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The U.S. Supreme Court recently declined to grant certiorari to review the Fourth Circuit’s decision in RJR Pension Investment, et al. v. Tatum, 761 F.3d 363 (4th Cir. 2014).  As we previously reported here, a divided panel of the Fourth Circuit held that, because the plaintiff proved that the plan fiduciaries acted imprudently…

Three years ago, the U.S. Supreme Court identified three forms of appropriate equitable relief — reformation, equitable estoppel and surcharge — that are available under Section 502(a)(3) of the Employee Retirement Income Security Act (‘‘ERISA’’). See Cigna Corp. v. Amara, 131 S. Ct. 1866, 50 EBC 2569, 2011 BL 128629 (2011). This article focuses on the availability of surcharge and, in particular, a division among the lower courts on whether surcharge is available to plaintiffs seeking monetary recovery for personal loss as opposed to a loss to the plan.

Twenty-five years ago, the U.S. Supreme Court ruled that courts should review an ERISA participant’s claim for benefits under a de novo standard of review unless the plan gives the plan fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.  Since then, courts have considered what type of plan language suffices to grant plan fiduciaries discretionary authority to warrant the more deferential arbitrary and capricious standard of review.

On Thursday, September 18, 2014, the Internal Revenue Service (“IRS”) released Notice 2014-55, which expands the cafeteria plan “change in status” rules to allow plans to offer employees an option to revoke their elections for employer-sponsored health coverage to purchase a qualified health plan through a Health Insurance Marketplace (“Marketplace”).   The notice is effective immediately and will appear in IRB 2014-41, to be published Oct. 6, 2014.

The notice addresses two specific situations in which a plan could allow an employee to revoke a cafeteria plan election (other than a health FSA election):  due to enrollment in the Marketplace; and due to a reduction in hours of service.  This should be a welcome relief to employers that may have been struggling with how to allow employees to change coverage from under the employer’s plan to a Marketplace or other group health plan.

“As for those who might contemplate future service as plan fiduciaries, all I can say is: Good luck.” 

That was the sentiment expressed in a blistering dissent by Fourth Circuit Judge J. Harvie Wilkinson in the latest ruling in a lawsuit challenging the decision by the fiduicaries of the RJR 401(k) plan to liquidate two stock funds that previously had been available to plan participants wishing to invest in Nabisco stock. Tatum v. RJR Pension Inv. Committee et al., No. 13-1360, 2014 WL 3805677 (4th Cir. Aug. 4, 2014). In a split decision, the panel ruled that, because plaintiff-participant Richard Tatum had proved that the plan fiduciaries acted imprudently by liquidating the stock fund without the benefit of a proper investigation, the burden of proof shifted to defendants to show that a prudent fiduciary would have made the same decision.  In so ruling, the Court reversed the lower court decision, which had found in favor of defendants after a bench trial upon finding that they had demonstrated that a prudent fiduciary could have made the same decision.

The Fourth Circuit’s decision makes a number of significant statements and rulings on the burdens of proof related to loss causation, the meaning of “objective prudence,” and the standards for reviewing decisions pertaining to stock funds in the wake of the Supreme Court’s ruling in Fifth Third v. Dudenhoeffer.  Some of the Court’s pronouncements are difficult to reconcile with existing case law.  If not set aside on en banc or Supreme Court review and if adopted elsewhere, the decision could substantially impact the future conduct of fiduciary breach litigation, as well as plan practices in administering stock funds.

Pension plan overpayments to participants and their beneficiaries are an all-too-common occurrence.  When overpayments occur, a plan administrator’s duties are fairly clear.  Typically, the plan administrator must seek repayment of the overpayment, plus interest, from the affected individuals, and if recovery from the individuals cannot be completed, recovery must be sought from the employer or…

For over two decades, federal courts have embraced the so-called Moench presumption of prudence in ERISA stock-drop cases. Pursuant to that presumption, courts have routinely dismissed such claims absent allegations in a complaint that a company’s situation was dire, or that the company was on the brink of collapse. On June 25,2014, the U.S. Supreme Court issued its decision in the highly anticipated case, Fifth Third Bancorp v. Dudenhoeffer, wherein it concluded by unanimous decision that the presumption of prudence could not be supported by the text of ERISA. As discussed below, that may be at most only mixed victory for the plaintiffs’ bar.

Factual Background

Participants in Fifth Third Bancorp’s (Fifth Third’s) defined contribution retirement plan (Plan) brought a putative class action against the Plan’s fiduciary committee, among others, alleging that defendants breached their fiduciary duties in violation of ERISA.

Under the Plan, participants made contributions into an individual account and directed the Plan to invest those contributions in a menu of options pre-selected by Fifth Third. Of the twenty options available to participants during the relevant period, one was the Fifth Third stock fund, which had been designated an employee stock ownership plan (ESOP). Fifth Third matched the first 4% of a participant’s contributions with company stock, after which participants could move such contributions to any other investment option.

Plaintiffs’ complaint alleged that Fifth Third shifted from a conservative to a subprime lender and, consequently, Fifth Third’s loan portfolio became increasingly exposed to defaults. It further alleged that Fifth Third either failed to disclose the resulting damage to the company and its stock or provided misleading disclosures. During the relevant period, Fifth Third’s stock price declined 74%, resulting in the ESOP losing tens of millions of dollars.

Plaintiffs commenced a putative class action lawsuit, alleging, among other things, that defendants breached their fiduciary duties under ERISA by: (i) imprudently maintaining significant investment in Fifth Third stock and continuing to offer it as an authorized investment option; and (ii) by failing to provide Plan participants with accurate and complete information about Fifth Third and the risks of investment in Fifth Third stock.

In Sun Capital Partners III, LP v. New England Teamsters and Trucking Industry Pension Fund, 2012 WL 5197117 (D. Mass. Oct. 18, 2012), a federal district court in Massachusetts concluded that a private equity fund was not a “trade or business” subject to the imposition of withdrawal liability and thus was not responsible for paying the withdrawal liability owed by one of its portfolio companies that had completely withdrawn from a multiemployer pension fund.[1]  In so holding, the court rejected a Pension Benefit Guaranty Corporation (“PBGC”) Appeals Board opinion letter that reached the opposite conclusion, finding the PBGC’s analysis “unpersuasive” and “incorrect as a matter of law.” If adopted by other courts, this decision could significantly limit a multiemployer pension fund’s ability to assess and collect withdrawal liability against companies that are owned and operated by private equity funds.

The US Departments of Labor, Health and Human Services (HHS), and the Treasury (the “Agencies”) jointly issued yesterday a document entitled “FAQs about the Affordable Care Act Implementation Part XV” (“FAQs”) addressing four issues of concern with respect to implementation of the Affordable Care Act (“ACA”) by group health plans and health insurers offering group coverage.