Washington Update | Published in February 2016

Rules & Regulations

Summaries of the latest news from Washington and the courts—what’s coming, what’s contemplated and what’s critical for plan sponsors to know.

By PLANSPONSOR staff | February 2016
Art by Alessandra De Cristofaro
PBGC Issues Final Rule for Multiemployer Plan Partitions
The Pension Benefit Guaranty Corporation (PBGC) has published a final rule to implement the application process and notice requirement for partitions of eligible multiemployer plans under Title IV of the Employee Retirement Income Security Act (ERISA), as amended by the Multiemployer Pension Reform Act (MPRA). Replacing an interim final rule published by the PBGC last June, the final rule lets the agency expand its efforts to help prevent the insolvency of financially troubled multiemployer pension plans. The amendments in the final rule will apply to applications for partition submitted to the PBGC as of this January 22.

IRS Proposes Normal Retirement Age Rule for Governmental Plans
The Internal Revenue Service (IRS) has issued a notice of proposed rulemaking for the applicability of normal retirement age regulations to governmental pension plans. The regulations would provide rules relating to the determination of whether the normal retirement age under a governmental plan—viz., within the meaning of Section 414(d) of the Internal Revenue Code (IRC)—that is a pension plan satisfies the requirements of Section 401(a) and whether the payment of definitely determinable benefits that commence at the plan’s normal retirement age satisfies these requirements.

Excessive Fee Claims Dismissed

The 8th U.S. Circuit Court of Appeals found that Principal Financial Group’s adherence to its agreement with a plan sponsor does not implicate any fiduciary duty. Affirming a district court’s decision that McCaffree Financial Corp. failed to state a claim, the 8th Circuit Court agreed that Principal was not acting as a fiduciary under the Employee Retirement Income Security Act (ERISA) when it entered into a contract with McCaffree to offer separately managed accounts for that company’s employee retirement plan. The appellate court said that to state a claim of breach of fiduciary duty, a plaintiff must first plead facts demonstrating the defendant is a fiduciary.

Mismanagement of Assets Caused Underfunded DB Plan

A lawsuit filed by participants in U.S. Bank’s defined benefit (DB) retirement plan has been dismissed as moot because the plan is now overfunded. Plaintiffs in the case contested U.S. Bank’s management of its defined benefit plan from September 30, 2007, to December 31, 2010. They challenged the strategy of investing plan assets exclusively in equities in the face of a deteriorating stock market, the bank’s investment of plan assets in the bank subsidiary FAF Advisors, and FAF Advisors’ actions with regard to a securities lending portfolio. The U.S. District Court for the District of Minnesota previously dismissed the 100% equities strategy allegations and granted summary judgment for U.S. Bank on the securities lending program claims.

Fiduciary Rule Moves to OMB

The Department of Labor (DOL) has advanced its conflict of interest regulation to the Office of Management and Budget (OMB). Traditionally, the OMB has 60 to 90 days to review regulations of this nature and to make public the final rule language. However, given the limited time the current administration has in office and the high-profile nature of the rule, the agency may also use its discretion to expedite the review.

‘Revenue Sharing’ Lawsuit
A recently filed lawsuit targets Great-West, and its Empower Retirement subsidiary, alleging the firm had entered into revenue-sharing and similar arrangements with various mutual funds, and other investment advisers, instruments or vehicles by which it receives revenue-sharing payments for its own benefit. The payments constitute excessive fees and violate the Employee Retirement Income Security Act (ERISA) because their receipt results in prohibited transactions under the act, the suit says. Filed by the TPS Parking Management LLC Plan, the lawsuit seeks to recover damages for the plan itself and “all other similarly situated retirement plans and entities.”