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A Recipe For Disaster: Mixing Fiduciary Responsibility With Directors And Officers

 

A trend has existed in recent decades increasing the liability of corporate directors for their failures to adequately oversee the companies they are in charge of. Directors and Officers liability insurance policies were created to address this liability trend. Directors and Officers insurance, commonly referred to as D & O insurance, is normally purchased by the corporation and indemnifies the directors, officers, and executives of the corporation from lawsuits filed alleging they acted negligently in running the company. In this sense, D & O insurance functions like malpractice insurance for CEOs and Chairmen of the Board.

Best Interest Rules In Fiduciary Responsibility Introduced By Security And Exchanges Commission

  

Many regulations put into place during the past few years have faced the potential for roll-backs under the current administration. This holds especially true for some controversial rules issued by the Department of Labor. These roll-backs, though, have introduced their levels of uncertainty into the marketplace, placing companies at considerable risk of unwittingly acting against their own interests.

More Court Decisions And Promised Federal Action On Fiduciary Responsibility

 

 On March 15, 2018, the United States Court of Appeals for the Fifth Circuit dealt Obama era regulations their most recent defeat. In the wake of numerous other overturned rules by regulatory action or executive order, a federal court struck down the Department of Labor’s fiduciary rule. The rule revised the definition of who constituted a fiduciary of retirees under the Employee Retirement Income Security Act (“ERISA”) and changed the exemptions available to advisors who sought to earn commissions for investment advice.

Higher Education The Focus Of Fiduciary Risk Litigation

 

In 2016, the same law firm started twelve different lawsuits against twelve different universities alleging violations of federal retirement law. Schlichter, Bogard, and Denton is often credited with starting the trend of filing lawsuits over excessive fees charged to retirement plans and has apparently moved on to 403(b) plans offered by nonprofit organizations. The university lawsuits alleged similar violations of the Employee Retirement Income Security Act (“ERISA”), claiming that the universities violated their obligation to their employees by failing to take steps to keep fees low while maximizing returns. The trouble for these organizations is that 403(b) plans and 401(k) plans have the same obligations under ERISA. The naming distinction comes from how such plans are treated under the tax code.

Ongoing, Expensive Litigation Of Fiduciary Liability Complaints Against JP Morgan

Litigation related to retirement plans continues to be a major issue facing businesses in the United States.  Companies must offer recruits and employees some form of retirement plan in order to attract and retain quality employees in a competitive labor environment.  At the same time, the fiduciary duties places on companies by the Employment Retirement Income Security Act (“ERISA”) and the regulations promulgated by the Department of Labor (“DOL”), and the Security Exchanges Commission (“SEC”) to enforce it can expose employers and the parties whom they hire to manage those plans to expensive litigation.  A wave of recent cases highlight both the cost of these cases and some pitfalls to avoid.

Market Fluctuations Cause Fiduciary Issues Under ERISA

ERISA, the federal Employee Retirement Income Security Act, sets standards that govern the management of private retirement plans such as 401(k)s, defined benefit plans (more commonly called pensions), employee stock ownership plans, and profit sharing plans. Generally speaking, the appellate courts across the US have generally adopted standards that make it more difficult for employees to sue under allegations of mismanagement for these plans.

Fiduciary Rule Changes Up In The Air

The Department of Labor’s new fiduciary rule with respect to retirement plans caused a lot of consternation when first announced.  The new rule created special rules aimed at limiting conflicts of interests within the world of investment advice for retirement accounts.  Some people within the industry decried the rule as more needless regulation that would only increase costs for consumers, whereas others simply saw it as codifying changes most investment advisors had already made in the wake of the 2008 financial collapse.  Now, though, several factors raise questions as to the rule’s status before it goes into effect in June of 2017. 

ERISA and 403b- What Non-Profits Need to Be On The lookout for

Lawsuits over retirement plans and the failure of organizations to meet their fiduciary duties under the Employee Retirement Income Security Act (ERISA) continue to proliferate and make the news.  Previous defendants in these suits include high profile companies like Lockheed Martin and Boeing.  Now these lawsuits have expanded to include non-profit organizations such as educational institutions and hospitals.