ERISA — Litigation, Procedure, Preemption and Other Title I Issues (Portfolio 374)

Tax Management Portfolio, ERISA — Litigation, Procedure, Preemption and Other Title I Issues, No. 374-4th, discusses substantive issues arising out of and related to ERISA civil and criminal litigation, along with a broad overview of procedural issues pertaining to both types of ERISA litigation. This Portfolio also discusses ERISA preemption and related issues.

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Tax Management Portfolio, ERISA — Litigation, Procedure, Preemption and Other Title I Issues, No. 374-4th, discusses substantive issues arising out of and related to ERISA civil and criminal litigation, along with a broad overview of procedural issues pertaining to both types of ERISA litigation. This Portfolio also discusses ERISA preemption and related issues.

A brief discussion about ERISA fiduciary duties and related matters appears in this Portfolio. For a more exhaustive discussion on this topic, see Tax Management Portfolio, ERISA — Fiduciary Responsibility and Prohibited Transactions, No. 365-2nd.


Marcia Beth Stairman Wagner

Marcia Beth Stairman Wagner, B.A., summa cum laude, Cornell University (1984); J.D., Harvard Law School (1987), Law and Economics Fellow; Massachusetts and District of Columbia Bars (1987). Ms. Wagner is a Fellow of the American College of Employee Benefits and has served the IRS Advisory Committee on Tax Exempt and Government Entities, (2007 to 2010; 2010 as Employee Benefits Subcommittee Chair); the Pension Liaison Committee, IRS Key District Office, Brooklyn, New York; Employee Benefits Committee, Tax Section of the American Bar Association; and as Tax Section Counsel of the Massachusetts Bar Association. She is widely quoted in such publications as the Wall Street Journal and Financial Times and is a frequent guest on FOX Business, CNN, Bloomberg, NBC News and other media outlets covering the retirement benefits industry. 401k Wire has named Ms. Wagner as one of the 100 most influential persons in the 401(k) industry for five consecutive years.

Table of Contents

Detailed Analysis

I. Introduction

II. Procedural Aspects of Civil Litigation Under ERISA

Introductory Material

A. Claim Must Relate to an Employee Benefit Plan

1. Welfare Benefit Plans

2. Pension Benefit Plans

B. Causes of Action Available and Parties with Standing to Sue

1. Participants

a. Definition

b. Causes of Action

2. Beneficiaries

a. Definition

b. Causes of Action

3. Fiduciaries

a. Definition

b. Causes of Action

4. Secretary of Labor

a. Definition

b. Causes of Action

5. Other Parties

6. ERISA § 510 Litigation - Discrimination

C. Subject Matter Jurisdiction

1. Jurisdiction of Federal Courts

2. Removal from State to Federal Court

D. Venue and Service of Process

1. Venue

2. Personal Jurisdiction and Service of Process

a. Service on Defendant - Nationwide Service

b. Service on Plan

c. Service on Secretary of Labor and Secretary of the Treasury

E. Exhaustion of Administrative Remedies

1. Claims Procedure

2. Benefit Claims

3. Statutory Claims

4. Exceptions to the Exhaustion Requirement

F. Pretrial Discovery

G. Class Actions

1. Class Certification

2. ERISA Class Actions

H. Trial by Jury

I. Statute of Limitations

J. Attorneys' Fees

1. Attorneys' Fees Pursuant to ERISA § 502(g)(1)

2. Attorneys' Fees Pursuant to ERISA § 502(g)(2)(D)

K. Judicial Review for Benefit Claims

1. Standard of Judicial Review

a. Plan Language for Discretionary Review

b. Conflict of Interest Arising from Dual Roles

c. Other Issues Impacting Judicial Review

d. Claims Procedures

2. Attorney-Client Privilege

3. Work Product Doctrine

III. ERISA Preemption

A. Introduction

1. Legislative History

2. The Conference Committee

B. The Supremacy Clause and the Foundations of ERISA Preemption

1. Conflict Versus Complete Preemption

2. Removal Jurisdiction and the Doctrine of “Complete” Preemption

C. Exemptions

D. The Preemption Rule

1. The “Relates to” Test

2. The Savings Clause

3. The Deemer Clause

4. Pilot Life and Alternative Remedies

5. State Law Welfare Plan Beneficiary Designations and QDROs

E. Special Case - “Administrative Services Only (ASO) Arrangements”

F. Health Care Claim and Benefit Denials

1. Pegram v. Herdrich

2. Post-Pegram Cases

3. Aetna Health Inc. v. Davila

4. Hawaii Management Alliance Association v. Insurance Commissioner

G. Automatic Enrollment Programs

IV. Substantive Topics Litigated Under ERISA

Introductory Material

A. ERISA § 510 Litigation - Discrimination

1. In General

2. Standing to Sue and Exhaustion of Claims Procedure

3. Remedies

B. Plan Benefit Claims

1. Causes of Action

a. Recovery of Benefits - ERISA § 502(a)(1)(B)

b. Breach of Fiduciary Duty - ERISA § 502(a)(2)

