Overnight Income Doesn't Float ERISA Plan's Boat.
On March 19th, a divided panel of the Eighth Circuit holds that "float," contributions by ERISA plan participants to their retirement plan awaiting investment in the designated investment option, is not a "plan asset." The investment options, not the plan, owned the float, bore the risk of loss with respect to the float accounts, and thus were entitled to any benefits of ownership. The Court therefore reversed a trial court's finding that Fidelity Management Trust, as the ERISA plan manager, breached its ERISA fiduciary duties by failing to pay overnight income earned by the float to the ERISA plan. Addressing claims against the plan administrators, the panel unanimously held that the plan administrators breached their recordkeeping duties. But it reversed and remanded the trial court's finding that the plan administrators breached their duties regarding the employees' investment selection and mapping. Tussey v. ABB, Inc.
Bankruptcy Law Triumphs over Equity.
On March 19th, the Seventh Circuit reversed a district court order avoiding pre- and post-bankruptcy petition transfers of assets by a debtor. Prior to and immediately after its collapse, securities and commodities broker Sentinel Management transferred assets to one set of customers to the detriment of another. The district court avoided both transfers so that one group would not be favored over the other. The Seventh Circuit, however, reversed. It found that the pre-bankruptcy petition transfers of securities cannot be avoided because the payments were made to settle securities transactions. And because the post-petition transfers were authorized by the bankruptcy court they too could not be avoided. Grede v. FCStone.