Data & Research August 31, 2007

IMHO: Impact Full

In a business notorious for change, it nonetheless seems fair to say that the past twelve months have been extraordinary ones indeed for financial advisers.
Reported by

In short order, we have had to absorb and assimilate the mandates of the Pension Protection Act, grapple with the portents of qualified default investment alternatives, gird ourselves for the impact of final regulations on deferred compensation plans and 403(b)s—and all this at a time when revenue-sharing practices are drawing an unprecedented level of scrutiny from all quarters.

There is nothing like tumultuous times to highlight the value of, and reinforce the need for, expert help for plan fiduciaries. It is also the kind of challenging environment that tends to separate the chaff from the wheat—that sorts out the committed from the merely intrigued. And, yes, it surely plays to the advantage of a profession dedicated to helping plan sponsors construct the right programs, and participants make the best of them.
That is why, in 2005, we launched our Retirement Plan Adviser of the Year award; to acknowledge “the contributions of the nation’s best financial advisers in helping make retirement security a reality for workers across the nation.” Today, it is both my honor and privilege to launch the nomination process for our fourth annual campaign to acknowledge the contributions of the very best financial advisers in the nation, both individuals and teams.
Impact Statement
The criteria that underlie the award are simple but impactful; we want to recognize advisers who make a difference through increasing participation, boosting deferral rates, enhancing asset allocation, and/or providing better programs through expanded service or expense management. It is no accident that those criteria also underlie the Pension Protection Act’s designs for defined contribution plans, for only by getting more workers saving in these programs at effective rates, and invested in prudent ways, can they have any real prospects for retirement security.
We will acknowledge the finalists in the December issue of PLANSPONSOR as well as the Winter issue of PLANADVISER, and profile the winners in the March issue of PLANSPONSOR and Spring issue of PLANADVISER. The finalists also will be recognized at PLANSPONSOR’s Annual Awards for Excellence celebration in New York City in March.
It has been our privilege these past several years to lend a hand to your efforts—first via PLANSPONSOR magazine; then via PLANSPONSOR.com, the NewsDash, and this publication; and, more recently, via our education arm, the PLANSPONSOR Institute and our PLANSPONSOR Retirement Professional (PRP) designation. Believe it or not, it was a year ago next month that we officially launched PLANADVISER—and later this month, we will offer our very first adviser-focused conference, the PLANADVISER National Conference, and I hope to see many of you there (but you need to register ASAP, if you haven’t already).

While these awards are designed to recognize financial adviser excellence, we trust the standards they embody will continue to provide a source of inspiration for those who make a difference every day. I look forward to getting to know you, and your practices, better through this process.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

You can nominate a co-worker, colleague, or yourself for PLANSPONSOR’s Retirement Plan Adviser of the Year HERE

Compliance August 31, 2007

Cashed-Out Participants Pursuing Fiduciary Breach Claims

Employees who have cashed out of their employer-sponsored retirement plans but still want to bring fiduciary breach suits seem to be getting some judiciary backing, with another federal court giving the go ahead for another such suit to proceed.
Reported by

U.S. District Judge Joseph L. Tauro of the U.S. District Court for the District of Massachusetts ruled that the former Boston Scientific Corp. employees can sue the surgical products maker for imprudently choosing company stock as a retirement plan investment option, even though they cashed out of their plans.

Tauro’s ruling follows several such decisions where federal courts around the country have allowed plaintiffs to go forward with a suit in which individuals who are no longer participants have nonetheless been granted standing to sue.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

The four employees alleged in the suit that Boston Scientific and other fiduciaries of the 401(k) plan breached their duties under the Employee Retirement Income Security Act (ERISA) by including company stock as an investment option, “despite knowledge that the stock price was artificially inflated.”

“Benefits are benefits…”

Tauro followed the reasoning used by the 7th, 6th and 3rd U.S. Circuit Courts of Appeal in allowing the suit to progress.

He used an excerpt from the 7th U.S. Circuit Court of Appeals ruling: “Benefits are benefits; in a defined-contribution plan they are the value of the retirement account when the employee retires, and a breach of fiduciary duty that diminishes that value gives rise to a claim for benefits measured by the difference between what the retirement account was worth when the employee retired and cashed it out and what it would have been worth then had it not been for the breach of fiduciary duty.”

Boston Scientific argued that the four former employees lacked standing to bring fiduciary breach charges under ERISA Section 502(a)(2), because they wanted individual monetary damages and benefits for only a subsection of the plan, and that section only provides equitable relief.

Tauro issued the latest ruling in In re Boston Scientific Corp. ERISA Litigation, D. Mass., No. 06-10105-JLT, 8/27/07.

ERISA attorney: Rulings are a Trend

ERISA attorney Fred Reish, of the Los Angeles-based law firm of Reish Luftman Reicher & Cohen, predicts this favorable ruling for former participants as a trend that will result in most courts following suit.

The courts were saying: “If you are still owed more money by a fiduciary, you are still entitled to assert your (fiduciary breach) claim. If your claim is valid, you can get your money. If it isn’t, your case will be thrown out of court,” Reish told PLANADVISER.com.

The bottom line, according to Reish, is that the courts are not giving these former participants a new right they didn’t have before because they have always had not only the right to their account balance but an “intangible” right to assert a claim that they should have been paid more because of a fiduciary breach, Reish added.

The take away for plan sponsors, according to Reish, is that the recognition by these appellate and trial courts of this existing right could lead to potentially larger class-action claims and potentially higher dollar claims values.

«