Articles Discussing Fiduciary Duty Under ERISA

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

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.

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 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?

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.

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).

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.

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.

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.

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.

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.

On April 14, 2015, the Department of Labor (DOL) released a proposal 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. In a press release, Labor Secretary Thomas Perez described the sweeping proposal as follows: “This boils down to a very simple concept: if someone is paid to give you retirement investment advice, that person should be working in your best interest.” Yet, the more than 120-page proposed rule is far from simple. Its requirements and impact on access to advice about retirement savings accounts are far from certain.

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”).

On April 14, 2015 the Employee Benefits Security Administration unveiled its proposal to re-define who is rendered a “fiduciary” of an employee benefit plan under ERISA by providing investment advice to a plan or its participants or beneficiaries. According to the proposal’s preamble, the revised regulations would treat those who provide investment advice or recommendations to an employee benefit plan, plan fiduciary, plan participant or beneficiary, IRA, or IRA owner as fiduciaries under ERISA “in a wider array of advice relationships than the existing ERISA and [Internal Revenue] Code regulations, which would be replaced.”

On Monday, the White House and the Department of Labor publicized efforts to target conflicts of interest in managing employee retirement funds. In essence, the Administration is promoting the DOL’s much–beleaguered proposal to more broadly define who constitutes a “fiduciary” for the purposes of rendering investment advice under the Employee Retirement Income Security Act (ERISA). According to a White House fact sheet, the DOL will issue its proposed fiduciary rule in the coming months. Notably, the agency withdrew its initial fiduciary rule in 2011 after the proposal faced significant opposition from the employer community.