Ten Ways to Stay Out of Trouble
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I talk a lot on these electronic pages about compliance. Its really, from my perspective as a litigator, an ERISA lawyer’s take on the old sports saw that the best defense is a good offense. I often say that, in this economy and this investment market, any problems in the operations of a plan will become grist for a lawsuit, including seemingly minor things that participants - and class action lawyers - would have simply ignored in years past while the markets were only going up, even if they suppressed returns slightly. That’s not the case when the markets take a precipitous fall, and when many participants are finding themselves out of work or forced into retirement with substantially reduced account balances. And so compliance becomes doubly important, as the best defense to the risk posed by litigation. It may or may not prevent getting sued, but strong compliance makes for a strong defense, and for a substantial reduction in the risk of getting hit for a large judgment or settlement.
This is a long lead in to this article here, on ten principles the author identified from a major ERISA conference for protecting plan sponsors and fiduciaries from liability and litigation exposures. They are very much of a piece with the idea of pro-actively protecting oneself by means of compliance. For instance, one of them has to do with watching the fees in investment options, something I have noted frequently in posts addressing how plan sponsors should position themselves going forward in the face of the glut of excessive fee claims.
One point in the article on which I do break ranks a bit from the author is in the tenth point, which discusses the importance of hiring an ERISA lawyer with litigation skills when sued, rather than just a litigator with strong litigation skills. I don’t disagree with the point about needing to hire a lawyer with significant ERISA knowledge, and not just a good litigator who hopes to learn about the subject. That latter option is not a good bet. Most areas of the law can be mastered just fine by a high quality litigator asked to handle a case, but not this one. The courts themselves are in so much disagreement from one circuit to the next - and often from one district court judge to the next in the same circuit - over various issues, and ERISA issues often raise so many subtle points, that it is just not an area that can be well litigated by someone without substantive knowledge, honed over years, of ERISA.
That said, though, it isn’t enough to just hire a good litigator who knows his or her way around ERISA. What you need is a trial lawyer, with a demonstrated record of trying and winning cases before both judges and juries, who is substantively steeped in the law of ERISA. You need it if the case ever gets tried, obviously. But more importantly, you need a trial lawyer leading your team to get the best result period, whether that is by settlement or a resolution on the papers at some point along the way. You can only fight fire with fire in a courtroom, and if the other side is fronted by experienced trial lawyers, you will be at a disadvantage every step of the way - from discovery to settlement discussions to motion practice - if you aren’t as well, in litigating against them. Conversely, if the other side’s team isn’t fronted by an experienced trial lawyer, having your team led by one will put them at a disadvantage, and will substantially increase the odds of getting a result that favors your side.
So therein lies the rub. An ERISA trial lawyer is what you need. But in this day and age, in which so few lawyers try cases anymore - or are trained to do it since most cases they will see settle or head off to arbitration - that’s not the easiest thing to find, although I do know at least one.
Introducing Pozek on Pensions
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Speaking of new blogs, I would be remiss as well if I didn’t pass along a link to Adam Pozek of Sentinel Benefits’ new blog, the wonderfully named Pozek on Pension (I have always been a big fan of alliteration). Adam has always been a font of knowledge on compliance issues and the day to day management and operational challenges of benefit plans, and I am pleased to see he has taken up the opportunity blogging presents to share that knowledge with the rest of us. When he was president, John Kennedy, in a far less politically correct world, reputedly described Washington as the perfect combination of Northern charm and Southern efficiency; if that was true then, Adam, a recently transplanted Southerner, and his benefit plan work, including on his new blog, is walking evidence that the New South has turned that phrasing on its head, into a place of Northern efficiency and Southern charm.
On Fiduciary Liability Insurance
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I have written before that one of the things that makes insurance coverage law interesting is the fact that almost every trend in liability or litigation eventually shows back up in insurance disputes, in a sort of fun house mirror sort of way. Whether it is corporate exposure for asbestos liabilities, or the sudden invention of Superfund liability, those liability risks eventually end up in insurance coverage litigation over the question of whether insurers have to cover them. I cannot think of one major doctrinal development in tort liability or one trend in liability exposure in the last 20 to 30 years that has not, eventually, resulted in litigation to determine whether insurance policies cover the new exposures flowing from those developments and trends.
