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Our Perspective

Pension Finance Update November 2022

Pension finances were mixed in November, as lower interest rates offset the impact of higher stock
markets. Both model plans1 we track were close to even last month: Plan A lost less than 1% last month
but remains up almost 10% for the year, while the more conservative Plan B gained less than 1% last
month and is now up less than 1% through the first eleven months of 2022

ESG, proxy voting, and ERISA’s revised fiduciary regulation

In our last article, we discussed the highlights of the Department of Labor’s final ESG/Proxy Voting rules, focusing on what changes the 2022 rules make to the 2020 rules. In this article, we review the new rules more generally. Background ERISA includes fiduciary duties of prudence and loyalty. DOL has, since 1979, had in place…Read More

DOL finalizes amendments to ESG/Proxy Voting rules

The Department of Labor has released its final amendment to the ESG/Proxy Voting rules, “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights.” The 2022 rules amend the (Trump) DOL’s 2020 amendments to ERISA fiduciary regulations on the same issues.
The new rules significantly relax restrictions on ESG investing, eliminating special restrictions on ESG investments in defined contribution default investments (such as 401(k) plan target date funds), making the “tie-breaker” rule – which allows consideration of non-financial issues in certain circumstances – more flexible, and eliminating recordkeeping and disclosure requirements with respect to the tie-breaker rule.
In this article we review the highlights of the new rules, focusing on what changes the 2022 rules make to the 2020 rules.

In post-Northwestern case, Seventh Circuit dismisses recordkeeping and fund fee prudence claims

On August 29, 2022, in Albert v. Oshkosh Corporation, the Seventh Circuit Court of Appeals affirmed the dismissal of an ERSIA fee-related prudence claim against fiduciaries of Oshkosh’s defined contribution plan. The case is especially interesting because it was a Seventh Circuit decision in the Northwestern ERSIA fee-related prudence litigation that the Supreme Court vacated and remanded in January 2022. The Supreme Court’s opinion in that case represented its most extensive discussion of the standards to be applied to motions to dismiss in these sorts of cases. In Oshkosh, the Seventh Circuit gives its first interpretation of the extent, and limits, of the Supreme Court’s decision in Northwestern.
In this article, we focus on the court’s decision and supporting legal analysis, and on the key legal issue: in fee-based ERISA prudence claims, what must a plaintiff plead to survive a motion to dismiss?

Big News on the Multiemployer Pension Front: What Contributing Employers Need to Know

The last several weeks have brought big news for employers that contribute to multiemployer pensions – some good and some not-so-good. The not-so-good: the Pension Benefit Guaranty Corporation has issued a proposed regulation on permissible actuarial assumptions to be used in withdrawal liability calculations that would allow multiemployer plan actuaries to use much lower interest rates than courts have recently allowed.

October 2022 Pension Finance Update

Pension finances enjoyed their best month of the year in October, driven by higher stock prices and higher interest rates. Both model plans1 we track gained ground last month; Plan A improved 6% during October and is now up 10% for the year, while the more conservative Plan B gained more than 1% last month and is now even through the first ten months of 2022:

Home Depot court finds for defendants on monitoring of Financial Engines investment advice arrangement

We recently discussed the September 30, 2022, decision in Pizarro v. The Home Depot by the United States District Court for the Northern District of Georgia, in which the court found for defendant plan sponsor/sponsor fiduciaries on cross-motions for summary judgment with respect to all plaintiffs’ claims. Our earlier article discussed the court’s decision on plaintiffs’ claim that the retention in the plan fund menu of the BlackRock Target Date Funds violated ERISA prudence standards (plaintiffs alleged those funds had “underperformed” comparators). In this article we discuss another important issue in the case, plaintiffs’ claim that plan fiduciaries failed to prudently monitor fees under the plan’s advice arrangement with Financial Engines and (subsequently) Alight Financial Advisors. This is one of the few decisions we’ve had on the substance of this issue and includes some significant guidance for 401(k) plan sponsors that include in their plan an advice service for plan participants.

New York District Court offers an interpretation of ERISA’s advice fiduciary rule that is at odds with DOL’s

On September 27, 2022, United States District Court for the Southern District of New York, in Carfora et al. v. Teachers Insurance Annuity Association of America and TIAA-CREF Individual & Institutional Services, found (among other things) that “advice” that defendants gave plaintiffs with respect to rollovers did not make them “advice fiduciaries” under ERISA. Carfora provides a judicial interpretation both of ERISA’s fiduciary definition and of the Department of Labor’s (regulatory) “five-part test” (discussed below) for fiduciary status in the critical context of plan rollovers. And in that regard, the court’s interpretation differs substantively from DOL’s own recent re-interpretation of the five-part test (in the preamble to Prohibited Transaction Exemption 2020-02). As such, the court’s decision is unique and offers a counter-interpretation to DOL’s new rule that may affect ongoing litigation over it.

District Court finds for defendant plan sponsor in BlackRock Target Date Fund suit

On September 30, 2022, in Pizarro v. The Home Depot, the United States District Court for the Northern District of Georgia found for defendant plan sponsor/sponsor fiduciaries on cross-motions for summary judgment. The case was brought (in 2018) by participants in Home Depot’s 401(k) plan, claiming that Home Depot and plan fiduciaries violated ERISA prudence…Read More