Chamber Backs CVS Health in Stable Value Fund Appeal

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

The U.S. Chamber of Commerce is siding with CVS Health Corp. in a case challenging the stable value fund in CVS’s 401(k) plan ( Barchock v. CVS Health Corp. , 1st Cir., No. 17-01515, proposed amicus brief filed 10/9/17 ).

Courts should focus on fiduciary process—and not specific results—when analyzing investment decisions made by the people who run retirement plans, the Chamber told the U.S. Court of Appeals for the First Circuit in a proposed amicus brief filed Oct. 9. The Chamber also urged the First Circuit to avoid assuming imprudence simply because a given investment decision or strategy deviates from “industry averages.”

The underlying lawsuit, which CVS won at the district court level, alleges the company’s stable value fund was too conservative. The fund allegedly invested in “ultra-short-term” cash investments with negligible returns and maintained “excessive liquidity” beyond what would have been reasonably necessary to fulfill obligations to investors.

Stable value funds—which are meant to be conservative, low-risk options that protect against interest rate volatility—have become a flashpoint in litigation under the Employee Retirement Income Security Act. Retirement plan sponsors including Anthem Inc., Chevron Corp., and Insperity Inc. have been sued for failing to include stable value funds in their investment lineups; none of those claims succeeded.

Other lawsuits have targeted the companies that offer and manage stable value funds, with cases pending against Massachusetts Mutual and Prudential. In March, a federal judge certified a class action accusing JPMorgan of exposing its stable value funds to overly risky mortgage-backed securities.

The Chamber is urging the First Circuit to affirm the ruling in favor of CVS, because the “hindsight-based theory of ERISA fiduciary liability” raised against the company would saddle businesses with increased administrative and litigation costs.

The Chamber also argued against the “odd theory” that courts should punish plan fiduciaries whose investment decisions don’t “line up with peer averages.” This theory is at odds with ERISA, which tells fiduciaries to take a plan’s individual circumstances into account when making decisions, the Chamber argued.

This is at least the second ERISA-related amicus brief the Chamber has filed in the past two weeks. On Sept. 26, the Chamber asked another federal appeals court to rethink a decision granting class treatment to about 22,000 participants in Deutsche Bank’s 401(k) plan who say the plan carries high fees. Class actions under ERISA have the ingredients to prompt “in terrorem settlements” through a process that courts have described as “settlement extortion,” the Chamber said.

The Chamber’s brief, which was joined by the American Benefits Council, hasn’t yet been accepted by the court. It was filed by Baker Botts LLP, the U.S. Chamber Litigation Center, and the American Benefits Council.

To contact the reporter on this story: Jacklyn Wille in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

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