Anyone who reads this blog knows that ERISA governed plans, and in particular pension and 401(k) plans, have become a huge target for large dollar claims over the past several years. Just a click through the posts on this blog detail many of the claims, such as stock drop and excessive fee litigation, that are working their way through the legal system. And with this, hand in hand, has come a new focus on whether plan fiduciaries have appropriate insurance coverage in place for those risks. Some do, some don’t, and others - consistent with insurance coverage litigation trends in the past when relatively new theories of liability have had to be analyzed under policies written before the theories themselves were developed in depth - won’t know unless and until courts pass on the meaning and scope of their policies. But here, though, is a good initial primer on the question and here, likewise, is a webinar that looks likely to provide much greater detail on the subject. One thing that is for sure is that this is an area of the law that anyone involved with the representation of plan fiduciaries needs to have more than a passing familiarity with at this point.
American Conference Institute's ERISA Litigation Conference
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Here at this blog, we are all about being a modern media company, as you can tell from all the pop-ups and the banner ads you encounter when you come here to read the latest posts. Synergy, and book serialization and cross-marketing and all those other business page buzzwords - that’s what we’re about here.
Now I will take a minute and pull my tongue out of my cheek, and move onto one cross-marketing opportunity that I have agreed to, because it benefits the readers of this blog and involves what promises to be an outstanding educational opportunity. The American Conference Institute is hosting what looks to be a very broad and in-depth examination of current hot topics in ERISA litigation next October in New York, and this blog has signed on as a media sponsor. As per our continuing non-commercial status, no money in it for us, but it gives readers of this blog an opportunity for a substantial discount if they register in the next couple of weeks for the seminar. Just use my name and tell them I sent you. Just kidding - the actual information and manner of laying claim to the discount is right here.
The brochure for the conference itself can be found here. I signed on as a media sponsor for the same reason I think readers may be interested in the seminar, which is that the list of topics reads like a table of contents for the blog; thus, light dawned over Marblehead here and I realized if you read this blog regularly, you would probably be interested in the subjects being addressed at the conference. Beyond that, you will see the speaker list (here comes the pun) speaks for itself.
Pension Fiduciaries in the Hot Seat - What to Avoid and How to React if Sued
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I and a cast of thousands will be speaking at a webinar on April 14th on “Pension Fiduciaries in the Hot Seat - What to Avoid and How to React if Sued,” put on by Pension Governance, Inc. Well, its not really a cast of thousands, just me and four very experienced worthies, who know so much about the subject that they seem like a cast of thousands.
I have to say that, long before ever being invited to participate in one of Pension Governance’s webinars, I attended as a member of the audience, and not only found them informative but enjoyable as well.
Wrongs That Can't Be Remedied: ERISA Preemption and Limited Statutory Remedies
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Paul Secunda, the law professor formerly known as the workplace prof, has a new law review article out on the “wrong without a remedy” aspect of ERISA litigation, which is the fact that the broad scope of preemption can combine with the limited range of remedies available under ERISA in a way that makes some alleged wrongs involving employee benefit plans simply not redressable. Notice that unlike many commentators, including Paul in his article, I call it an aspect of ERISA litigation, rather than a problem, as, contrary to Paul’s article, I am not convinced this isn’t the logical outcome, rather than the problematic distortion, of the original statutory structure. Either way, there is certainly room to argue over whether, and if so what, should be done about this aspect, and Paul provides his own version of changes that could be enacted legislatively or by judicial development to eliminate the “wrong without a remedy” scenario. I don’t necessarily agree with all of his points or his reasoning, but its an interesting read and presents some interesting approaches. Moreover, I am on record - I guess as part of a Greek chorus at this point - with my criticism of legal scholarship that is simply part of a hermetically sealed circle of philosophical commentary, without adding value to practicing attorneys, courts, or the legal system as a whole. Paul’s article avoids this problem, I am happy to report, in two ways, making it something worth recommending as reading to practitioners. The first is that the article provides a highly readable, educational (and cite-able) survey of the historical and current state of the law of preemption. The second is that the article thoughtfully shifts the nature of the discussion of this problem from the general fixation on the preemption prong, which is usually the focus of the discussion in commentary and in litigation, to the remedies part of the problem, posing the idea that preemption is broad enough to preclude adding state law causes of action to benefit plan cases, and that instead the place to look to end the “wrong without a remedy” conundrum, which Paul has called in other places the “grand irony of ERISA,” is to the statutory remedies under ERISA and to whether they can be expanded by judicial development or legislative fiat. In the courtroom, in cases involving the clash between preemption of state court remedies and the limited nature of the relief available under ERISA, the focus tends to be on the scope of preemption; Paul, in his article, posits that it would make more sense to simply start the analysis, and any response to this issue, from the premise of accepting the broad scope of preemption, and then go from there.
