News

"DOL has expressed concern that the 'regular basis' and 'mutual agreement' prongs of the prior Five-Part Test 'worked to defeat legitimate retirement investor expectation of impartial advice' and attempted to close these perceived loopholes in the Retirement Security Rule .  ... On May 2, 2024 (or 9 days after the Final Rule was adopted), the FACC filed its complaint in the United States District Court for the Eastern District of Texas." [Federation of Americans for Consumer Choice Inc. v. DOL, No. 24-0163 (E.D. Tex. complaint filed May 2, 2024)]

"The Court ... [held] that Plaintiff failed to state a claim for imprudence because he did not plead any facts showing how the fiduciaries' process in selecting and monitoring plan investments was flawed, did not plead any facts showing that the plan's recordkeeping fees were excessive in relation to the services rendered, and did not identify any specific misrepresentations Schenker made." [ Partida v. Schenker Inc. , No. 22-9192 (N.D. Cal. Mar. 29, 2024)]

"Members of the House [ H.J. Res. 143 ] and Senate [ S.J. Res. 79 ] introduced companion bills under the Congressional Review Act that would nullify the [DOL's] Retirement Security Rule.... If the bill were to pass [both the House and Senate], it is all but certain to be vetoed by President Joe Biden. The legislation has been endorsed by the Insured Retirement Institute and American Securities Association."

"Initially geared towards ERISA-governed retirement plans, the DOL has subsequently stated that its 2021 cybersecurity best practices also apply to ERISA-governed group health plans.... [T]he DOL lists 12 best practices to help ERISA plan fiduciaries to mitigate cybersecurity risks: ... [E]mployers are encouraged to consider adopting these best practices to help withstand any DOL scrutiny related to cybersecurity."

"Under the DOL's current guidance, a plan fiduciary that is considering a defined benefit plan 'lift-out' must take steps calculated to obtain the safest annuity available, unless under the circumstances it would be in the best interests of participants and beneficiaries to do otherwise. In connection with this requirement, the DOL provides [a list] of factors that a plan fiduciary should consider ... when selecting an annuity provider[.]"

"While the revision of the definition of advice fiduciary fundamentally changes/expands who is a fiduciary, the PTE had (in 2020) already largely anticipated this expansion, and the final 2024 changes to it are more in the nature of 'tweaks.' "

"To obtain the protection of PTE 2020-02, four categories of 'conditions' must be satisfied.... This article [covers] the conditions that are effective on September 23 of this year.... [1] The Impartial Conduct standards: care obligation; loyalty obligation; reasonable compensation limitation (including best execution, if applicable); [and] no materially misleading statements (including by omission). [2] The Fiduciary Acknowledgement Disclosure."

"With a new Complaint to be filed, in some sense, the case is starting all over again. But, there is some learning from the Defendants' letter and their Memorandum on dismissal that are worth a review, and that Plaintiff is no doubt taking into account for purposes of a First Amended Complaint." [Lewandowski v. Johnson & Johnson, No. 24-0671 (D.N.J. complaint filed Feb. 5, 2024)]

"As staff members in the HR and benefits department often wear multiple hats, from overseeing an organization's retirement plan to managing a company's health care benefits, it is easy for these workers to feel overwhelmed, stressed and burnt out at times. For plan sponsors ... it is important to be aware of the challenges that HR and benefits staff members face daily and not blur the line of fiduciary responsibility with these employees."

"The third RxDC report is due June 1, 2024; instructions may cause plan sponsors to reconsider whether they need to make 'plan level' submissions instead of relying on their vendors to make 'aggregate' submissions on their behalf.... Considering the spotlight recently shed on fiduciary duties and the risks associated with not complying with those duties, the additional insight plan-level filings provide can help fiduciaries stay on course in fulfilling their responsibilities."

"The amicus brief filed [by the coalition] in support of AT&T argues that: [1] The Ninth Circuit's decision renders standard and ubiquitous contracts ... in American retirement plans presumptively unlawful. [2] The Ninth Circuit's decision will open the floodgates to speculative claims regarding routine matters, multiplying frivolous litigation and costing employees and employers. [3] Allowing claims that all re-negotiations of service provider agreements are prohibited transactions unless proven otherwise will have far-reaching negative consequences for plan sponsors, fiduciaries, and participants." Bugielski v. AT&T Servs., Inc. , No. 21-56196 (9th Cir. Nov. 8, 2023; cert pet. filed Apr. 5, 2024)]

68 pages. "Rollover advice is explicitly included in the regulation as a form of fiduciary advice.... PTE 2020-02  ... would be the flagship DOL exemption providing relief for conflicted investment advice ... Compliance with other 'best interest' and conflict mitigation regulations [does] not suffice under PTE 2020-02.... [T]he application of the Final Rule to insurance distribution remains complex.... [E]lements of the Final Rule create the predicate for a potential private right of action by IRA owners."

