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401(k) Fee Litigation Update – What Tussey v. ABB Means for Plan Sponsors

At the end of last month, Judge Laughrey handed down her decision in Tussey v. ABB, Inc. (W.D. Mo., No. 2:06-CV-04305). In their simplest recitation, the facts of Tussey v. ABB are that ABB selected Fidelity to provide not only recordkeeping and other administrative services to its 401(k) plans, but also certain investment management services through one of Fidelity’s affiliates. During the time period at issue in this lawsuit, Fidelity also provided services to ABB in other capacities, including recordkeeping services for ABB’s defined benefit plan, non-qualified deferred compensation plan, health benefits, and payroll services (collectively referred to as “corporate services” by the court). Plaintiffs brought claims on behalf of a class of present and former ABB employees who are participants in ABB’s 401(k) plans alleging various breaches of fiduciary duties on account of ABB’s relationship with Fidelity, ABB’s management of the plans and Fidelity’s treatment of “float”

District Court’s Remand To Plan Administrator Is Not Final And Appealable

April 23, 2012


The Eleventh Circuit Court of Appeals recently ruled that a district court’s remand of a benefits claim to the plan administrator is not appealable to the circuit court. For a copy of the court’s opinion in Young v. Prudential Ins. Co., 2012 WL 538955 (11th Cir. Feb. 21, 2012), click here.

The plaintiff in Young submitted a claim for long-term disability benefits, which was denied by Prudential. After she exhausted her administrative appeals, the plaintiff sued for benefits. On cross motions for summary judgment, the district court found in favor of the plaintiff and remanded the case to Prudential for reconsideration of whether the plaintiff was disabled. The district court clerk then entered what purported to be a final judgment and closed the case. Prudential initiated an appeal to the Eleventh Circuit, and while that appeal was pending, Prudential (in its capacity as plan administrator)

Moench and the Motion to Dismiss: Two Recent Stock Drop Cases Show Courts’ Division

Although the volume of so-called “stock drop” litigation has decreased somewhat in recent years, decisions announced in February and March, 2012, show this is still an issue to follow. The plaintiffs of Pfeil v. State Street Bank and Trust Company (2012 WL 555481 (6th Cir. 2012)) and In Re: BP ERISA Litigation (case number 4:10-md-02185, S.D. Texas (March 30, 2012)) alleged that ERISA fiduciaries to defined contribution plans breached their duties of prudence by continuing to allow participants to invest in company stock during the time periods leading up to the financial decline of the companies sponsoring the plans. The outcomes of each of these cases are opposite to the other due to differing applications of what has come to be known as the Moench presumption.

We last wrote of the Moench position in a February 6, 2012 blog entry. The presumption provides that a plan

IRS Releases Proposed Rules on New Comparative Effectiveness Fee for Health Plans

On April 12, the IRS released proposed regulations regarding the collection of the fee for the Patient-Centered Outcomes Research Trust Fund (the “Fund”) under the Patient Protection and Affordable Care Act (“PPACA”). The Fund will be used to pay for the Patient-Centered Outcomes Research Institute which has the goal of helping health care providers and consumers make informed health decision by synthesizing research comparing the outcome effectiveness of various treatments.

Who Pays for This

Here’s the kicker: insurers and self-insured health plans get to pay for this, along with multiemployer plans, state and local governmental plans, stand-alone VEBAs and other health plans. We focus primarily on private employer plans, but many of the rules apply similarly to other types of plans.

How Much

Initially, the fee is $1 per covered life. It will first apply for plan or policy years ending between October 1, 2012 and October 1,

Multiemployer Withdrawal Liability “Insurance”

Multiemployer Withdrawal Liability “Insurance”

April 11, 2012

Authored by: benefitsbclp

In a recent decision, the Sixth Circuit Court of Appeals upheld an indemnification of multiemployer plan withdrawal liability in an collective bargaining agreement.

In the case, the employer and labor union had bargained that the union would indemnify the employer for any withdrawal liability from the multiemployer plan. The union, however, subsequently disclaimed its representation of the employees. As a result of that disclaimer, the union was no longer the exclusive bargaining representative of the affected employees and the collective bargaining agreement terminated. As a result, the employer effected a withdrawal from the multiemployer pension to which it had been obligated to contribute and incurred a substantial withdrawal liability.

It so happened that the pension fund in question was the Central States Southeast and Southwest Areas Pension Fund, which is known to have had funding problems for some time. When the pension fund assessed withdrawal liability on the

Jumpstart Our Business Startups Act (JOBS ACT) Contains Executive Compensation Provisions

Update (2:45 PM): As expected, President Obama has signed the JOBS Act into law.

The JOBS Act is expected to be signed by President Obama today. According to the Act, it is intended:

To increase American job creation and economic growth by improving access to the public capital markets for emerging growth companies.

The Act includes provisions relating to crowdfunding, access to capital markets, exemptions to encourage small company capital formation, increased private company shareholder threshold for registration, and reduced public company compliance and disclosure burdens for “emerging growth companies.”

In addition, Title I of the Act “ Reopening American Capital Markets to Emerging Growth Companies,” includes changes to executive compensation disclosure requirements for emerging growth companies.

Emerging Growth Company. An emerging growth company means a company with total annual gross revenues of less than $1 billion (indexed for inflation). Only companies with an IPO after

Five Common 409A Design Errors: #5 Payment Periods Longer than 90 Days

This post is the fifth and final post in our series on five common Code Section 409A design errors and corrections. Go here, here, here, and here to see the first four posts in that series.

Code Section 409A abhors discretion. One concern with discretion is that it could lead to the type of opportunistic employee action or employer/employee collusion that hurt creditors and employees during the Enron and WorldCom scandals.

Another concern is that discretion could be used opportunistically to affect the taxation of deferred compensation. Consider an employment agreement with a lump-sum payment due at any time within thirteen months following a change in control, as determined in the employer’s discretion. This provision would permit the employer to pick the calendar year of the payment. Because non-qualified payments are generally taxable to the recipient when paid, this type

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