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Total Articles: 21

Proving Loss Causation in Breach of Fiduciary Claims — The Split Widens

As a follow up to Heather Panick’s article below, please see my recent article in Bloomberg BNA Pension and Benefits Daily – Thorne Article

Tenth Circuit Follows Majority of the Circuit Courts and Holds Plaintiff Bears the Burden of Proving Causation in ERISA Breach of Fiduciary Duty Cases

On June 5, 2017, in Pioneer Centres Holding Co. Employee Stock Ownership Plan & Trust v. Alerus Fin., N.A., Case No. 15-1227, the U.S. Court of Appeals for the Tenth Circuit held that the plaintiff bears the burden on each element of its breach of fiduciary duty claim under ERISA.

Tenth Circuit Departs From Other Circuit Courts and Holds Plaintiff Bears the Burden of Proving Causation in ERISA Breach of Fiduciary Duty Cases

On June 5, 2017, in a split decision to be published, the U.S. Court of Appeals for the Tenth Circuit held that the plaintiff bears the burden on each element of its Employee Retirement Income Security Act of 1974 (“ERISA”) claim for breach of fiduciary duty, including causation and damages. Pioneer Centres Holding Co. Emp. Stock Ownership Plan & Trust v. Alerus Fin., N.A., Case No. 15-1227 (10th Cir. June 5, 2017). The Tenth Circuit affirmed a trial court’s decision that had bypassed the issue of whether the plan fiduciary had breached its duty.

The Fiduciary Rule Applicability Date is Finally Here! What now?

The applicability date for the long-awaited, much-debated Fiduciary Rule (see prior Jackson Lewis coverage here) is now upon us. So what does it mean?

DOL Fiduciary Rule Still a Go for June 9, but its Future Remains Uncertain

United States Department of Labor (“DOL”) Secretary Alexander Acosta recently announced that the final DOL fiduciary regulations (the “Fiduciary Rule”) will go into effect on June 9, 2017. In an op-ed in the Wall Street Journal, Secretary Acosta noted that the current version of the Fiduciary Rule “may not align with President Trump’s deregulatory goals,” but he stated there was “no principled legal basis to change the June 9 date.” In addition to the announcement in the op-ed, the DOL issued two items of guidance regarding the implementation of the Fiduciary Rule: FAB 2017-02 and FAQs on the Fiduciary Rule.

TCB on the BIC: DOL Issues Guidance on Application of the Fiduciary Rule’s New Best Interest Contract Prohibited Transaction Exemption

On October 27, the DOL published guidance on the new prohibited transaction exemptions (“PTEs”) issued under the DOL’s rule redefining “fiduciary” in the context of providing investment advice (See “Guidance,” here).

Hire Me!

Financial Advisers and retail financial services firms face a number of challenges in dealing with the new fiduciary rule the Department of Labor announced this spring. But little did they know that they may confront the issues from their first contact with a potential client. That’s right—even before selling their advisory services, these new fiduciary issues pop up.

Dissecting the Department of Labor’s Final Fiduciary Rule

In early April, the Department of Labor (DOL) issued a final rule to re-define who is rendered a "fiduciary" of an employee benefit plan under the Employee Retirement Income Security Act (ERISA) by providing investment advice to a plan or its participants or beneficiaries. More than five years in the making, issuance of a final rule to address conflicts-of-interest in retirement advice has been a priority for the White House and DOL to advance its “middle-class economics” agenda in the face of criticism in Congress and by a number of stakeholders.

U.S. Department of Labor Issues Final Rule Redefining ERISA’s Definition of “Fiduciary” for Certain Types of Investment Advice

On April 6th, the U.S. Department of Labor (DOL) released a final rule (the “Fiduciary Rule”) that expands the types of retirement investment advice that will be subject to the fiduciary duty rules of the Employee Retirement Income Security Act (ERISA). The Fiduciary Rule primarily affects the investment advice that investment advisers, consultants, broker-dealers, and similar third parties provide to retirement plans, plan sponsors, and individual participants in retirement plans and IRAs. In general, the Fiduciary Rule requires those advisers to provide investment advice that is in the best interest of the recipient of investment advice.

The New Fiduciary Rule: Are you Prepared?

The Department of Labor recently announced its new Fiduciary Rule – aka the “conflicts of interest rule.” This new rule expands the definition of fiduciary and alters how investment advice is delivered in retirement accounts. It won’t go into effect for at least another year, but it’s not too early to start thinking about how the changes will affect the professionals who render this advice.

Overview of Department of Labor’s Final Fiduciary Rule

The Department of Labor has issued its much-anticipated final rule (the “Rule”) concerning the expanded definition of who is considered a fiduciary under the Employee Retirement Income Security Act, as amended (“ERISA”), and the Internal Revenue Code of 1986, as amended (the “Code”), as well as certain exemptions addressing conflicts of interest.

