fees paid by a plan.
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