The good people at Fiduciary News gave me a soapbox, and I was happy to climb up on it. They interviewed me as part of their series of monthly interviews on ERISA and related topics, and I discussed ERISA litigation and a wide range of related issues. You can find the “Exclusive Interview: ERISA Attorney Stephen Rosenberg Says Litigation’s Legacy is Improved Plan Design” here.  You will see I went on for a bit, as I am wont to do when anyone wants to talk about ERISA!

Is Osberg v. Foot Locker a tipping point? Only time will tell, but it has that feel about it.

I have written extensively in the past on the orphan-like status of equitable remedies in ERISA litigation related to plan communications: all agree that a range of traditional equitable remedies is now open to participants, but courts have been very reluctant to adopt them, both doctrinally and as a practical matter, where the dispute concerns a disjunct between what a plan provides and what plan communications state. As I have written before, when participants in ERISA governed plans seek equitable relief, circuit courts of appeal seem intent upon reading in stricter requirements for equitable claims than exist in other areas of the law, and on enforcing existing elements of traditional equitable remedies more strictly than they do in other types of cases. I have argued that, underlying this tendency of the courts, is an understandable concern about the risk of turning every ERISA case into a “he said, the plan administrator said” case; judges do not want to birth equitable approaches to ERISA cases that turn every dispute into an argument by a participant that he or she was told something different, perhaps by a low level HR contact or perhaps in a written plan communication, than is actually provided under the express terms of a plan itself, with the participant arguing that he or she is therefore entitled to what was said rather than what was written in the plan. One can easily see a broad view and application of equitable remedies in the ERISA context, particularly with claims of equitable estoppel, giving rise to such a circumstance.

I have also always thought, however, that the concerns underpinning this view are overstated. There are, in fact, many instances in which a participant has a serious, well-documented claim of being told in writing one thing, under authorized or required plan communications, and then being given something else under the plan. There is no reason why, when there is a sufficient evidentiary basis to support the claim that a participant was misled about plan benefits, that the participant should not be allowed to proceed with an equitable remedies claim in that context, and, if the participant can prove it, to then be awarded the benefits he was led to believe existed. In that scenario, this type of case simply becomes like every other claim for equitable remedies, in every other context of the law that I can think of: if you say the defendant misled you and you should recover more as a result, then prove it on the evidence. It doesn’t require doctrinal bars or judicial reluctance to recognize equitable claims to avoid excessive litigation in ERISA cases over these types of circumstances; all that is required is testing the evidence just as would occur in any other type of case.

In fact, any concern that openly adopting and enforcing equitable claims in the context of ERISA will give rise to endless numbers of meritless claims is unwarranted. Preventing this “parade of horribles” requires nothing more than a strict interpretation and forceful application of Iqbal and Twombley – if the plaintiff cannot show the elements of an estoppel claim, for instance, based on significant factual support in pleading the claim, then the plaintiff’s claim can and should be tossed out on a motion to dismiss. Wasn’t this the original point of those two decisions, and the extent to which they raised pleading requirements? To bar the courthouse door to claims where the plaintiff cannot actually plead a factual basis for all of the elements of a claim? Courts can successfully bar the courthouse door to unfounded equitable relief claims under ERISA simply by strictly enforcing the pleading requirements of Iqbal and Twombley, and thereby dismissing estoppel and other equitable relief claims that do not have a substantial factual basis.

Nonetheless, there has been ample skepticism in the case law over the past few years towards equitable relief claims brought under ERISA. A couple of weeks ago, however, in Osberg v. Foot Locker, the Southern District of New York gave broad equitable relief to participants based on a reformation theory. In a well-reasoned 83 page opinion, the Court explained that there was more than sufficient evidence to demonstrate that the participants were actively misled about the extent of their retirement benefits. As one excellent summary explained:

U.S. District Judge Katherine B. Forrest of the U.S. District Court for the Southern District of New York found that the plan’s summary plan description (SPD) as well as other communications to participants failed to inform them that their benefits would be in a period of “wear-away” during which new accruals would not increase the benefit to which a participant was already entitled. . . . “Here, there is no doubt that Foot Locker committed equitable fraud,” Forrest wrote. “It sought and obtained cost savings by altering the Participants’ Plan, but not disclosing the full extent or impact of those changes.”

