A bad third-party administrator (TPA) can be a weapon of mass destruction. So when plan sponsors focus on price or using their payroll provider in selecting the TPA, they neglect the most important attribute of a good TPA: service.
A quality TPA service puts a plan sponsor out of harm’s way by minimizing their liability and avoiding errors that will require extensive and expensive repair.
In Hughes v Northwestern, a unanimous Supreme Court held that the Seventh Circuit erred by holding that a plaintiff can’t state a plausible claim against plan fiduciaries based on the inclusion of a few imprudent investment options if the investment lineup offered to plan participants is diverse and contains prudent investment options.
It’s a win for plaintiffs and ERISA litigators as the Supreme Court didn’t curtail a participant’s right to sue in Federal Court. However, the case did nothing in setting pleading standards, so it will still invite sloppy ERISA litigators who just show a plan is expensive without showing how that’s an actual breach of fiduciary duty.
So expect more fee litigation cases and more fee litigation dismissals.
It’s a question I get often, the 401(k) plan sponsor wants to terminate their plan and start a new one.
Can’t do it. 401(k) plans have a unique rule (actually 403(b) plans also have it) called the successor plan rule.
The successor plan rule states that a plan sponsor with a terminated 401(k) plan can’t start a new one within 12 months after all the assets from the terminated plan are distributed.
Why do we have that rule? To circumvent plan sponsors from terminating a 401(k) plan, distributing deferrals to participants pre- age 59 1/2, and then starting a new plan.
When dealing with plan issues, understand the successor plan rule may keep you from fixing the situation by terminating a 401(k) plan.
I referred a client to a third-party administrator (TPA) that would be the best fit for fixing a defined benefit plan that was a hot mess. The fees are a little higher, but the client would make that up with a quality TPA. The client’s advisor was making things difficult, but I nipped it in the bid as it pertained to haggling over fees. That TPA didn’t allow haggling and I wanted what was best for my client, instead of having to find another TPA if this one would bolt over haggling. A concern is whether I was wasting the TPA’s time. If they would end up doing that, I’d apologize on my client’s behalf.
There are times when a referral you make to a client isn’t filled. That is OK. Wasting the time of people you respect, who don’t get hired, should require a simple apology, regardless of whether it’s your fault.
The Supreme Court told defined contribution sponsors Monday that they have to monitor all investments in plans’ lineups rather than leave the analysis to participants.
In an 8-0 ruling, the justices vacated and remanded a decision by the 7th Circuit Court of Appeals, Chicago, involving two Northwestern 403(b) plans, that had favored the university and its fiduciaries. The 7th Circuit Court reasoning was “flawed,” Justice Sonia Sotomayor wrote in the Supreme Court’s opinion.
The appeals court failed to follow the “duty to monitor” guidelines established by the Supreme Court in the 2015 decision, Tibble et al. vs. Edison International et al., Ms. Sotomayor wrote.
The question before the Supreme Court was whether participants in a defined contribution (DC) ERISA plan stated a plausible claim for relief against plan fiduciaries for breach of the duty of prudence by alleging that the plan sponsor fiduciaries caused the participants to pay investment management and administrative fees higher than those available for other materially identical investment products or services.
Specifically, the plaintiffs in the case sued the defendants for allegedly breaching ERISA’s duty of prudence in the following three ways: failing to monitor and control recordkeeping fees, resulting in unreasonably high costs to plan participants; offering mutual funds and annuities in the form of “retail” share classes that carried higher fees than those charged by otherwise identical share classes of the same investments; and offering options that were likely to confuse investors.
The Supreme Court explains that the act of determining whether plaintiffs state plausible claims against plan fiduciaries for violations of ERISA’s duty of prudence requires “a context-specific inquiry of the fiduciaries’ continuing duty to monitor investments and to remove imprudent ones, as articulated in the Tibble case.
My latest article for JDsupra.com can be found here.
My latest newsletter fi retirement plan professionals can be found here.
My latest article for JDSupra.com can be found here.
I was a first-year law student participating in moot court, just because all second-year students participated even when I knew I had zero interest in ever being a litigator. In those days, my mother would buy me these cheap cartoon character ties at Marshalls, as well as these nice Nicole Miller ties (it was the 1990s).
The second-year students were in charge of the moot court and one of the judges in my case was a highly opinionated student government official. After I presented, he criticized my Flintstones tie as being inappropriate. I don’t judge people by the look of their ties, but a lot of people do.
While I like to wear Mitchell and Ness jerseys, I don’t wear them to important meetings with potential clients and if I do dress that way with other providers, I warn them ahead of time that I’m doing it. The point is that while you should never judge a book by its cover, people still do and you shouldn’t lose a potential opportunity just because of the way you dressed.
The local school board member who posts ridiculous stuff on social media was just appointed Acting Parks Commissioner for my county. It’s a little disheartening.
My wife says I post too much on Facebook and she is probably right. I may post a lot, but I try to watch what I post. I avid any comments that could be misinterpreted and considered hateful or in poor taste. I’m a little shell-shocked because I was accosted by my law firm’s managing attorney about some innocuous posts when I worked there. Your reputation in business means everything and you can’t let some silliness on social media get the better of you. Everyone loses their temper, but going online with diatribe posts means it’s likely to be preserved in one fashion or another.
I’ve seen businesspeople that I will never do business with, just because they have anointed themselves as COVID experts.I’ve seen way too many businesses and respected individuals who have suffered because they said way too much in social media posts that they couldn’t take back. I know I certainly say too much in many of my posts concerning old places I worked or organizations I belonged to, but I always see that as a teaching moment. I try to avoid political comments on my business social media, but no one could accuse me of social media posts that could land me in hot water for being insensitive or divisive. The point is to avoid any social media posts that make you look like a creep.
