Tagged ‘Fiduciary‘

Sixth Circuit Imposes Penalties for Not Providing ERISA Plan Documents Upon Request

Lessons plan administrators should learn from Cultrona v. Nationwide Life Insurance Company (6th Cir. 2014):

  1. If a participant requests a document to which he or she is entitled under ERISA, hand it over.
  2. If you can’t figure out which document the participant wants, then the smart thing to do is to ask.
  3. If you don’t hand over the document….be prepared to pay up.

It’s just not that hard to do the right thing.  And it’s cheaper than paying the penalty for noncompliance. Read More →

Fifth Circuit: De Novo Review for Breach of Fiduciary Duty Claims

As any first-year law student can attest, sometimes it’s all about the footnotes.   In this vein, the Fifth Circuit’s unpublished opinion in Futral v. Chastant is poised to become the latest case to boast a footnote likely to overshadow the holding.

Laurie Futral, the widow of a murdered dentist, claimed that she was entitled to receive benefits from the qualified plans sponsored by her husband’s dental practice.  Her brother-in-law, Paul Chastant, served as her husband’s executor and served as trustee of the qualified plans.  Futral filed suit against Chastant in order to obtain payment of the plan benefits.  During the course of litigation, Chastant became aware of allegations that Futral was involved in her husband’s death and asserted that payment was not permissible under Louisiana’s Slayer Statute.  Chastant used approximately $80,000 in plan assets to pay for attorney’s fees relating to the litigation.  After a jury determined that Futral did not play a part in the murder, Chastant released the plan benefits to Futral.  Shortly thereafter, Futral brought a claim for breach of fiduciary duty against Chastant and sought to recover the amount of the plan assets which he spent in defending against her claim for benefits.  Not surprisingly, the Fifth Circuit held that Chastant did not breach his fiduciary duty simply by “us[ing] plan funds to defend against a suit seeking to compel disbursement to a potentially ineligible beneficiary.”  The Court did draw the line at authorizing Chastant to obtain additional attorney’s fees directly from Futral.  The Court noted that while the plan documents authorized payment of legal expenses from the corpus of the plans in some situations, they did not extend to authorizing recovery from a beneficiary after the plans’ funds had been disbursed.

While interesting, this result is not the real headline.  Instead, in a footnote, the Court explained that it declined to review Chastant’s actions under the “abuse of discretion” standard articulated by Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989).  The Court conceded that, under Firestone, the application of an abuse of discretion standard would be proper in reviewing a challenge to a denial of benefits under ERISA Section 502(a)(1)(B).  The Court rejected Chastant’s argument that his decision to pay the attorney’s fees fell into the same category and instead applied the less deferential standard of de novo review.

It’s a fair bet that, sometime in the near future, we’ll see further discussion of the final words of the Fifth Circuit’s footnote:  “Because this is a suit for a breach of fiduciary duty rather than a suit for denial of benefits, Firestone does not apply and the proper standard of review is de novo.”



AARP Survey: Plan Sponsors Want 401(K) / 403(B) Providers to Give Advice in Best Interest of Participants

According to a newly released AARP study, 89 percent of plan sponsors would like defined contribution plan providers to be required to meet fiduciary standards when offering investment advice to plan participants. Moreover, 78 percent would be “very likely” or “somewhat likely” to require providers to offer advice in the best interest of participants even in the absence of a government mandate.

Approximately two-thirds of the plan sponsors have engaged a provider that offers investment advice or consultation to plan participants.  While most of the 3010 survey respondents expressed confidence in their own providers, more than half acknowledged that a provider’s advice “may be influenced by the money that the provider makes from the plan investments.”

The Department of Labor is expected to issue guidance on the fiduciary obligations of investment advisors in August.  In the interim, plan sponsors should review their current contracts with defined contribution plan providers in order to understand whether the “best interest” standard is currently in force.

To read the full survey report, click here.