The Court ordered that “the plan must be reformed to actually provide the benefit that the misrepresentations caused participants to reasonably expect.”

Importantly, the Court’s opinion was based on substantial and extensive evidence proffered to show misleading statements about the benefits, the effect of those statements on participants, and the manner in which they differed from the actual plan terms. Enforcing equitable remedies under ERISA by focusing on whether the evidence supports the charge, as Osberg shows, is all that is necessary to separate the wheat from the chaff when participants come to court challenging plan decisions based on equitable remedies.

So is Osberg a tipping point that may lead the way to a less grudging view by the courts of equitable relief claims under ERISA where allegedly misleading plan communications are at issue? Time will tell, but it has all the indicia that past tipping points in other areas of ERISA litigation, such as excessive fee disputes, have had: a well-reasoned decision by a well-respected court, well-founded in the evidence. If the Second Circuit eventually affirms it, I think we can all expect that, yes, in fact, a tipping point on these types of claims has in fact been reached.
 

Its entirely politically incorrect in 2015, and rightfully so, to ever equate litigation (or football, or anything else) to war, but that doesn’t change the fact that there are historical lessons to be learned from military history and wonderful allusions and metaphors to be drawn from it. See, for instance, my early article on excessive fee litigation under ERISA, which predicted that early defense rulings would eventually give way to favorable plaintiff rulings; to capture that idea of fortune shifting from one side to the other, I borrowed, for the article’s title, the American Civil War concept of the high water mark, which was the furthest point north that the Confederacy advanced into Pennsylvania before the tide turned on the Confederacy once and for all.

This morning, again, something about litigation drew me back, for a historical reference, to the Civil War, namely to the battle of the Wilderness, where soldiers fought among such dense forests that they effectively could not see the forest for the trees, in a nearly literal sense. Those of us who litigate insurance related disputes on a regular basis often likewise get lost in the trees, focused on the specific details of whether a particular claim is covered or not, and whether an insurer did the right thing (or acted in bad faith, to use the legal concept) in a particular situation.

However, the picture of the insurance industry, from 30,000 feet and looking at the forest as a whole, is brighter than that which a narrower focus on the specifics of an individual claim would otherwise paint. Eamonn Freeman, Managing Director of an insurance company based in Ireland, has created an interactive presentation of the world’s largest disasters, and the scale of the insurance payments arising from them. As you flip through it, just think how much worse the suffering from these catastrophes would have been without insurance companies, which is the most interesting lesson, I think, that you can take from the presentation.
 

Two small notes today that I wanted to pass on. Each stuck in my mind as the possible foundation for a substantial blog post, but I have found that once items like this start to pile up in number, it can be quicker and more useful to get them out in a shorter post. Sports columnists, like the Boston Globe’s Dan Shaughnessy, used to describe columns full of small notes that were picked up along the way with none sufficient to warrant a full column on their own, as “clearing out the attic of my mind.” If I really set out to do that, we would be here awhile, but I am limiting myself to two items today: we can call it more like “cleaning out the corner of a desk drawer of my mind,” rather than the whole attic.

One of them was this article in Planadvisor titled “Do Retirement Plan Advisers Have a Duty to ‘Rat?’” Really, how can you not read an article with that heading? Although the headline sounds like clickbait for anyone in my line of work, it is actually a substantive discussion of a real problem, namely, when, given the risks on one hand of co-fiduciary liability and, on the other hand, of losing a client, a service provider should speak out about questionable or even illegal acts by a plan sponsor. One of my favorite southerners turned New Hampshire Yankee (which is not quite the same thing as a Yankee in King Arthur’s Court, but close enough), Adam Pozek, sums up the issue in this quote from the article:

Adam Pozek, a partner at DWC ERISA Consultants in Salem, New Hampshire, says, “It varies widely depending on what type of infraction there is. No one wants the reputation of turning a client in when something small happens, but in a situation where there is outright theft, most would agree the adviser has a duty to report it.”

