Compliance November 12, 2014

State Street Public Plan Solicitation Practices Investigated

State Street Corporation has revealed it is under investigation for its solicitation of asset-servicing business for public retirement plans.
Reported by

In a 10-Q filing with the Securities and Exchange Commission (SEC), State Street said it is responding to subpoenas from the Department of Justice and the SEC for information regarding its solicitation practices with public plans and has retained counsel to conduct a review. 

The review will include “our use of consultants and lobbyists in our solicitation of business of public retirement plans and, in at least one instance, political contributions by one of our consultants during and after a public bidding process,” the firm said.

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State Street noted, “adverse outcomes could have a material adverse effect on our business and reputation.”

Compliance November 12, 2014

Supreme Court Denies Review of Tussey Fee Case

The U.S. Supreme Court has denied a request to review an appellate court’s decision in a case concerning retirement plan recordkeepers and fees.
Reported by

The law firm of Schlichter, Bogard & Denton petitioned the U.S. Supreme Court for a “writ of certiorari” in Tussey v. ABB, Inc.

The 8th U.S. Circuit Court of Appeals agreed with a district court finding that the ABB fiduciaries breached their duties to the plan by failing to diligently investigate Fidelity and monitor plan recordkeeping costs, but it agreed with Fidelity and ABB that the district court relied on hindsight in its ruling that the switch from the Vanguard Wellington fund to Fidelity Freedom funds violated their fiduciary duties under the Employee Retirement Income Security Act (ERISA). Fidelity was also found not liable for breaches concerning its use of “float” income.

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Schlichter recently told PLANSPONSOR, his appeal to the Supreme Court contends it is inappropriate to give such discretion to plan fiduciaries that have already been proven by the same appeals court (and as part of the same case, no less) to have breached their fiduciary duty. The plan fiduciaries have already been shown to have made decisions that were not in the participants’ best interest, he says, so why should their motives for switching to the Fidelity funds be interpreted charitably by the court? 

The Supreme Court did not give a reason why it will not review the Tussey case. Last month, it agreed to review another case involving fees and monitoring of a retirement plan, Tibble v. Edison. The issue in that appeal is whether the Employee Retirement Income Security Act (ERISA) statute of limitations applies to the duty to monitor investment funds of the plan.

 

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