The article is titled “Sorry, No Remedy: Intersectionality and the Grand Irony of ERISA,” and can be downloaded here.
BrightScope and 401(k)s
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Holy Transparency, Batman! If you like Zillow, and you have a 401(k) plan, have I got a website for you. BrightScope has now publicly launched its rating website, in which you plug in a particular company’s name and the site then provides you with a colorful, graphic presentation of that particular plan’s performance and structure in comparison to certain benchmarks and comparable companies. Its simply a lot of fun, and, moreover, allows an easy, quick overview of a particular plan, without having to wade through all of the paper information for a particular plan. This facet alone makes it worthwhile, in a world in which plan participants really do need an understanding of the details of their companies’ 401(k) plans but may not have the time or expertise to parse the documents themselves. I certainly am not advocating limiting participant education to checking BrightScope, but every piece of information - the more accessible and transparent the better - helps. At the end of the day, its been my experience that, in all areas of the law, the more information, the less litigation, and I think that is clearly the case with regard to retirement funding. Remember that piece of folksy wisdom the next time you see someone pause in the face of government moves to increase 401(k) plan disclosure and transparency.
I have actually been playing with their site for awhile, while it was in testing, but its now been publicly unveiled, so you can go there yourself and see what I am talking about. I could say more about the site, what it does and how it runs, but I don’t have to, because Josh Itzoe has done it for us, right here, and you can go test run it yourself now, right here.
If you do want to read more on it, though, try here and here.
ERISA Litigation: An Update from the Front Lines
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When John Calipari was the basketball coach at the University of Massachusetts, he was famous for saying that he would play anyone, anywhere, at any time. I like to say - and did in my seminar a couple weeks ago covering current trends in ERISA litigation - that I will likewise speak to anyone, anywhere, at any time about this subject.
Well, one of the great things about publishing a blog is you can take this sentiment one step further, beyond talking anywhere to anyone at anytime, and publish what you have to say. And with that, here is the material I presented to the ASPPA Benefits Council of New England in a seminar a couple of weeks ago, entitled “ERISA Litigation: An Update from the Front Lines.”
Talkin' ERISA Litigation Trends
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I will be presenting a seminar next week, on Wednesday January 14th, to the ASPPA Benefits Council of New England, entitled “ERISA Litigation: An Update from the Front Lines.” After three full days of outlining my talk, I now actually have a pretty good idea of what I am going to say; the talk will blend the latest developments nationally and at the Supreme Court in ERISA law with ERISA litigation trends and realities in the First Circuit. If you are interested in attending, its not too late to register. The brochure and registration form for the talk is here.
On Education and Repetition
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Well, I think Roy Harmon and I (mostly Roy, actually) just previewed for you what this webinar plans to cover, the ethical and privilege traps involved in providing legal counsel to ERISA governed plans and their administrators. Still - luckily for people like me and Roy who blog on these subjects and for the presenters of the seminar - there is literally always more to be said about these types of topics. That point was made crystal clear by this article here, which details a court ruling waiving the attorney-client privilege as a result of electronic discovery mistakes, just days after I posted - for the upteenth time - on my qualms about the impact of electronic discovery on clients, costs, and litigation, particularly in the data intensive realm of ERISA actions.
On the other hand, here’s a seminar on everything topical in ERISA breach of fiduciary duty litigation, presented by a who’s who’s of practitioners, which, by its description, is covering a lot more ground than can be trod by a few lone bloggers.
