ERISA stories
During the first quarter of 2020, 31 ERISA-related lawsuits were filed and/or updated. Each event represents the involved parties either reaching a settlement, filing an appeal or a court decision was made. The parties involved in the ERISA lawsuits in the first quarter included nine financial firms, three health-care-related firms, and prominent organizations such as Northwestern University, Salesforce.com, CenturyLink Inc., Northrop Grumman Corp. and Trader Joe’s. Cases involving Putnam Investments, U.S. Bancorp., IBM and Intel were reviewed by the U.S. Supreme Court.
Financial firms
- The U.S. Supreme Court declined to hear a petition by Putnam Investments to overturn a Boston federal appeals court’s ruling in an ERISA fiduciary breach lawsuit. Putnam asked for judges to rule on whether plaintiffs must prove a loss caused by a fiduciary breach or whether sponsors must disprove the loss.
- The Supreme Court justices heard arguments on whether U.S. Bankcorp.’s defined benefit plan participants can sue for fiduciary breaches even if a plan is overfunded and participants have not experienced a monetary loss.
- Wells Fargo & Co.’s 401(k) plan participant sued the company and fiduciaries, alleging that plan fiduciaries violated their duties under ERISA by offering proprietary products and retaining expensive underperforming investment options.
- BOK Financial ’s 401(k) plan participants asserted that plan fiduciaries violated their duties under ERISA by offering higher-cost proprietary products.
- SunTrust Banks Inc. agreed to pay $3.5 million to settle complaints by participants in a company 401(k) plan that plan fiduciaries violated their duties under ERISA.
- Invesco Holding Co. agreed to pay $3.47 million to settle a lawsuit by participants in the company's 401(k) plan for offering proprietary products.
- John Hancock Life Insurance Co.’s 401(k) plan participants filed an ERISA compliant alleging that plan executives only provided expensive underperforming proprietary products.
- A U.S. District Court judge dismissed an ERISA complaint by multiple plaintiffs against the parent company of Fidelity Investments, FMR LLC, and several affiliates, who alleged that Fidelity violated fiduciary duties for charging secret fees and offering competitors' mutual funds to participants. Some of the ERISA complaints against Fidelity for offering non-Fidelity products can still move forward.
- Fidelity Investments, FMR LLC and Shell Oil Co. were sued by Shell Oil Co. 401(k) plan participants for its role as a record keeper to cross-sell products to participants that weren't part of the Shell DC plan.
Health-care organizations
- A U.S. District Court judge in Chicago rejected a request by Walgreen Co. to dismiss an ERISA lawsuit against the company and its fiduciaries alleging that plan executives offered underperforming target-date investment options.
- A U.S. District Court judge dismissed the third amended complaint of a participant lawsuit against Adventist Health System alleging that the plan failed to meet the "church plan" exemption ERISA status.
- Ardent Health Services Management Co.’s defined contribution plan participants filed an ERISA lawsuit against the management for its failure to provide cheaper and better performing investment options.
Other organizations
- The U.S. Supreme Court declined to act on an ERISA stock-drop lawsuit of Retirement Plans Committee of IBM et al. vs. Larry Jander et al. and sent the lawsuit back to a New York federal appeals court with instructions to review issues that lower courts had not addressed.
- The Supreme Court ruled against Intel Corp. claiming that receiving retirement plan disclosures and having "actual knowledge" of the information are not the same thing. An Intel retirement plan participant filed a lawsuit alleging that plan managers violated ERISA obligations regarding alternative investments choices and investment disclosures.
- A federal appeals court ruled in favor of Northwestern University to dismiss an ERISA lawsuit submitted by two 403(b) plan participants, alleging plan fiduciaries offered too many investment options and charged higher fees.
- Salesforce.com 401(k) plan participants sued the company plan fiduciaries, saying they violated ERISA in managing the plan by adding lowest-cost shares too late and failing to consider collective trusts, commingled accounts or separate accounts as alternatives to the mutual funds.
- CenturyLink Inc.’s 401(k) plan participants sued the plan fiduciaries in an ERISA lawsuit for violating their duties by offering an underperforming large-cap domestic stock fund and failing to prudently monitor the fund to make improvements.
- Northrop Grumman Corp. agreed pay $12.4 million to settle an ERISA complaint filed by the company's 401(k) plan participants alleging that plan fiduciaries failed to remove underperforming investment options and charged high record-keeping fees.
- 401(k) plan participants of Trader Joe's sued the plan fiduciaries for keeping inappropriate higher-cost mutual fund share classes and failing to take advantage of the large plan size to negotiate lower fees.
Non-ERISA stories (order by the most recent date)
During the first quarter of 2020, 25 COVID-19-related stories were written; 19 stories were written on non-ERISA lawsuits that involve legal prosecution or settlements; and an additional 62 legislation and regulation stories were written.
March
- President Donald Trump signed a roughly $2 trillion economic stimulus package approved by Congress for affected companies and workers that also provides some temporary relief for retirement plan sponsors and participants.
- The House introduced the Retirement Protection Act that would suspend required minimum distributions from defined contribution plans for the current year.
February
- The Securities and Exchange Commission rejected a proposal from Cboe Global Markets to introduce a "liquidity provider protection" feature called LP2 to enhance liquidity in the U.S. equities markets.
January
- The Federal Reserve, Securities and Exchange Commission, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp. and Commodity Futures Trading Commission collectively proposed changes to the Volcker rule that would loosen restrictions on banks investing in or sponsoring hedge funds and private equity funds.
- House Democrats unveiled a five-year, $760 billion infrastructure investment framework that aims to revamp the nation's roads, bridges and transit systems.
- The U.K. Financial Conduct Authority and Bank of England released a set of deadlines for phasing out the London interbank offered rate before its formal end on Dec. 31, 2021.
- A bill aimed at preventing corporate executives from trading stock before publicly disclosing significant events was approved by the House of Representatives in a bipartisan 384-7 vote.
