recordkeeping

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The Second Circuit recently held that in order to state a claim for a prohibited transaction pursuant to ERISA section 406(a)(1)(C), it is not enough to allege that a fiduciary caused the plan to compensate a service provider for its services.  Instead, “the complaint must plausibly allege that the services were unnecessary or involved unreasonable compensation.”  Cunningham v. Cornell Univ., 2023 WL 7504142 (2d Cir. Nov. 14, 2023).  Separately, the Second Circuit affirmed summary judgment for the defendants in connection with the plaintiffs’ fiduciary breach claims that were premised on allegations of excessive recordkeeping fees, underperforming investment funds, and the defendants’ failure to transition to lower-cost share classes of certain mutual funds.

A federal district court in Illinois recently dismissed “excessive fee” and “imprudent investment” claims against the plan fiduciaries of the CareerBuilder 401(k) plan fiduciaries, relying largely on the Seventh Circuit’s decision in Divane v. Northwestern University, 953 F.3d 980 (7th Cir. 2020).  (Our blog on the Divane decision is available here.)  In the…

If your 401(k) plan recordkeeper has not talked to your company lately about hardship distributions, it may be time to reach out to the recordkeeper.  The short story is that the IRS recently issued an internal memorandum (found here https://www.irs.gov/pub/foia/ig/spder/tege-04-0217-0008.pdf) providing guidance to its employee plans examination group on the substantiation requirements for hardship…

Posted in IRS

A federal district court in California granted defendants’ motion to dismiss claims asserted by Chevron 401(k) plan participants that the plan fiduciaries breached their ERISA fiduciary duties by selecting underperforming investment options and permitting the plan to pay excessive fees.

As a preliminary matter, the court dismissed plaintiffs’ duty of loyalty claims because they failed…