A Thanksgiving Week Feast
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Some of the more prolific bloggers manage to be prolific by posting short notes on various topics of interest written by others, which isn’t my usual style. But over the past week or so I have managed to back up a good stack of things that I have wanted to talk about in detail, but haven’t had the time to comment on. So in the spirit of a Thanksgiving host laying out a big spread, here’s a whole bunch of things at once:
First, here is a good follow up story providing more detail on Wal-Mart’s success in defending itself against excessive fee litigation, a topic I first discussed in this post here. This particular story, in PlanAdvisor, does a nice job of illustrating the point I made in my earlier post, which is that the court, in ruling in favor of Wal-Mart, did not focus on or analyze the propriety of the particular fees themselves, but rather focused on the method used by the fiduciary to select the investment options in question and whether that was prudent. Interestingly, the article describes the Wal-Mart investment menu, and it reads like one you would find in just about any 401(k) plan. Does this suggest that most plans are actually fine on this front? Or might it suggest that fiduciaries as a whole accept fees that are too high, and that perhaps comparing a particular plan’s investment choices, such as Wal-Mart’s, against industry benchmarks is not really the right focus for deciding whether the fees in a particular plan were too high? Just asking.
Second, here’s one court’s answer to an oft asked question: is a plan participant seeking benefits entitled to attorney’s fees for the administrative appeal portion of his claim?
Third, here’s an interesting webinar rounding up the Supreme Court’s treatment of ERISA issues during the 2008 term. The Court’s fascination with ERISA during the past year has been well documented and the biggest item of discussion in ERISA related media, and pretty much everything about those developments has been chronicled on this blog and a million other places. But if you haven’t seen it all enough by now, the webinar may be for you. Interestingly, one of the topics noted in the webinar is the Court’s involvement in a case, still pending and not yet decided, concerning waivers by divorcing spouses of plan benefits. This is the quickly becoming infamous Kennedy case, which to date has caught the eye for two reasons: first, many people have some question as to why the Court took on this case and whether it merited the Court’s involvement, and second, because of the Court’s decision to seek supplemental, post-argument briefing on the very basic issue of the extent to which plan administrators are bound - barring an effective QDRO - to the express written terms of a plan. As a very experienced benefits consultant recently commented to me, the Court is going to upturn an awful lot of apple carts if, intentionally or even (probably by accident) implicitly, they indicate that administrators are not strictly controlled by the actual written terms of the plan instrument. As a result, a case that started out as perhaps the least substantively significant of the ERISA cases taken up by the Court in the past year threatens to become one of the more disruptive to settled practices, in a manner similar to how the Court reopened much settled thinking on fiduciary duty issues by indicating in LaRue that rules long established in the defined benefit context may not hold true for all other situations.
Okay, that clears some of the backlog.
From Preemption to ERISA Standing, and Lots of Things In-Between
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Philadelphia, New York, court hearings - I have been everywhere the past week or so other than at my desk where I could put up blog posts. Here’s a run down of interesting things I came across along the way that you may want to read. First, for those of you who can’t get enough of this topic - I know I can’t, but then I am fascinated enough by this stuff to maintain an entire blog on the subject of ERISA - Workplace Prof passed along this student note on preemption and “pay or play” statutes: Leslie A. Harrelson, Recent Fourth Circuit Decisions: Retail Industry Leaders Ass'n v. Fielder: ERISA Preemption Trumps the "Play or Pay" Law, 67 Maryland L. Rev. 885 (2008). Second, SCOTUS passed along that the Supreme Court decided not to accept for hearing Amschwand v. Spherion Corp., which, I noted in a previous post, presented an opening for the Court to address when monetary awards for breaches of fiduciary duty can qualify as equitable relief that can be sought under ERISA. I have commented before that the Court has advanced the ball on equitable relief under ERISA into almost untenable terrain, and I am not sure whether the Court can bring any greater clarity to the issue without backtracking from its recent jurisprudence on the subject; given the unlikeliness of the Court doing so already with regard to such relatively recent decisions, it is probably just as well that the Court did not take on the issues presented by that case.
