The US Department of Labor (DOL) released its 2020 statistics on ERISA enforcement activities on October 27, affirming that the agency’s investigations remain robust. In sharing the statistics, the DOL not only boasted that it had restored $3.1 billion to employee benefit plans, participants, and beneficiaries, but also that this amount is the “most ever” that the agency has recovered in one year. The DOL further emphasized its active enforcement program by pointing out that its investigatory recoveries increased 175% from fiscal year 2017 to 2020, and 310% from fiscal year 2016 to 2020. The DOL reports that these results were obtained through 1,122 civil investigations, with 67% of such cases resulting in monetary recoveries or other corrective actions
One of the simplest yet most integral parts of meeting your ERISA fiduciary duties is “sticking to the plan.” Section 402(a)(1) of ERISA requires that every employee benefit plan it covers be established and maintained pursuant to a written instrument.
Establishing a written plan document is a nonfiduciary “settlor” activity. This means that all of the decisions that go into designing the plan are not subject to the ERISA standard of care and cannot be challenged for a breach of fiduciary duty.
On the other hand, following the written plan document in the day-to-day management and administration of the plan is a fiduciary duty under Section 404(a)(1)(D) of ERISA to the extent that it is consistent with ERISA. ERISA requires strict compliance, and veering from the plan’s written terms is generally a per se violation of ERISA. Failure to follow the written plan terms is the most obvious breach of fiduciary duty for a court or regulatory agency to spot and enforce. For example, where a fiduciary’s decision may or may not plainly be a breach of prudence under ERISA, a clear violation of the plan’s written terms may otherwise be the court’s or regulatory agency’s path to finding a breach.
As the effects of the coronavirus (COVID-19) pandemic hit the United States, downsizings and shutdowns are spreading indiscriminately throughout the economy. Employers who are complying with “shelter in place” regulations and attempting to mitigate these extraordinary economic challenges with layoffs should keep in mind that such unprecedented actions may still involve complying with routine regulatory obligations.
The outsourcing of retirement plan recordkeeping and other administrative responsibilities has increased in recent years for both defined contribution and defined benefit plans. Although there is no overarching privacy law governing retirement plans, fiduciaries must adhere to the “prudent expert” standard of care in fulfilling their duties, and be continuously diligent and attentive to the privacy and security of participant data.
This diligence extends to the structuring of outsourcing agreements for administrative responsibilities. Read this post from our Tech & Sourcing @ Morgan Lewis blog for more data security considerations in plan administration outsourcing agreements.
Recent decisions by the US Court of Appeals for the Ninth Circuit have reinvigorated the debate over whether mandatory individual arbitration provisions are enforceable with respect to ERISA claims and, if so, whether these provisions are worth including in your ERISA plan document. In Dorman v. Charles Schwab Corp., the Ninth Circuit affirmed that provisions in plan documents requiring individual arbitration of ERISA claims could be arbitrable, a contrast to the Munro v. University of Southern California decision in July 2018. To learn about these changes, please read our LawFlash.
Our ERISA litigation chairs, Jeremy Blumenfeld, Debbie Davidson, and Brian Ortelere, recently chatted with Law360 about how Morgan Lewis is handling some of the hottest areas in ERISA litigation, including retirement plan management for universities and the trend of workers' savings being steered toward proprietary investment funds. Read the full Law360 article for their insight on recent cases they’ve handled and what litigation they are watching.
Congratulations to our employee benefits practice for being recognized as Law Firm of the Year in the Employee Benefits (ERISA Law) category by the US News & World Report– Best Lawyers Best Law Firms. The Law Firm of the Year distinction is awarded to only one law firm in each practice area nationwide. The rankings are determined by evaluating client, lawyer, and peer review.
Additional congratulations to Morgan Lewis’s securities regulation practice for also being named Law Firm of the Year in their subsequent category, and to the 256 practice areas named as leading law firms across national and metropolitan categories. Find more information via our firm press release.
With the economy humming along and unemployment at historic lows, it seems a strange time for a blog post about severance plans. This is the ideal time, however, to start planning for the next phase of the business cycle and the inevitable reductions in workforce that will follow. In connection with this planning, we wanted to remind our readers of the numerous advantages of adopting an ERISA-compliant severance plan. While many employers think they do not have an ERISA-covered plan—because it is not written or is not distributed to employees—they may in fact have a de facto plan if they have a routine policy for providing severance benefits that requires ongoing administrative discretion. Don’t panic: ERISA coverage is generally a good thing.
The end of summer doesn’t always mean the end of employment for seasonal employees. Employers often rely on the pool of talent they have developed through seasonal hiring when it comes time to fill new or newly vacated ongoing positions. Here are several things to keep in mind when hiring or rehiring a seasonal employee into a year-round, benefits-eligible role.
Join Morgan Lewis in May 2018 for these programs on a variety of topics in employee benefits and executive compensation, including investment related matters.
- 2018 Morgan Lewis Advanced Topics in Hedge Fund Practices Conference: Manager and Investor Perspectives
- SEC Proposed Standards of Conduct for Retail Advice| May 9 | Webinar presented by Chris Cox, Jennifer Klass, Steven Stone, and Brian Baltz
- 2018 Technology May-rathon: Benefits and Compensation – Implications of Tax Reform on Executive Compensation, Fringe Benefits, and Misconduct Settlements | May 29 | Webinar presented by Jonathan Zimmerman and Steven Johnson
We’d also encourage you to attend the firm’s Global Public Company Academy series:
- Morgan Lewis Global Public Company Academy—When the SEC Calls: The Nuts and Bolts of Dealing with Enforcement and Corp Fin | May 2 | Webinar presented by Peter Chan and Celia Soehner
- Morgan Lewis Global Public Company Academy—Granting Equity Outside Home Jurisdictions – US, Asia, and Europe | May 16 | Webinar presented by Kate Habershon Gina Lauriero, and Zaitun Poonja
Visit the Morgan Lewis events page for more of our latest programs.