Since the Spring 2021 edition of the Newsletter, there have been a number of noteworthy developments in the world of benefits, other than the articles contained in this Summer 2021 edition that the editors have highlighted — and other than the still ongoing COVID-19 pandemic. While these developments are worthy of their own spotlight articles, the publication timeline for the Newsletter makes it difficult to publish articles on topics that are just hitting the press. However, because the issues below may have a lasting impact, you should not be surprised to see a more thorough article analysis on these topics in a future edition of the Newsletter.
In the Spring 2021 edition, we highlighted the Newsletter’s recently adopted Mission Statement, which is the guiding philosophy the editors use in preparing each edition. As the Mission Statement provides, the editors’ goal in publishing the Newsletter is to provide articles of professional interest to the membership of the EBC, which include practitioners on all sides of the spectrum. While the editors do their best to stay apprised of material developments, employee benefits covers an incredibly broad array of topics. As such, we acknowledge that there may be topics of interest to you that are not being adequately covered.
This is your Newsletter and we want to make sure we are publishing anything that interests you. So please let us know if there are topics of interest that you would like us to cover. Please also let us know if you (or someone you know) would be interested in writing an article for an upcoming edition of the Newsletter. It sounds cliché but the success of this Newsletter absolutely depends on EBC members who are willing to contribute their time, effort, and perspectives.
Without further ado, here are some interesting new developments in the area of benefits space since the last edition of the Newsletter.
- Supreme Court Grants Certiorari in ERISA Fiduciary Breach Case: On July 2, 2021, the U.S. Supreme Court granted certiorari in Hughes v. Northwestern University to address the pleading standard that applies to ERISA breach of fiduciary duty claims. Hughes is one of now hundreds of cases filed in recent years against the company sponsors and fiduciaries of defined contribution 401(k) and 403(b) plans alleging breaches of fiduciary duties for purportedly failing to adequately control the plan’s administrative costs or monitor the plan’s investments. In recent years, the Courts of Appeals in the Third, Seventh, and Eighth Circuits have reached differing conclusions of the plausibility of such claims at the pleading stage, setting the stage for the Supreme Court to clarify what factual allegations are required to state a claim.
- Supreme Court Denies Certiorari in ERISA Cash Balance Plan Case: On June 28, 2019, the U.S. Supreme Court denied certiorari in Pricewaterhouse Coopers LLP v. Laurent, which involved a challenge to the Second Circuit’s determination that ERISA Section 502(a)(3) permits reformation of a plan as a preparatory step to the ultimate monetary relief awarded under ERISA Section 502(a)(1)(B). At the invitation of the Supreme Court, the Acting U.S. Solicitor General Elizabeth Prelogar submitted a brief recommending that the Court deny Pricewaterhouse Coopers’ petition because the Second Circuit had correctly concluded that the plaintiffs could seek reformation of their cash balance plan and pursue a claim for benefits pursuant to the existing plan.
- Seventh Circuit Finds Claims Against Directors and Officers Who Served as Corporate and ERISA Fiduciaries Not Preempted: In July 2021, the Seventh Circuit addressed in Halperin v. Richards whether ERISA preempted state law claims asserted by bankruptcy creditors against the directors and officers of a company who allegedly “inflated the company’s stock value to conceal the company’s decline and to benefit corporate insiders.” Although the defendants argued that ERISA preempted the creditors’ state law claims, the Seventh Circuit held that the claims were not preempted because ERISA “contemplates parallel state-law liability against directors and officers serving dual roles as both corporate and ERISA fiduciaries.” Because the Court acknowledged that there was limited precedent to support its conclusion, the scope of ERISA preemption will continue to be a central issue in many cases going forward.
- U.S. Department of Labor Information Letter Provides That ERISA’s Claim Regulations Require Production of Audio Recordings: On June 14, 2014, the Department of Labor (“DOL”) issued an Information Letter to our very own Section Co-Chair, Cassie Springer Ayeni, addressing whether plan administrators are required to disclose recordings or transcripts of phone calls between participants and plan representatives regarding their benefit claims. The DOL explained that ERISA’s claim regulations (29 C.F.R. § 2560.503-1) require plan administrators, upon request, to provide claimants with copies of relevant information to their claim for benefits, which includes information “generated in the course of making the benefit determination.” Accordingly, even if a plan administrator does not rely on a recording or transcript of a phone call in making its benefit determination, that recording, or transcript is not excluded from ERISA’s disclosure regulations.
- GAO Report Recommends Changes to Participant Fee Disclosures: In July 2021, the Government Accountability Office (“GAO”) issued a report finding that almost 40% of 401(k) plan participants do not fully understand and have difficulty using the fee disclosure information that plans are required to provide to participants under existing regulations. The GAO recommended that the DOL (specifically, the Employee Benefit Security Administration) make certain changes to the required plan fee disclosures. The DOL responded that the GAO recommendations “pose significant technical and feasibility challenges” and would require notice and comment rulemaking.