"The FACC's complaint relies heavily on a 2018 Fifth Circuit case -- binding in the Eastern District of Texas -- that struck down a 2016 iteration of the Fiduciary Rule, arguing that the 2024 Fiduciary Rule is 'effectively indistinguishable' from the 2016 rule that was vacated in full ... The complaint also alleges that the speed with which DOL promulgated the Fiduciary Rule ... demonstrates both that the Rule is merely a 'regurgitation' of the 2016 rule and DOL's 'zeal to reach the desired result of turning every financial product salesperson who deals with a retirement investor into a fiduciary.' " [Federation of Americans for Consumer Choice Inc. v. DOL, No. 24-0163 (E.D. Tex. complaint filed May 2, 2024)]

"[P]laintiffs' claim that the administrator provided substantially inaccurate pension benefit statements was cognizable under Section 1025(a)(1)(B)(ii). The panel also concluded that plaintiffs adequately pleaded an ERISA violation based on their allegation that they made written requests sufficient to trigger the duty to produce pension benefit statements. The panel rejected the administrator's argument that there were no remedies available for the ERISA violations plaintiffs alleged. Accordingly, the panel reversed the district court's dismissal of plaintiffs' claims ... and remanded for further proceedings." [Bafford v. Northrop Grumman, No. 22-55634 (9th Cir. May 9, 2024)]

"[1] Regularly review and update plan documents ... [2] Conduct thorough due diligence on current and potential vendors ... [3] Implement strategies to proactively identify and mitigate potential threats to the plan's financial stability and participant satisfaction.... [4] Compliance adherence and conflict of interest avoidance ... [5] Education and training ... [6] Maintain open lines of communication with plan participants ... [7] Engage independent third-party reviewers ... [8] Maintain detailed records of all decisions ... [9] Proactive cost-containment efforts."

"With a split among the five circuit courts that have weighed in, a vigorous dissent in the Second Circuit's decision, and another circuit court decision expected soon, we may see the issue make its way to the Supreme Court in the not-too-distant future." [ Cedeno v. Sasson , No. 21-2891 (2d Cir. May 1, 2024)]

"A quick comparison reveals that the most significant change is in the additional requirement that the recommendation must reflect the application of professional or expert judgment to the retirement investor's particular needs or individual circumstances."

"Under the proposed rules , in addition to disclosure and operational requirements, [auto-portability providers (APPs)] would need to acknowledge their fiduciary status in writing and would be subject to fiduciary duties. Unlike the existing rules for safe harbor IRAs, the proposed rules provide no fiduciary safe harbor for rollovers to a new employer's plan by an APP.... Moreover, according to the DOL, the decision of an employer to participate in an APP program would constitute a fiduciary act."

"The problem with [the Sellers reasoning] is that it treats fiduciary prudence as infinite, as something that can always be challenged in court as having been insufficient no matter how much was done ... At some point, a fiduciary has engaged in more than enough prudence to satisfy the statutory obligation ... [T]here is always more that could be done, but that alone shouldn't preclude finding that a fiduciary did, in fact, enough." [ Sellers v. Trustees of Boston College , No. 22-10912 (D. Mass Apr. 11, 2024)]

"Legal experts with varying perspectives on the rule agree that the DOL likely does not have authority to apply fiduciary duties under Title I of [ERISA] to individual retirement accounts [IRAs].... Kendra Isaacson ... former Senate pension policy director for Senator Patty Murray ... says, 'the IRA is a creature of the [Internal Revenue] Code,' and under the authority of the Treasury Department. She adds, 'If DOL wanted to cover these rollovers, it should have been a joint rulemaking.' "

"Low-cost index funds hit Fidelity's revenue, prompting a focus on more profitable products like managed money, the advisor's suit claims. The suit says advisors were pressured to sell higher-revenue products even when they were not in clients' best interest." [Maeker v. Fidelity Investments, No. 24-1078 (N.D. Tex. complaint filed May 6, 2024)]

"[W]ith this new package DOL believes it has addressed the concerns articulated by the Fifth Circuit in a way that advances the DOL’s concerns about the harm suffered by those who receive conflicted advice. If the DOL’s rule stands, going forward, a new somewhat nuanced paradigm will prevail and, in many instances, financial salespeople and insurance agents will be held to a relationship of trust and confidence with their retirement investor customers[.]"

"[The] main takeaway from the [DOL's] fact sheet , budget , and the stated Enforcement Projects , as well as recent experience with DOL investigations, is that the following areas may be of particular focus during future DOL investigations: [1] Cybersecurity and participant data issues.... [2] Missing participants ... [3] Illiquid and hard-to-value assets, including private equity and alternative investment classes (such as cryptocurrency) in both defined benefit and defined contribution plans.... [4] Mental health parity and MHPAEA enforcement.... [5] Proper use of plan forfeitures.... [5] Evidence of insurability issues[.]"

"The amendments describe how advisers should mitigate their conflicts in the PTE's preamble and section on policies and procedures.... The DOL says explicitly that they do 'not require Financial Institutions to categorically eliminate all sales quotas, appraisals, performance or personnel actions, bonuses, contests, special awards, differential compensation, sales contests, quotas, or bonuses.' "

"[T]he Second Circuit Court of Appeals joined the Third, Seventh, and Tenth Circuit Courts of Appeals in holding that an arbitration provision which operates as a prospective waiver of substantive, plan-wide remedies under ERISA is unenforceable." [ Cedeno v. Sasson , No. 21-2891 (2d Cir. May 1, 2024)]