ERISA fiduciary breach cases regarding plan fees and other fiduciary problems have been in the news lately, especially as cases come up for trial and settle. Benefit plan administrators are watching these cases closely and trying to make proactive changes to the plans they administer to avoid future litigation. Recently, Tussey v. ABB, Inc., a long-standing case that was the first ERISA case to go to trial regarding excessive plan fees, came to an end as the parties agreed on settlement terms.
In Tussey v. ABB, Inc., plan participants alleged that ABB failed to monitor recordkeeping fees, resulting in excessive fees. They alleged further that the plan fiduciaries engaged in self-dealing by mapping investments in Vanguard’s Wellington Fund to Fidelity’s Freedom Funds. Fidelity was the plan recordkeeper and was giving ABB a pricing break on services because of the plan investment mapping. The case has gone to the Court of Appeals for the Eighth Circuit twice, and it was denied review by the Supreme Court. Being the first case to go to trial and generate a judicial record, this case has been a guiding lawsuit regarding how courts will regard plan fiduciary obligations and how courts will measure losses to members of a class action.
In another example, the U.S. District Court for the Western District of Missouri found that plan fiduciaries’ failure to monitor fees resulted in a loss of $13.4 million, and the fund mapping resulted in a loss of $21.8 million. The appellate court upheld the findings regarding the fiduciaries’ failure, but it reversed the decision regarding plan mapping as speculative. When returned to the lower court in 2015, class members were awarded no damages for plan mapping and plaintiffs appealed. Again, the appeals court vacated the decision and ruled that the case required further consideration in the area of damages for plan mapping.
After this back and forth in the ABB matter, it appears the parties have reached a settlement covering both claims. Further, ABB has been ordered by the court to gather competitive bids for recordkeeping services and work to negotiate plan costs. ABB fiduciaries are required to manage the benefit plan in the best interest of plan participants.
The total ABB settlement will be $55 million. Of that, a little over $20 million will be going to the attorneys for their fees and litigation expenses. The named members of the class, who stood as representatives of the class regarding the excessive fees in the ABB 401(k) plan are receiving $25,000 each. The balance of the settlement will be distributed to the remaining members of the class. These remaining members of the class are individuals who participated in the plan from December 29, 2000 until Dec 31, 2007.
Tracking ERISA litigation and understanding how it impacts our clients is important to the experienced ERISA attorneys at Hall Benefits Law. We take steps to ensure that the benefit plans our clients use operate according to state and federal laws and regulations, and we take trends in benefits litigation into account to proactively protect businesses and plan participants. Call 678-439-6236 today, or visit the Hall Benefits Law website to learn more.
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HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.