The Seventh Circuit revived two previously dismissed ERISA breach of fiduciary duty claims in its latest decision in Hughes v. Northwestern, which had been remanded from the Supreme Court. In doing so, the Seventh Circuit issued its own pleading standard for deciding ERISA duty of prudence claims alleging mismanagement of defined contribution plans. The standard does not affect how plan fiduciaries review, choose, and monitor investment choices and recordkeeping fees, but makes it easier to second-guess those decisions without fully understanding the “circumstances prevailing” at the time the fiduciary acts.
In Case You Missed It – Winter 2023
Written by members of Faegre Drinker’s benefits and executive compensation team, this blog features analysis and information on matters related to retirement plans, health and welfare plans, ESOPs, ERISA litigation, fiduciary governance, and other benefits issues.
This quarterly digest provides links to our most popular posts during the past few months so that you can catch up on what you missed or re-read them.
Secure 2.0 Adds New Distribution Options for Defined Contribution Plans
By Mark Rosenfeld, Erik Vogt, and Mark M. Brown
SECURE 2.0 introduced several new distribution options and tax reporting rules for defined contribution plan sponsors. In this post, we overview the new provisions and their potential implementation dates.
COVID-19 National Emergency Plan Deadline Extensions Set to End This Summer
By Stephanie L. Gutwein and James E. Crossen
On January 30, 2023, President Biden announced the Administration’s plan to extend the current declarations of the COVID-19 national emergency and public health emergency (PHE) through May 11, 2023, and end both emergencies on that date. The end of the national emergency, which was originally declared in March 2020, will cause certain employee benefit plan-related deadline extensions to conclude this summer.
Multiemployer Pension Plan Alert: Evergreen Clauses May Trump the Bargaining Parties’ Subsequent Agreement
By Gregory Ossi and Caitlin M. Britos
The U.S. Court of Appeals for the Seventh Circuit recently ruled that Central States, Southeast and Southwest Areas Pension Fund may continue its lawsuit against Transervice Logistics, Inc. and Zenith Logistics, Inc. seeking allegedly outstanding pension fund contributions. The case examined two consolidated appeals, each involving a nearly identical collective bargaining agreement (CBA) between each employer and a union, and trust agreements between each employer and the plaintiff fund.
Fourth Circuit Endorses Rule 52 for Resolving ERISA Benefit Claim Cases with Factual Disputes
This article originally appeared in the March 2023 edition of The Brief Case, DRI’s monthly newsletter.
Amid a circuit split, the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) has firmly taken a side as to its treatment of benefit claim denials brought under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1132(a)(1)(B). In Tekmen v. Reliance Standard Life Insurance Company, 55 F.4th 951 (4th Cir. 2022), the Fourth Circuit endorsed seeking judgment, not via summary judgment or a quasi-summary judgment procedure, but through Federal Rule of Civil Procedure 52 if the case involves de novo review of a benefit claim with factual disputes. Rule 52 allows a court to conduct a “trial on the papers” and thus issue findings of fact and conclusions of law.
NLRB: Severance Pay Cannot Include Condition to Waive Rights Under NLRA
The decision of the National Labor Relations Board (the Board) in McLaren Macomb, 372 NLRB No. 58 ( Feb. 21, 2023), reinstates a limit on the confidentiality, non-disclosure, and non-disparagement clauses that employers may include in severance agreements with most of their lower-level employees. While the Board bills its decision as a return to the standard applied in earlier cases, this decision suggests that the Board will take a broader view of how such agreements infringe on employees’ rights under Section 7 of the National Labor Relations Act.
