Employee Benefits & Executive Compensation Blog

The View from Proskauer on Developments in the World of Employee Benefits, Executive Compensation & ERISA Litigation

Tag Archives: 401(k) Plans

Sixth Circuit Rejects Arbitration for Proposed Fiduciary Breach Class Action

The Sixth Circuit, in a matter of first impression for that Circuit, held an arbitration clause contained in an individual employment agreement did not apply to ERISA fiduciary breach claims brought on behalf of a defined contribution plan.  The case is Hawkins et al. v. Cintas Corp., No. 21-2156, __ F.4th __, 2022 WL 1236954 … Continue Reading

Ninth Circuit Revives Second Excessive Fee 401(k) Plan Litigation

On Friday, for the second week in a row, the Ninth Circuit reversed dismissal of a 401(k) plan excessive fee litigation challenging the offering of retail share classes of mutual funds instead of cheaper institutional share classes.  As with its decision reviving the other 401(k) plan litigation (discussed in detail here), the Ninth Circuit declined … Continue Reading

Ninth Circuit Revives Fee Challenge to Salesforce.com 401(k) Plan

On Friday, the Ninth Circuit became the first circuit court to rule in a 401(k) plan fee and investment litigation following the Supreme Court’s January 2022 decision in Hughes v. Northwestern University, 142 S. Ct. 737 (2022).  In Davis v. Salesforce.com, Inc., No. 21-15867 (9th Cir. Apr. 8, 2022), the Ninth Circuit, without discussing Hughes, … Continue Reading

District Court Enforces 403(b) Plan Arbitration Clause With Class Action Waiver But Allows For Plan-Wide Non-Monetary Relief

A federal district court in Florida sent a proposed ERISA breach of fiduciary duty class action to individual arbitration on the basis of a plan arbitration clause that allowed for individual relief and plan-wide injunctive relief.  The case is Holmes v. Baptist Health South Florida, Inc., No. 21-cv-22986, 2022 WL 180638 (S.D. Fla. Jan. 20, … Continue Reading

District Court Declines to Dismiss 401(k) Fee Litigation Case in First Decision Post-Hughes

In the first decision since the Supreme Court’s ruling in Hughes v. Northwestern Univ., No. 19-1401, 595 U.S. ___ (U.S. Jan. 24, 2022) (discussed further here), a Georgia federal district court held in favor of plaintiffs and declined to dismiss allegations that defendant’s 401(k) plan included costly and underperforming funds and charged excessive recordkeeping fees. … Continue Reading

The Supreme Court Declines to Establish Pleading Standard for Defined Contribution Plan Excessive Fee Litigation

To the disappointment of many in the ERISA community, the Supreme Court issued a six-page opinion on January 24th that declined to opine on most of the issues that were before the Court in Hughes v. Northwestern University, No. 19-1401 (U.S. Jan. 24, 2022). In a unanimous opinion authored by Justice Sotomayor, in which Justice … Continue Reading

District Court Dismisses Investment and Recordkeeping Claims Against 401(k) Plan Fiduciaries

A Kentucky federal district court ruled that a participant in CommonSpirit Health’s 401(k) plan failed to state plausible claims for breach of fiduciary duty related to the fees and performance of actively managed target date funds and recordkeeping fees. The court first rejected plaintiff’s claim that the plan fiduciaries should have offered a passively managed … Continue Reading

Fifth Circuit Holds Participants Lack Standing To Challenge Plan Investment Options

The Fifth Circuit affirmed the dismissal, for lack of standing, of a fiduciary breach representative action against American Airlines and its 401(k) plan investment committee.  Ortiz v. American Airlines, Inc., No. 20-10817, 2021 WL 3030550 (5th Cir. July 19, 2021).  As discussed in an earlier post, two former American Airlines employees brought this suit in … Continue Reading

[Podcast]: Cyber-theft of 401(k) Accounts

In this episode of the Proskauer Benefits Brief, partner Robert Projansky and special guest Garrett Fenton, senior attorney at Microsoft Corporation, discuss cyber theft of 401(k) plan accounts.  Tune in as we discuss why 401(k) plans are vulnerable to cyber security breaches, what kinds of cyber security frauds we are seeing in 401(k) plans, evolving litigation on … Continue Reading

DOL Issues Final “ESG” Rule Restricting ERISA Fiduciary Consideration of Non-Pecuniary Investment Factors

On October 30, 2020, the U.S. Department of Labor (the “DOL”) issued a final rule on factors for selecting plan investments, which restricts “do-good” or “ESG” investing.  In response to public comments, the final rule rolls back some of the restrictions and burdens from its proposed rule issued in June (summarized here), but it reaffirms … Continue Reading

Internal Revenue Service Provides Temporary Relief and Other Guidance on Mid-Year Reductions of Safe Harbor Contributions to 401(k) Plans due to COVID-19

On June 29, 2020, the Internal Revenue Service (the “IRS”) issued Notice 2020-52 that provides temporarily relief to plan sponsors that amend their safe harbor Section 401(k) or 401(m) plans (“Safe Harbor Plans”) mid-year to reduce or suspend employer safe harbor matching or nonelective contributions due to the COVID-19 pandemic.  To qualify for the relief, … Continue Reading

DOL Information Letter Outlines Fiduciary Considerations for Including Private Equity Allocations in Defined Contribution Plan Investments

