Retirement Plan Participants Must Prove Harm to Sue

January 15, 2014 (PLANSPONSOR.com) – A federal district court has ruled that in a case involving allegations of harm to retirement benefits, plaintiffs lack standing to sue if they cannot substantiate the allegations.

In the case of Fox v. McCormick (civil action number 12-1869 (RMC)), the U.S. District Court for the District of Columbia ruled that while the plaintiff may have had standing under the Employee Retirement Income Security Act (ERISA) to bring the lawsuit, they do not have standing under Article III of the U.S. Constitution.

The court cites that under Article III, federal courts have limited jurisdiction, specifically over cases involving a federal statute and where there is controversy over the interpretation of that statute. Citing the cases of Warth v. Seldin and Baker v. Carr, the court further says that under Article III, plaintiffs are required to have a “personal stake in the outcome of the controversy as to warrant invocation of federal court jurisdiction.”

Get more!  Sign up for PLANSPONSOR newsletters.

The Fox lawsuit was brought by participants of the Central Pension Fund of the International Union of Operating Engineers and Participating Employers. These plaintiffs allege that 21 current and former trustees of this pension plan did not collect contributions from long-delinquent employers—ABM Industries Inc. and Able Engineering Services. These contributions, the plaintiffs contend, would have “increased the assets of the plan, induced the trustees to raise benefit rates upon retirement, and ultimately enlarged participants’ monthly pension benefits.”

In the suit, the plaintiffs cite Sprint Communications v. APCC Services as giving them the standing to sue fiduciaries under allegations of the violation of ERISA. However, the court feels that language from Sprint that is cited by the plaintiffs is “taken out of context” and was “not persuaded that Sprint represents a broadening of the traditional factors that govern Article III standing in this case.”

To further support the plaintiffs’ lack of standing, the court cites New Orleans ILA Pensioners Association v. Board of Trustees of New Orleans Empr’s International Longshoremen’s Association AFL-CIO Pension Fund, which says, “Participants do not have the standing to sue on behalf of their plan losses caused by fiduciary breach, unless the participants can establish that the remaining pool of assets will be inadequate to pay for the plan’s outstanding liabilities.”

The court concluded that “without a factual allegation that the trustees’ failure to collect contributions from ABM and Able deprived the Central Pension Fund of funds so that the [Pension] Fund’s risk of default has materially increased, plaintiffs lack Article III standing” and therefore the plaintiffs cannot sue the plan trustees to recover losses that are alleged and not substantiated.

The full text of the court’s decision can be found here.

Reps. Petition DOL on Fiduciary Rule

January 15, 2014 (PLANSPONSOR.com) – U.S. House members belonging to the New Democrat Coalition asked the Department of Labor (DOL) to ensure new fiduciary rules protect access to investment advice.

In an open letter sent to Thomas Perez, Secretary of Labor, 30 members of the House express concerns about a scheduled update of the DOL’s fiduciary standards. In its 2014 regulatory agenda, the DOL’s Employee Benefits Security Administration (EBSA) says the new proposed definition of fiduciary—or as the EBSA now calls it, the conflict-of-interest rule—is due out in August.

The Securities and Exchange Commission (SEC) is also considering whether or not to propose a fiduciary requirement for registered representatives. Both organizations have reported concerns that the emergence of new technologies and business models may lead to conflicts of interest that have previously been overlooked.

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

Late last year, Perez said the DOL would delay any proposed fiduciary rule until August so that regulators could continue to listen to and address concerns of Congress and the financial services industry.

In the letter, members ask Perez to coordinate with other regulators “to ensure that all regulatory efforts with respect to fiduciary standards work together in a way that serves retirement savers effectively.”

“We certainly want to protect plan participants, IRA [individual retirement account] owners and plan sponsors from unfair and deceptive practices,” the members say. “But this should be done in a way that does not restrict access to critical investment assistance.”

In its letter, the New Democrat Coalition says it is especially concerned about the way expanded fiduciary rules could impact low- and middle-income individualsas well as small businesses—who may lose access to cheaper, non-fiduciary forms of financial advice under the new rules.

On its website, the New Democrat Coalition identifies itself as the “pro-growth, fiscally-responsible wing of the Democratic Party.” Not all members of the New Democrat Coalition signed the letter.

A full copy of the letter, including a list of the undersigned lawmakers, can be viewed here.

«