Continue reading “NLRB: Severance Pay Cannot Include Condition to Waive Rights Under NLRA”
Multiemployer Pension Plan Alert: Evergreen Clauses May Trump the Bargaining Parties’ Subsequent Agreement
The U.S. Court of Appeals for the Seventh Circuit recently ruled that Central States, Southeast and Southwest Areas Pension Fund may continue its lawsuit against Transervice Logistics, Inc. and Zenith Logistics, Inc. seeking allegedly outstanding pension fund contributions. The case examined two consolidated appeals, each involving a nearly identical collective bargaining agreement (CBA) between each employer and a union, and trust agreements between each employer and the plaintiff fund. The court was asked to determine whether the employers were required to maintain contributions to a multiemployer pension plan pursuant to so-called “evergreen clauses” that renewed the CBAs each year unless timely terminated.
Factual Background
The CBAs obligated the employers to make pension fund contributions to plaintiff, making the fund a third-party beneficiary of the agreements. The trust agreements obligated the employers to contribute to the fund for the “entire term of any collective bargaining agreement… (including any extension of a collective bargaining agreement through an evergreen clause…).” The CBAs were set to expire on January 31, 2019 but contained evergreen clauses that renewed the CBAs each year unless terminated with 60 days’ notice.
SECURE 2.0 Expansion of Self-Correction Program and Plan Loan Error Corrections
The SECURE 2.0 Act of 2022 (SECURE 2.0), the follow-up legislation to the Setting Every Community Up for Retirement Enhancement Act of 2019 (now known as SECURE 1.0) (previously discussed here and here), includes many important legal changes affecting retirement plans. SECURE 2.0 is intended to expand access to retirement plans, encourage additional retirement savings and ease certain administrative burdens on retirement plan sponsors.
In a measure that substantively affects plan sponsors and alters retirement plan correction practices, SECURE 2.0 significantly expands the availability of self-correction by widening the range of operational failures for which self-correction is available, including plan loan errors.
Continue reading “SECURE 2.0 Expansion of Self-Correction Program and Plan Loan Error Corrections”
COVID-19 National Emergency Plan Deadline Extensions Set to End This Summer
On January 30, 2023, President Biden announced the Administration’s plan to extend the current declarations of the COVID-19 national emergency and public health emergency (PHE) through May 11, 2023, and end both emergencies on that date. The end of the national emergency, which was originally declared in March 2020, will cause certain employee benefit plan-related deadline extensions to conclude this summer.
Specifically, under relief that the Department of Labor, the Department of the Treasury, and the Internal Revenue Service jointly provided effective March 1, 2020, the timeframes for taking the following actions were extended during the “Outbreak Period” for up to one year:
Continue reading “COVID-19 National Emergency Plan Deadline Extensions Set to End This Summer”
SECURE 2.0 Adds New Distribution Options for Defined Contribution Plans
SECURE 2.0 introduced several new distribution options and tax reporting rules for defined contribution plan sponsors. Below is an overview of the new provisions and their potential implementation dates. (For an overview of SECURE 2.0 for defined contribution plan sponsors, click here.)
Here is a quick summary of the new distribution changes in SECURE 2.0.
Continue reading “SECURE 2.0 Adds New Distribution Options for Defined Contribution Plans”
New Kids on the Block: IRS Creates Determination Letter Program for Individually Designed 403(b) Plans
The Internal Revenue Service (IRS) has announced that beginning June 1, 2023, it will accept determination letter applications for individually designed 403(b) retirement plans. As background, 403(b) plans are a distinct type of retirement plan for employees of 501(c)(3) tax-exempt organizations and public schools (including colleges and universities). Despite the formal distinction, though, in many respects modern 403(b) plans often resemble 401(k) plans.
ERISA Litigation Roundup: Judge Permits Partial Jury Trial in Eversource Energy 401(k) Dispute
In an unusual decision, a federal judge last month refused to strike a plaintiff class’ demand for a jury trial in an ERISA 401(k) class action.
In Garthwait v. Eversource Energy Co., a class of former and current participants in the Eversource 401(k) Plan (the Plan) filed an action against Eversource Energy Company and Plan fiduciaries seeking to recover plan losses caused by alleged breaches of fiduciary duty and requesting other equitable or remedial relief.