On June 3, 2020, the Department of Labor (the “DOL”) published an Information Letter confirming that investment options under a defined contribution plan (e.g., a 401(k) or 403(b) plan) may include a limited allocation to private equity.  Notably, the Letter does not discuss direct investment in private equity funds (for example, by adding a PE … Continue Reading

Final Hardship Distribution Regulations, Part Three: New Disaster Relief and Expanded Sources Available for Hardship Distributions

The IRS recently released final regulations making a number of changes to the rules applicable to hardship distributions from 401(k) and 403(b) plans.  Concluding our three-part series on the final regulations, this blog entry will focus on the following changes to the hardship distribution rules: (1) modifications to the list of safe harbor expenses that … Continue Reading

Final Hardship Distribution Regulations, Part Two: Implementation Considerations

As discussed in our prior blog entry, the IRS recently released final regulations making a number of significant changes to the rules applicable to hardship distributions from 401(k) and 403(b) plans.  As part of our continuing series on these final regulations, this blog entry will focus on two specific issues: (1) the elimination of the … Continue Reading

Final Hardship Distribution Regulations, Part One: Key Changes and Deadlines for Plan Sponsors

Last week, the Department of Treasury and the IRS issued final regulations regarding hardship distributions from 401(k) and 403(b) plans.  The final regulations respond to comments based on earlier proposed regulations and make a number of significant changes to the existing IRS rules that apply to hardship distributions. Given the detailed material in the regulatory … Continue Reading

Back to Basics: IRS Issues Ruling About Failure to Cash a Distribution Check from a Qualified Retirement Plan

In Revenue Ruling 2019-19, the IRS answered three basic questions about the consequences of an individual’s failure to cash a distribution check from a qualified retirement plan. Uncashed checks arise in a number of contexts and questions on the taxation of uncashed checks should be carefully considered. In the hypothetical posed by the IRS, Individual … Continue Reading

Treasury and IRS Issue Eagerly-Awaited Guidance on Hardship Distributions – with a Few Surprises

Last Friday, the IRS issued eagerly-awaited proposed regulations regarding hardship distributions under section 401(k) and 403(b) plans (the “Proposed Regulations”). The Proposed Regulations primarily address hardship distribution issues raised by the Bipartisan Budget Act of 2018 (the “Budget Act”). (For our earlier blog entry summarizing these issues, click here.) At the same time, the Proposed … Continue Reading

Record-Keeper Defeats Second Round of Robo-Adviser Fee Litigation

As we reported here, record-keepers for large 401(k) plans have thus far been successful in defending ERISA fiduciary-breach litigation over investment advice powered by Financial Engines.  These lawsuits generally claim that fees collected by record-keepers for investment advice were unreasonably high because the fees exceeded the amount actually paid to Financial Engines.  Plaintiffs in Chendes v. … Continue Reading

The Budget Act Relaxes Hardship Withdrawal Rules, But Some Changes May Not Apply to 403(b) Plans

On Feb. 9, 2018, Congress passed, and the president signed, the Bipartisan Budget Act of 2018 (the “Budget Act”). As we previously discussed here, the Budget Act contains a number of provisions that affect qualified retirement plans.  These changes include expanding the type of funds that can be distributed under Code Section 401(k) in the … Continue Reading

First Round of Robo-Advisor Fee Litigation Goes to Record-Keepers

Since 2016, record keepers for large 401(k) plans have been defending litigation over investment advice provided by the Financial Engines investment advice algorithm.  (This kind of arrangement is commonly referred to as “robo-advice.”) The lawsuits claim, in essence, that fees collected by record keepers for investment advice were unreasonably high, because the fees exceeded the … Continue Reading

Third Circuit Analyzes Standing for ERISA Plan Management Claims

A recent Third Circuit decision reinforced the need for ERISA plaintiffs to plead injury-in-fact to establish Article III standing.  In Krauter v. Siemens Corp., No. 17-1662, 2018 WL 921542 (3d Cir. Feb. 16, 2018), the plaintiff was a beneficiary of four pension plans that had been sponsored by Siemens.  After the Plaintiff’s retirement, Siemens sold … Continue Reading

The Bipartisan Budget Act’s Impact on Retirement Plans

On Friday, February 9, 2018, Congress passed, and the President signed, the Bipartisan Budget Act of 2018 (the “Budget Act”). The Budget Act contains a number of provisions that affect qualified retirement plans.  Plan sponsors should consider the impact of the Budget Act on their retirement programs. Hardship Withdrawals. The Budget Act relaxes the rules … Continue Reading

Annual IRS Revenue Procedure Includes Surprising Change to User Fees

On January 2, 2018, the IRS published its annual bulletin that updates procedures for requesting rulings, determinations, and other guidance from the IRS. As in past years, the bulletin includes new user fees for determination requests and submissions under the Voluntary Correction Program (“VCP”). But this year’s update includes a significant surprise for the VCP … Continue Reading

Tax Reform Contemplates Changes to Employee Benefits

The House Committee on Ways and Means publicly released a working draft of the Tax Cuts and Jobs Act for the first time on Thursday. In the weeks leading up to the release of the draft, speculation has swirled as to whether it would eliminate or otherwise limit the ability to make pre-tax employee deferrals … Continue Reading
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