Third, you could learn everything you need to know about the standards of review for benefit denials and the impact of the Supreme Court’s decision in MetLife v. Glenn by clicking on the “Standard of Review” topic over on the left hand side of this blog; or you could spend an hour listening to this webinar on the topic.
Fourth, Pension Risk Matters passes along this Sixth Circuit decision enforcing the Supreme Court’s approach to individual claimants in LaRue, finding that two participants could sue for breach of fiduciary duty. There are two particularly interesting side notes about this. First, it illustrates a particular point I - and others - made in a number of media outlets after the Supreme Court issued its opinion in LaRue, namely that, while it may not result in an avalanche of litigation that otherwise would not have been filed, the ruling is certainly going to lead to an increase in the filing of smaller cases on behalf of a few participants in circumstances that, in the past, would not have generated suits unless a class wide action could be brought. Second, the case presages what may be the dying off, by a thousand cuts, of the long held use of standing to cut off ERISA breach of fiduciary duty suits at the earliest stages of procedural wrangling, long before any litigation over the merits of a case, something which occurred at the federal district court level in the original LaRue case itself. Roy Harmon, over at his Health Plan Law blog, has a detailed analysis of this question, one I have been thinking about since LaRue was decided but which Roy has thankfully saved me from addressing in detail at this point.
Passing Along Some Reading on Excessive Fee Cases and Other Timely ERISA Topics
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What would this blog be if it was done as a newsletter instead? Well, probably something like this new ERISA newsletter out of Proskauer Rose, with its detailed but readable length discussions of current events in the field, such as the Supreme Court’s recent decision in LaRue and the Supreme Court’s consideration of whether to hear a case that will allow it to return again to the problem of defining the available scope of equitable relief under ERISA. For me personally, I particularly liked the discussion of the latest trends at the trial level in the federal court system with regard to lawsuits filed over allegedly excessive fees charged on mutual fund investment options, as it takes an approach that I like to pursue whenever possible in my own posts here on this blog: it discusses the early decisions on the issue at the motions stage in the trial courts, and looks ahead to what this may mean for the industry as a whole and service providers. Its worth a read, and if you enjoy this blog, you will almost certainly enjoy this newsletter as well.
Want to Learn More About the Post-LaRue World?
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I am trying to kick the LaRue habit, but couldn’t resist going back to the well one more time (how’s that for mixing my metaphors?). I know from readers of this blog and from talking to other lawyers that people are very interested in LaRue and the Supreme Court’s current interest in ERISA cases - in fact, one lawyer told me that right after LaRue was decided he was at a meeting on an entirely different topic but LaRue is all anyone wanted to talk about that day- so I wanted to pass along this very interesting looking teleconference next month on individual 401(k) suits post-LaRue. The faculty includes Tom Gies, who represented the plan and its sponsor in LaRue, and Karen L. Handorf, an attorney currently in private practice who previously worked for the Office of the Solicitor of Labor, background that may make her ideally suited to comment on one of the biggest mysteries of all raised by LaRue and the Supreme Court’s selection for its docket of two more ERISA cases, namely what’s with the Supreme Court’s sudden fascination with ERISA litigation.
Conducting an ERISA Self-Audit
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We spend a lot of time here at the blog talking about lawsuits, causes of action, and court rulings concerning ERISA issues; the name of the blog, after all, is the Boston ERISA and Insurance Litigation blog. But every litigator knows that the flip side to a lawsuit is prevention, and the key to prevention in the employee benefit world is the ERISA self-audit, whereby a plan investigates itself to ensure compliance and avoid subsequent government action or private litigation. For those of you interested in this “ounce of prevention is worth a pound of cure” approach, here’s an interesting looking teleconference on key topics in conducting such an audit.
More Education is Always Better than Less: American Conference Institute's Upcoming Seminar on 401(k) Risks
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I mentioned in yesterday’s post that my goal for the week was to move rapidly through several items that had caught my attention over the last week or so, and that I wanted to pass on to readers of this blog. I thought the next one I would mention is this conference in New York in December, sponsored by the American Conference Institute, on litigation and regulatory issues related to 401(k) plans. The subject matter of the conference ranges across the hottest topics in litigation and potential exposures for sponsors and fiduciaries of 401(k) plans, including stock drop litigation, excessive fee issues, and in a topic that hits both primary subjects of this blog, insurance coverage for fiduciary liability risks. Here’s the brochure for the conference.
