Defined Contributions Plans

In 2010 the DOL published a final regulation requiring plan administrators of participant-directed individual account plans to disclose fees, expenses, and certain other plan information to participants and beneficiaries. The regulation requires plan administrators to provide these disclosures on or before the date on which a participant or beneficiary can…
Continue Reading Department of Labor Establishes Two-Month Grace Period for Participant-Level Fee Disclosure

For sponsors and fiduciaries of employee benefit plans, the Amara case has presented many interesting and important issues that have been discussed at length in this blog and elsewhere. However, the most recent chapter in this long-running dispute has not garnered nearly as much attention as either the Supreme Court or Second Circuit decisions that came before it. Nonetheless, this latest decision, Cigna Corporation v. Executive Risk Indemnity, raises a critical issue for plan sponsors and fiduciaries: what is and, perhaps more importantly, what is not, covered by fiduciary and other liability insurance policies.

The facts of the Executive Risk case are relatively straightforward. Cigna sought a declaratory judgment that it was entitled to coverage under its fiduciary liability policies for claims asserted in the Amara case. The insurers denied coverage, relying on a policy exclusion for “deliberately fraudulent or criminal acts or omissions.” The trial court ultimately applied the exclusion and denied coverage.

Given the considerable amount at stake, the decision is undoubtedly important to Cigna, Executive Risk, and the other insurers who were defendants in the case. However, other plan sponsors and fiduciaries would be wise to understand the significance of this decision as well: insurance coverage cases often turn on the language of the insurance policies in question and there generally is not “standard” policy language on many critical issues.Continue Reading ERISA Liability Insurance: Know What’s Covered . . . And What Isn’t

In Lees v. Munich Reinsurance America, Inc., a federal district court in New Jersey recently held that an oral misrepresentation could serve as the basis for a fiduciary breach claim.

The plaintiff in Lees worked for American Re-Insurance Company (a predecessor of the defendant), but was being paid by…
Continue Reading Oral Misrepresentation Could Support Fiduciary Breach Claim, District Court Holds

An eight-year transition period for U.S. tax-qualified retirement plans covering Puerto Rico residents is set to end in 2015.  Employers that cover Puerto Rico residents under U.S. tax-qualified plans should consider spinning off the Puerto Rico portion of the plan in 2015, to avoid subjecting Puerto Rico residents to U.S. federal income tax.


Continue Reading Action Required for Retirement Plans Covering Puerto Rico Residents

The Pension Benefit Guaranty Corporation (“PBGC”) recently finalized its rule on insurance for amounts rolled over from a defined contribution plan to a defined benefit plan.  Although amounts rolled over will be subject to greater protections than apply for most other benefits (i.e., benefits derived from employer contributions), the full rollover benefit will not necessarily be protected if the plan terminates with insufficient assets. Employers should assess the impact of the limitations on PBGC protection for their plans and consider updating participant communications to better explain the potential risks from a rollover to a defined benefit plan.
Continue Reading Understanding Limits on PBGC Protection for Amounts Rolled Over From a Defined Contribution Plan

When a defined contribution plan terminates, the plan administrator must distribute participants’ accounts as soon as administratively feasible.  However, participants do not always update the plan administrator when their contact information changes, and some participants may not be responsive when the plan administrator requests directions on how to distribute their accounts.

On August 14, 2014, the DOL published guidance describing the plan administrator’s fiduciary obligations in such a situation.  The guidance focuses on two questions.  First, what steps must a plan administrator take to try to locate a missing participant?  Second, if a plan administrator fails to locate a participant after taking any required search steps, what must the plan administrator do with the balance of the participant’s account?  The DOL guidance does not directly address analogous situations under defined benefit plans or health and welfare plans, but is likely to have relevance to them as well.
Continue Reading What to Do with Missing Participants: Department of Labor Provides Guidance

Yesterday, the Supreme Court issued its much anticipated decision in the stock-drop case, Fifth Third Bancorp v. Dudenhoeffer.  The Court vacated the lower court decision that was adverse to the employer, Fifth Third Bancorp, and remanded the case to the lower courts for further proceedings.

Fiduciaries of employee stock ownership plans (ESOPs) had hoped that this decision would clarify their responsibilities for administering an employer stock fund.  Although the decision leaves many questions unanswered, it does provide useful guidance for fiduciaries administering an employer stock fund in an ESOP:
Continue Reading Stock-Drop Decision Helpful to ESOP Fiduciaries

A recent Ninth Circuit decision, Gabriel v. Alaska Elec. Pension Fund, offers useful insight for deciding how to fix a pension overpayment.

Virtually every employer that administers a pension plan has experienced (or will experience) discovering a calculation error after incorrect payments have been made for several years–resulting in thousands of dollars of overpayments.  Fixing these overpayments is often difficult.  On the one hand, plan fiduciaries have an obligation to stop overpayments and restore losses from excess payments.  IRS guidance instructs plan administrators to recover overpayments from the affected participants.  On the other hand, participants who have received overpayments inevitably claim that they have relied on the incorrect benefit and that correcting the error would result in undue harm to them.  The affected participants often recognize that an incorrect benefit cannot be paid by the plan, but they argue that the cost of the correction should be borne by the administrator who made the error, rather than by the affected participant.

Since the Supreme Court’s 2011 decision in Cigna Corp. v. Amara (and even before that decision), many participants who received overpayments have alleged that an equitable remedy like “reformation,” “equitable estoppel,” or “surcharge” entitles them to keep overpayments.Continue Reading Judges Disagree on Remedies for Pension Mistake