Archive for the ‘Fiduciary Liability’ Category

Worried the current regulation may limit investment advice, Labor Department hopes to amend definition by June

by Jessica Toonkel Marquez, Investment News www.investmentnews.com

The Labor Department is planning to expand its definition of fiduciary under ERISA — a move that would have implications for all financial advisers that work on retirement plans. Read more

With lawsuits piling up against pension plan sponsors, individual fiduciaries would do well to protect themselves against financial risks, experts say.

Randy Myers – CFO.com | US

November 19, 2009

If you are a fiduciary for your employer’s retirement savings plan, you already know that life isn’t getting any simpler. Lawsuits against plan fiduciaries are on the upswing, and some fiduciaries have been found personally liable for plan losses under ERISA, the Employee Retirement Income Security Act of 1974. Read more

by Tim Hull, Courthouse News Service, www.courthousenews.com

LOS ANGELES (CN) – A federal accuses Blue Cross of a wide-ranging scheme to underpay claims from out-of-network hospitals. Methodist Hospital of Southern California claims Blue Cross refuses to let it transfer patients from emergency rooms, then underpays the hospital and sticks patients with hefty bills, falsely claiming the patients “requested” to stay put. Read more

In Administrative Committee of the Wal-Mart Stores, Inc. v. Gamboa, 479 F.3d 538 (8th Cir. 2007), an ERISA plan administrator brought suit seeking equitable reimbursement from a plan participant who had received a settlement from a tortfeasor. Although the reimbursement provision was contained in an SPD for a health plan, the employer had no formal written health plan. Reversing summary judgment for the participant, the Eighth Circuit held that the plan administrator reasonably construed the SPD to be on the plan document for purposes of a group health plan in the absence of any formal plan and that the reimbursement provision in the SPD was therefore enforceable. Read more

by Fred Schneyer of PLANSPONSOR, www.plansponsor.com

An Indiana manufacturer has received a mixed ruling from a federal judge in a lawsuit alleging its misdeeds in the handling of its benefits program constituted a fiduciary breach. Read more

The Brualdi Law Firm, P.C. has issues a press release regarding suit they have filed against Lehman Brothers Holdings, Inc. for potential violations of ERISA.  The suit concerns Lehman Brother’s 401(k) plan, which comes within the purview of ERISA.  Brualdi, representing members of the Plan, assert that Lehman Brothers and other administrators of the Plan may have breached their fiduciary duties, owed to plan participants.  Such a breach may occur when fiduciaries fail to prudently manage plan assets. Read more

Roy F. Harmon III has posted recent U.S. Department of Labor legal endeavors regarding employee benefit plans on his Health Plan Law blog (http://healthplanlaw.com/).  In recent months, most legal controversies regarding ERISA plans have related to plan administration and violations of fiduciary duty.  Whether it is an individual plan member suing to enforce plan terms (see LaRue v. DeWolff, Boberg & Associates below) or the U.S. Department of Labor investigating irresponsible management of plan funds (the sale, for example, of a $28 million dollar plan investment for $4.5 million), fiduciary duties to plan members is at the forefront of recent ERISA law.

On June 18, 2007, the United States Supreme Court granted a writ of certiorari to hear the appeal of this Fourth Circuit case.  Their ruling will once again affect the application of ERISA.  Plaintiff (employee LaRue) alleged that the administrator had failed to invest his funds as instructed, resulting in a loss.  He sought monetary rewards, and both the District Court and Court of Appeals determined that the remedy he sought fell outside the scope of “equitable relief” § 1132(a)(3) of ERISA authorized. Money damages were the classic form of legal relief, absent from the list of equitable remedies available under § 1132(a)(3). Plaintiff could not recover under an equitable restitution theory since he did not allege that funds owed to him were in defendants’ possession but instead that the funds never materialized. Read more

This case arose from a Plan’s failure to add an employee’s dependents to an ERISA welfare benefit plan. As a benefit of employment, the employer offered its employees health insurance. Under the Plan, the employer was both a “participant” and the “Plan Administrator.” Employees were instructed to direct their inquiries about the Plan to their employer, which acted as the general intermediary between its employees and the Insurer. Read more

In this case, a TPA was sued by their clients (employers and those employer’s employees), for mishandling their plans’ funds. The TPA trustees in turn hoped to sue their attorney, claiming that their attorney should have notified them of the fund management issues and improper expenditures. The court found that the attorney did not have discretionary control over the assets of the plan, access to funds, or powers to administer the plans, and was therefore not a fiduciary. Even if the attorney knew of the transactions and failed to disclose them, the fund trustees would be unable to demonstrate how the attorney’s actions or lack of action proximately caused the mismanagement of the funds. Read more

In this case, an employee stopped working due to a medical condition and began receiving disability benefits from her employer’s self funded ERISA plan. After two years the case was reassessed, the TPA terminated the benefits. The insured filed suit against the TPA, seeking both payment of past claims and re-instatement of future benefits. The TPA moved to dismiss arguing that it was not a proper defendant in this case because it did not have any financial responsibility to the employee. The employer and plan, the TPA asserted, were the proper defendants. The court denied the motion to dismiss, however, stating that the TPA’s discretionary power over the payment of claims made it a fiduciary to the plan and plan members. Read more

Section 502(a)(3)(B) of ERISA permits a fiduciary to bring a civil action “to obtain equitable relief to enforce the terms of the plan”. To obtain this “equitable relief,” the basis for the fiduciary’s claim and the relief it seeks must be equitable in nature. Importantly, a fiduciary cannot seek to impose personal liability, as that would be a legal remedy. The Policy in this case required repayment of an overpayment of benefits that resulted when a claimant received benefits in the amount of $ 19,612. The Plan requested reimbursement and the beneficiary refused, stating that she no longer had any of the funds. Read more