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Employee Benefits Law Report Reporting on recent trends and developments affecting employee benefits

Tag Archives: DOL

DOL Sues Insurance Brokerage Firm – Selection of an Annuity Provider for a Terminating Pension Plan is a Fiduciary Duty

Posted in ERISA Fiduciary Compliance

The Department of Labor (“DOL”) has sued an insurance brokerage firm, and its owner, for allegedly breaching fiduciary duties associated with purchasing an annuity contract for a terminating defined benefit plan. The complaint alleges that in 2003, the firm entered into an agreement to function as an ERISA fiduciary with respect to the purchase, for a fixed fee of $50,000, with no additional compensation. The firm then purportedly arranged to receive an additional $522,047 of compensation from the insurance company that was eventually selected, and falsified information submitted by other bidders so that this insurance company would appear to be …


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Fee Disclosures Are Almost Here — What Should Plan Sponsors Do Now?

Posted in ERISA Fiduciary Compliance, Health and Welfare Plans, Other Articles

The quickly approaching deadline for written fee disclosures by covered service providers creates new homework for plan sponsors–in the form of enhanced fiduciary review obligations and a suggested need to review (and/or create) written service agreements.

By now folks who work in the tax-qualified retirement industry are well (and perhaps painfully) aware that the United States Department of Labor (“DOL”) issued final service provider fee disclosure regulations early this year.  As the deadline for service providers to provide the required disclosures (i.e., July 1, 2012) draws close, it seems like an opportune time to consider what plan sponsors …


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Definition of Fiduciary—Relief Or More of the Same?

Posted in ERISA Fiduciary Compliance

The United States Department of Labor (the “DOL”) last week withdrew a proposed regulation that would have expanded the definition of “fiduciary” under ERISA in the context of retirement plans. (See our recent post that announced that withdrawal.) The regulation project was based on a belief that the old regulations defining the term, which originally were issued in 1975, were inadequate in today’s marketplace (a contention that seemingly drew little opposition in the abstract). The proposed regulations would have expanded greatly the types of services and the circumstances under which an entity would be deemed an ERISA fiduciary. However, proving …


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“Fiduciary” Regulation Change Put On Hold, Pending Revision and Economic Analysis

Posted in ERISA Fiduciary Compliance, ESOPs

The Department of Labor’s Employee Benefits Security Administration(EBSA) has put the brakes on its proposed rule on the definition of a fiduciary, which was slated to become final in the near future. EBSA’s goal for the regulatory change was to ensure that potential conflicts of interest among financial advisors would not compromise the quality of investment advice to individuals. Many employers were concerned that the regulation could increase the costs of investments in their 401(k) plans, and undermine efforts to educate employees about investments and retirement planning. The proposed regulation would also have turned employee stock ownership plan (ESOP) …


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Resolving Employee Benefit Plan Audit Problems and Late or Amended Forms 5500

Posted in Audits and Correction, ERISA Fiduciary Compliance

This time of year, many employers are struggling to satisfy the independent auditors of their employee benefit plans so that they can obtain opinions and file their Forms 5500 on time. For a calendar year plan that filed a Form 5558 extension, the deadline is generally October 15 (but is October 17 this year, given that the 15th is a Saturday). As the deadline nears, employers may also encounter problems with electronic filing (now in its second year) and with getting answers to their questions regarding the filing. The potential penalties for failure to timely file a Form 5500 are …


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Health Care Reform Update: Grandfathered Plans

Posted in Health Care Reform

The Department of Labor (“DOL”) has published Frequently Asked Questions describing the scope of the anti-abuse rule (available here). Generally, transferring employees from one grandfathered plan or benefit package (transferor plan) to another (transferee plan) will cause the transferee plan to relinquish grandfather status if amending the transferor plan to replicate the terms of the transferee plan would have caused the transferor plan to relinquish grandfather status. An exception exists where the employer has a bona fide employment-based reason to transfer the employees.…


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Update on What Fiduciaries Need to Know about Investments and Fees

Posted in ERISA Litigation, ESOPs

Plan fiduciaries generally understand that they have certain duties related to plan investments and service provider fees. Court decisions over the years have shed some light on these duties. Fiduciaries should already be doing the following to satisfy their fiduciary duties:

1. Obtain some measure of expertise in plan investments. Lacking expertise, a fiduciary should hire someone with the professional knowledge required to carry out the investment functions.

2. When selecting service providers, engage in a reasoned decision-making process and document the basis for decisions. The duty to act prudently focuses primarily on the decision-making process.

3. Pay only reasonable


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DOL Urges Sixth Circuit to Weaken Presumption of Prudence of Plan Fiduciaries in Stock Drop Cases

Posted in ERISA Litigation, ESOPs

The United States Department of Labor (“the DOL”) has challenged the dismissal of a 401(k) plan fiduciary breach claim on two grounds, in an amicus brief filed with the Sixth Circuit Court of Appeals, See Pfeil v. State Street Bank & Trust Co., E. D. Mich. No. 09CV12229; (Brief available here). One argument the DOL is rejecting is a position that affords fiduciaries of 401(k) plans and ESOPs a presumption of reasonableness in stock drop cases. The DOL’s second argument is that under the ERISA Section 404(c) safe harbor, fiduciaries may still be liable for the imprudent selection …


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