Supreme Court Rules Plan Fiduciaries Owe a Fiduciary Duty to Periodically Review Plan Investments

In a unanimous decision, the U.S. Supreme Court in Tibble v. Edison International held that plan fiduciaries owe an ongoing duty to review plan investments periodically to ensure compliance with their obligations under the Employee Retirement Income Security Act (ERISA). In doing so, the Court reversed the Ninth Circuit's holding that the statute of limitations for challenges to the continued offering of an investment option begins running only at the time the investment option is selected by an ERISA plan fiduciary (absent a change in circumstances), but stopped short of defining any specific obligations apart from a "continuing duty to monitor investments and remove imprudent ones."1 The decision reinforces the importance of maintaining and documenting a formal program for review of all investment options under an individual account plan.

Set it and Forget it? Not so Fast, Says the Supreme Court in Tibble

On May 18, 2015, the Supreme Court of the United States rendered a much anticipated (by ERISA attorneys, at least) decision in Tibble v. Edison International, clarifying a relatively narrow but still significant issue involving fiduciary responsibilities and retirement plan investments. Tibble v. Edison International, No. 13–550, Supreme Court of the United States (May 18, 2015).

New Fiduciary Regulations Require Retirement Investment Advisers to Act in Clients' Best Interests

On April 14, 2015, the U.S. Department of Labor (DOL) issued new proposed regulations that changed the definition of “fiduciary investment advice” as currently found in DOL Regulation 2510.3-21(c). These proposed rules also formally withdraw the prior proposed regulations issued in 2010. According to the DOL, these latest proposed rules will improve the protections provided for persons saving for retirement by ensuring that fiduciaries provide advice that is in their clients’ best interests.

Labor Department Proposes Fiduciary Conflict of Interest Rules — Again

On April 14, 2015, the U.S. Department of Labor (DOL) reissued the long-awaited re-proposal of its regulation expanding the definition of "fiduciary" under the Employee Retirement Security Act of 1974, as amended (ERISA), and prescribing stricter conflict-of-interest rules that will apply to relationships between such fiduciaries and their customers (mainly retirement plans and IRAs). Along with the proposed regulation, the DOL proposed two related Prohibited Transaction Class Exemptions (PTCE) and amendments to six existing PTCEs that will also apply to relationships between fiduciaries and their retirement plan customers (the proposed regulation and the PTCE's together, the "Proposal").

Supreme Court Clarifies ESOP Fiduciaries’ Obligations

On June 25, 2014, the Supreme Court of the United States ruled that a fiduciary of an “employee stock ownership plan” (ESOP) is subject to the same duty of prudence that the Employee Retirement Income Security Act (ERISA) requires of fiduciaries in general. Justice Breyer, delivering the opinion of a unanimous Court, rejected a financial services firm’s argument that a challenge to an ESOP fiduciary’s decision to buy or hold company stock “cannot prevail unless extraordinary circumstances such as a serious threat to the employer’s viability, mean that continued investment would substantially impair the purpose of the plan.” In rejecting a special ESOP-specific presumption, the Court noted that plan participants who challenge a fiduciary’s decisions are not required to allege that the employer was on the “brink of collapse.” Fifth Third Bancorp v. Dudenhoeffer, No. 12–751, Supreme Court of the United States (June 25, 2014).

Another Federal Appeals Court Presumes that Fiduciaries’ Employer Stock Investment Decisions Are Legal.

In Quan v. Computer Sciences Corp., after their employer’s stock dropped 12% in one day, a group of 401(k) plan participants sued the plan’s fiduciaries, alleging that by investing plan funds in the stock, they had breached their fiduciary duties.

Courts Must Show Deference to Interpretations by Plan Administrators (Even the Second Time Around).

On April 21, 2010 the Supreme Court affirmed that a court must give deference to an ERISA fiduciary's second interpretation of ambiguous plan language, even if the first interpretation made by the fiduciary is struck down by the court as unreasonable. Using a "one strike doesn't mean you're out" analysis, the Court held that where the plan gives the fiduciary the broad authority to interpret the plan, that authority extends to the fiduciary's alternative interpretation if the first was a mistake. The so-called Firestone standard of judicial review which requires a court to give deference to a plan administrator's interpretation of a plan provision was upheld as a principle not susceptible to special exceptions. A court's duty is to be sure the fiduciary does not abuse its discretion, not to substitute its judgment if the fiduciary gets it wrong the first time because of an "honest mistake."

New DOL Guidance on Qualified Default Investment Alternatives.

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.

Ruling Allows Individuals To Recover Individual 401(k) Losses.

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."

Final Default Investment Rules Provide Additional Protection (pdf).

The US Department of Labor recently issued final regulations providing fiduciary relief to plan fiduciaries.
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