20th Annual ERISA Litigation Conference
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I wanted to pass this along while the electronic brochure was still (fairly) hot off the metaphorical presses and cooling off in my in-box. Here’s the information for West Legalworks’ 20th Annual ERISA Litigation Conference, held in, well, probably the three best places you could pick: Florida in February, and California and New York City in the fall. On a more analytical note, what really jumped out at me is the conference’s focus this year on what the marketing materials describe as “ the continuing lessons from the post-Enron wave of litigation over employer stock investments in 401(k) and ESOP plans and . . . the current wave of decisions addressing whether former employees who withdrew their plan balances before bringing suit have standing,” as well as on the “impact of procedural violations of the claims and appeal regulations [and] [t]he recent crop of preemption cases,” all topics that have been discussed extensively over the past year here on this blog.
Introducing Pension Governance LLC
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I have talked before about my tendency to veer from my appointed rounds when something more interesting appears on the horizon than that which I had planned to work or post on, and today is another one of those days. I came in full of grand hopes to discuss insurance coverage for intellectual property risks and discovery issues in insurance bad faith cases, using two upcoming seminars on those topics as a foundation from which to riff. Those can wait for another day, and I will return to them, either over the weekend or next week, but something more interesting appeared on the horizon this morning that I wanted to post on, and that is likely to be of interest to those of you who read this blog out of a professional interest in ERISA and how it applies to 401(k) plans and pensions, namely, the launching of Pension Governance LLC, a subscriber website providing independent advice and information for pension investment fiduciaries. Among other features, the website, http://www.pensiongovernance.com/home.php, provides analysis, research and commentary on issues affecting defined contribution and defined benefit plans; interviews with industry leaders; annotated online articles from a variety of news sources; access to research team members; original content from expert practitioners; and educational webinars. Readers of this blog who have been curious enough to peruse either the “About Stephen Rosenberg” part of this blog or the what’s new section of my firm’s website already know that I am a member of the website’s editorial board; I have already submitted one article for the site, and am looking forward to contributing still more to it.
While I am excited about the launch of the website, that’s not the only reason I write about it today. The more urgent reason for writing about it today, and to introduce Pension Governance to you right on the heels of its launch, is that the site is currently offering a free two week trial subscription, and I think the information that it makes available will be of interest to many who read this blog.
Investment Management Fees, and Contract Geeks
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Two things to chew on over the holiday, other than the turducken (I have always wanted to use that word in a sentence), one to know about before it occurs, the other to note before it disappears. I guess I could take that dichotomy a little further, and note that one concerns the first half of the blog’s title, and the other, the other half.
The first: Susan Mangiero, who writes the excellent blog Pension Risk Matters, is hosting a webinar on November 28 covering issues related to investment fees, the management of 401(k) plans, and fiduciary obligations. The webinar, covering “401(k) plan fees - what they are, how they can affect reported performance and the fiduciary practices that address investment management fees” is driven by the fact that:
In the aftermath of the Pension Protection Act of 2006, 401(k) plan sponsors are required to carefully select "fiduciary advisors", identify appropriate default investment choices for participants and comply with more rigorous federal reporting procedures. All of this could spell trouble for retirement plan fiduciaries who fail to realize that regulation, public awareness and employee angst put them in the spotlight as never before. This is especially apropos with respect to plan fees.
You can find more information on the webinar here.
The second: Insurance coverage lawyers, almost by definition, have to be contracts geeks. At the end of the day, what they are really doing is fighting over the language in contracts, a particular type of contract certainly, but contracts nonetheless. And here, before it vanishes from the internet, is the story of how much money there is in not being a contracts geek.
19th Annual ERISA Litigation Conference
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West Legalworks has announced the time, place, faculty and subject matter for its annual ERISA Litigation Conference, the 19th ANNUAL ERISA LITIGATION CONFERENCE: The Nation's Leading Forum on How Current Rulings Affect Claims, Plan Design and Operations.
For those of us who litigate cases governed by ERISA and who like this stuff, this one looks like fun.