DOL Proposes New Investment Advice Rule
The Department of Labor has issued a proposed rule implementing the prohibited transaction exemption for providing investment advice to 401(k) plan and IRA participants added by the Pension Protection Act of 2006. The proposed rule replaces previously published final rules that were withdrawn last year following critical comments. The new proposed rule is narrower in scope: it does not include a separate administrative exemption. It also clarifies the application of the statutory exemption to arrangements involving affiliates of a fiduciary advisor. Comments are due by May 5, 2010. A link to the proposed rule can be found below. This is only proposed and will not be effective until after it is published in final form.
Procedural Prudence Saves Plan Fiduciaries
A U.S. District Court has granted a motion for summary judgment in favor of plan fiduciaries in a case where the plaintiffs alleged that the fiduciaries committed various ERISA fiduciary breaches by (1) maintaining a “unitized stock fund” within a 401(k) plan in which day trading resulted in increased expenses and lower returns to participants; and (2) paying excessive fees to the plan’s administrator. The court dismissed all of the claims after determining that the plan fiduciaries used a “reasoned decision-making” process. George v. Kraft Foods Global Inc., 48 EBC 1929 (N.D. Ill. Jan. 27, 2010).
Health and Welfare
Health Plan TPA Breached its ERISA Fiduciary Duties by Overpaying Medical Claims
A U.S. District Court held that a health plan’s third-party administrator breached its fiduciary duties under ERISA by failing to exercise due care and by failing to administer the plan in accordance with plan documents when it overpaid medical claims. Notwithstanding the fact that the TPA contract disclaimed fiduciary status, the court held that the TPA was an ERISA fiduciary because it exercised discretionary control over plan assets. Hartsfied, Titus & Donnelly LLC v. Loomis Co., D.N.J., No. 08-3329 (WJM) (Feb. 16, 2010).
“De Novo” Standard Applies When Reservation of Rights Clause is Ambiguous
In an unpublished decision, the U.S. Court of Appeals for the Ninth Circuit held that a clause providing that “[the plan administrator] reserves the right to determine if your proof of loss is satisfactory” is sufficiently ambiguous to require a “de novo” rather than the “abuse of discretion” standard of review that is more favorable for plan administrators. For “abuse of discretion” to apply, an ERISA plan must unambiguously provide discretion to the administrator to interpret plan terms. Mazet v. Halliburton Company Long Term Disability Plan, No. 08-17101, Slip Op. (9th Cir. Feb. 24, 2010).
Supreme Court Decides Not to Review Unisys Case
In In Re: Unisys Corporation Retiree Medical Benefits ERISA Litigation, the U.S. Court of Appeals for the Third Circuit previously held that a plan sponsor is liable for a breach of fiduciary duty by failing to remind employees that their retiree medical benefits could be reduced, despite an explicit “reservation of rights” in the governing plan documents. The U.S. Supreme Court has denied Unisys’ petition to review the Third Circuit’s decision.
Additional SEC Guidance on Proxy Disclosure Rules
On February 16, 2010, the Securities and Exchange Commission posted additional Compliance and Disclosure Interpretations addressing the new rules for 2010 proxy and registration statements filed on or after February 28, 2010. The additional Interpretations offer guidance on disclosure under Items 401 and 402 of Regulation S-K, as well as guidance on calculating the four-business day filing period for disclosing on Form 8-K the results of a shareholder vote. Links to the new guidance can be found below.
EU Stock Incentive Plans
The Committee of European Securities Regulators (CESR) has proposed to exempt more employee stock incentive plans from filing a full prospectus with the European Union. If an employee stock incentive plan does not fit within this exemption, the CESR also has issued guidance to allow the companies to prepare a short form prospectus rather than the full prospectus.
The DOL’s proposed rule on investment advice can be found at:
A fact sheet about the proposed rule can be found at:
A copy of the White House health care proposal can be found at:
Copies of the SEC’s Compliance and Disclosure Interpretations can be found at: