Among the many claims brought by plaintiffs challenging investment offerings in defined contribution plans is the claim that plans should offer stable value funds in lieu of more conservative capital preservation funds, such as money market funds and deposit accounts that are insured by the U.S. government.  Plaintiffs have argued that stable value funds are inherently better than more conservative options because they typically provide a higher rate of return. A federal district court in…

In August 2020, the SEC issued two orders against VALIC Financial Advisors Inc. (VFA) related to VFA’s management of 403(b) and 457(b) plans. These matters arise out of two of the SEC’s enforcement initiatives, the Teachers and Military Service Members’ Initiative and the Share Class Selection Disclosure Initiative. VFA is a registered investment adviser and broker-dealer with approximately $21.1 billion in assets under management and services defined contribution retirement plans for Florida public school teachers, among other plans. These two…

The DOL recently provided retirement plans with a new method to comply electronically with certain participant disclosure and notice requirements. See our blog post outlining the new DOL rule. This new method adds to the previously issued DOL safe harbor and the IRS rules.  Below is a side-by-side general comparison to help plan administrators keep track of when each method may be used, and what requirements must be met. Plan administrators should consult with…

Employers that are tax-exempt or have tax-exempt affiliates (for example, a foundation) should pay close attention to a 21% excise tax under Section 4960 of the Internal Revenue Code on certain executive compensation.  Proposed Regulations under Section 4960 are described here.  The discussion includes traps for the unwary.  Please reach out to your Proskauer contact to discuss how these rules affect your organization.…

The U.S. Department of Labor’s (the “DOL”) new “fiduciary rule” package, issued on June 29, 2020, and published in the Federal Register on July 7, 2020, has three important components: The DOL has formally reinstated its “five-part test” initially set forth in its 1975 regulation for determining whether a person is a “fiduciary” by reason of providing “investment advice” for a fee. This reinstatement is effective immediately, and generally reflects the status quo after the…

The Fifth Circuit concluded that an individual plaintiff was not entitled to attorneys’ fees, even though she persuaded the Fifth Circuit to vacate and remand a summary judgment decision in favor of the Humana Health Plan, because her victory was “purely procedural.”  While ERISA section 502(g)(1) provides that a court “in its discretion may allow a reasonable attorney’s fee and costs of action to either party,” the Supreme Court has made it clear that an…

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 case against the Careerbuilder plan fiduciaries, the plaintiff alleged that defendants breached their duties of prudence and loyalty under ERISA by:…