c. Equitable Relief - ERISA § 502(a)(3)

d. Recovery of Insurance Contract or Annuity Amounts - ERISA § 502(a)(9)

e. Common Law Actions

2. Remedies

C. Penalty Recovery Under ERISA § 502(l)

D. Interpleader

E. Viaticals

V. Fiduciary Responsibility and Liability

Introductory Material

A. Statutory Definition of Fiduciary

B. General Fiduciary Duties

1. Solely in the Interest of Participants

2. Paying Assets from Plan Accounts

a. Background

b. DOL Advisory Opinion 2001-01A

c. DOL Hypothetical Fact Patterns

(1) Plan Spinoff as Part of Sale of Business Unit

(2) Reduction in Staff in Conjunction with Early Retirement Window

(3) Plan Amendments to Add Participant Loan Program and Early Retirement Window

(4) Nondiscrimination Testing and Amendment of Plan for Law Changes.

(5) Plan Disclosure Expenses - Preparation and Distribution of Plan Information to Participants

(6) Outsourcing Benefit Administration - Start-up Fees and Research

d. DOL Position on Expenses Attributable to Specific Plan Participants

(1) Prudence

(2) Diversification

(3) Plan Documents

3. Acting in Accordance with Plan Documents

C. Prohibited Transactions

1. Party in Interest Transactions

2. Fiduciary Self-Dealing

3. Liability of Co-Fiduciaries

4. Relief Available for Fiduciary Breaches

D. Nonfiduciary Liability

E. ERISA § 404(c) Protection

VI. Prohibited Transactions

A. The Prohibited Transaction Issue - In General

B. Prohibited Transaction Rules

C. Class Exemptions

1. In General

2. PTE 77-4 - Described

3. Why PTE 77-4 Is Likely Inapplicable to Most Investment Advisory and Managed Account Relationships

D. Individual Exemptions

1. Shearson Lehman Brothers, Inc. (Individual PTE 92-77)

2. TCW Group, Inc. (Individual PTE 97-60)

E. DOL Advisory Opinions

1. Legal Significance of Advisory Opinions

2. DOL Advisory Opinion 2001-09A

3. What SunAmerica Opinion Letter Provides - Creation of Managed Accounts

VII. Investment Education Versus Investment Advice and Managed Accounts

Introductory Material

A. ERISA § 404(c) Regulations

B. Investment Education - Background

C. Investment Education –– Defined

1. Plan Information

2. General Financial and Investment Information

3. Asset Allocation Models

4. Interactive Investment Materials

D. Investment Advice and Managed Accounts

1. Definition of Managed Accounts and Distinction from Investment Advice

2. Selection and Monitoring of Educators, Advisers, and Managers

3. No Protections

4. State Law Concern

5. Investment Education May Constitute Investment Advice

a. The Interpretive Bulletin

b. The Definition of Investment Advice Fiduciary

(1) Make Recommendations as to Advisability of Investing in Securities or Other Property

(2) Render Advice on a Regular Basis

(3) Provide Individualized Advice

(4) Advice Must Be Rendered for a Fee

(5) Advice Must Be Rendered Pursuant to Mutual Agreement or Understanding that it Will Serve as One of Primary Bases for Participant's Investment Decisions

6. Investment Advice Pursuant to an Exemption or Managed Accounts Pursuant to an Advisory Opinion Is More Protective of Plan Fiduciaries Than Education

7. Conflicted Advice Without Protections of an Exemption or Advisory Opinion

E. Investment Advice Versus Managed Accounts

1. Plan Participants

2. Public Policy

3. Plan Sponsors

a. Business Rationale

b. Minimize Fiduciary Risk

4. Financial Institutions

5. Monitoring Effectiveness

F. Life Cycle Funds Versus Managed Accounts

1. Self Dealing Issues

2. Quality of Process

3. Quality of Algorithms

4. Disclosure Issues

VIII. Criminal Violations of ERISA

Introductory Material

A. Crimes Under ERISA Title I

1. Reporting and Disclosure Violations

2. Coercive Interference with ERISA and Plan Rights

3. Prohibition from Plan Service

B. No Preemption of State Criminal Prosecution

C. ERISA-Related Provisions of the Federal Criminal Code

1. Theft or Conversion of Plan Assets

2. Falsification of Plan-Related Documents

3. Improper Payments to Plan Officials

4. Racketeer Influenced and Corrupt Organizations (RICO)

D. Criminal Enforcement Scheme

Working Papers

Working Papers

Table of Worksheets

Worksheet 1 Department of Labor Advisory Opinion 2001-01A: Guidance on Settlor Expenses vs. Plan Expenses

Worksheet 2 Causes of Action Under ERISA Section 502 - Table

Worksheet 3 Impact of ERISA on Actions Under Other Areas of Law - Table

Worksheet 4 Potential Causes of Action Under ERISA - Delinquency Actions

Worksheet 5 Potential Causes of Action Under ERISA - Spousal Rights




Treasury Regulations:

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