Compliance March 29, 2011

Breach Claims against Investment Consultants Allowed to Proceed

March 29, 2011 (PLANSPONSOR.com) – The trustees of a Nevada supply company’s 401(k) plan can proceed with their suit that alleges a plan consultant committed a fiduciary breach by convincing the plan to invest in questionable funds.
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U.S. District Judge Edward C. Reed of the U.S. District Court for the District of Nevada said the plan trustees “narrowly survived” the plan consultant’s motion to dismiss because there were only a few issues from which the court could find that the consultant was an Employee Retirement Income Security Act (ERISA) fiduciary.

However, Reed did throw out the trustees’ claim that the consultant, Barry Downs, violated ERISA by failing to provide the trustees with plan documents. The court said that only plan administrators are liable under ERISA for failing to disclose plan documents. Western Nevada Supply Co.’s profit-sharing and 401(k) plans brought a lawsuit in 2009 against investment managers for their advice to put money in particular investment options.

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The court found there were sufficient allegations that Downs was a plan fiduciary through his capacity as a paid consultant to the plans. The case is Western Nevada Supply Co. Profit-Sharing Plan and Trust v. Aneesard Mgmt., D. Nev., No. 3:09-cv-00737-ECR-VPC.

Compliance March 29, 2011

High Court to Review EEOC Case for Church School Employee

March 29, 2011 (PLANSPONSOR.com) – The U.S. Supreme Court has agreed to review a case in which a teacher at a church-run school claims she was discriminated against and fired in retaliation for complaining.
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At issue is whether the teacher falls under the ministerial exception in the Americans with Disabilities Act which blocks government intrusion in the employment decisions between religious institutions and ministerial workers. CNN reports that Cheryl Perich was considered by the Hosanna-Tabor Evangelical Lutheran Church and School to be a “called” employee who had completed a formal colloquy, receiving a certificate of admission into the teaching ministry.   

Those parochial instructors are hired on an open-ended basis and cannot be summarily dismissed without proper justification, the news report explained. Assigned to third and fourth grades, Perich led instruction in math, language arts, social studies, gym and music, with much of the curriculum identical to the local public schools. But, she also taught a religion class four days a week, and engaged in daily prayers and devotionals with her students – activities that typically took up about 45 minutes of the seven-hour school day – and she led chapel services with her class twice a year, on a rotation basis with other instructors.   

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According to CNN, Perich went on medical leave for narcolepsy in 2004, and when she tried to return, school officials said a substitute had been hired to complete the school year. After weeks of discussions between Perich and the school, she was fired for insubordination and “regrettable” conduct toward church leaders.   

Perich complained to the U.S. Equal Employment Opportunity Commission, which then sued the church on her behalf. The 6th U.S. Circuit Court of Appeals eventually ruled for Perich, saying her primary duties as a teacher were not religious in nature.  

“[T]he intent of the ministerial exception is to allow religious organizations to prefer members of their own religion and adhere to their own religious interpretations. Thus, applying the exception to non-members of the religion and those whose primary function is not religious in nature would be both illogical and contrary to the intention behind the exception,” the appellate court said. 

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