Pozek also says it hinges to some degree on whether the adviser is acting in a fiduciary capacity. If not, in general, the adviser has less of a responsibility legally. However, depending on what titles they hold, they may have ethical or professional standards to consider. “It’s a judgment call for advisers who are not fiduciaries,” he states.

The other item I wanted to pass along is ERISA lawyer Rob Hoskins’ post on the ERISA Board the other day on this decision from the Southern District of New York noting that medical reviewers in LTD claims are not to be treated as experts for purposes of the federal rules of evidence and that their reports, on which LTD insurers and administrators rely in deciding LTD claims, are not subject to the Daubert standards that govern expert testimony. Its worth bearing that point in mind, simply because medical reviewers in litigated LTD claims sit in something of a unique position for purposes of the rules of evidence, in that they fall somewhere in between a treating physician, whose records are often broadly admissible, and an expert retained for litigation, whose testimony is governed by Daubert and the federal rules that govern expert testimony. Neither fish nor fowl, to a certain extent, are such reviewers and their reports for these purposes, but long standing practice has established the admissibility of such reports and the weight to be given them in the context of litigation over LTD claims.
 

Honestly, I couldn’t really care one whit about the little locker room stare down between Roger Goodell and Tom Brady. Its just sports. A spinning teacher of mine once looked out at the class the day after a playoff or Super Bowl loss by the Patriots (I forget which) and said, in the middle of a sprint: “Guess what, Brady’s still a multimillionaire married to a super model.” Sort of sums up my feelings about the whole thing right there.

I do get, though, why so many people care, but what is more interesting to me are the remarkable lessons for lawyers buried in the judicial ruling and the decisions that led up to it, and I don’t mean for a second the question of whether or not Brady really cheated or whether the league could prove he had cheated. Litigators with experience with arbitration and the Federal Arbitration Act always knew, even if – like me – they didn’t bother to follow the case as it weaved along on its merry, monotonous way, that the judicial decision would be about process and the rules of arbitration, not in any way about whether Brady cheated or not. And really, its better that way, isn’t it? Who, really, cares whether a professional athlete pushes the boundaries a little bit in a way that doesn’t physically hurt anyone? We are not talking, after all, about East German sports authorities doping up athletes, or even baseball players voluntarily – but illegally – taking PEDs. We are talking simply about manipulating a ball. Face it: sports was more fun when batters corked bats and pitchers scuffed the ball, and no one called in the lawyers over it. Back then, legal proceedings were saved for things that warranted it and were actually important, like the reserve clause and whether baseball players were legally entitled to free agency or were instead bound, like indentured servants, to the first team that signed them. But I understand that times change and with them, peoples’ priorities and sense of perspective.

But when I said there were real and important lessons for lawyers buried in the decision and its prelude, I meant it. They flow from the errors by the NFL and its lawyers that are the basis for the Court’s ruling. Judge Berman found that a number of clear errors in the process required overturning the suspension, primarily that Brady was not on notice of the potential severe penalties for the conduct in question, that the NFL relied on inapplicable standards, and that the NFL withheld relevant evidence by refusing to allow NFL General Counsel Jeff Pash to testify as to his role in the creation of the evidence – the Wells Report – used to hang the accused.

As I said, these are procedural failings on which the judge overturned the sanction, and don’t even address the question at all of whether Brady did anything wrong. But in these procedural failings are a number of lessons about arbitration and, in a broader sense, the proper role of a lawyer in advising a client.

First, as errors go, those identified by Judge Berman in his ruling would have been obvious in advance to any lawyer experienced in arbitration. As a general rule, you can’t go to court after an arbitration concludes and ask the court to change the outcome by rearguing the merits. Instead, you have to convince the court that the arbitration proceeding itself was so flawed that reversal is needed, either because the procedures used were flawed, the arbitrator was biased, the ruling was so far afield that it reflects a failure by the arbitrator to follow applicable law, or the party that lost at arbitration was deprived of a fair opportunity to present that party’s case. The errors identified by Judge Berman in his ruling, and on which his ruling turned, fall soundly into these categories; if anything, the errors were such a perfect fit for the narrow grounds available for overturning an arbitration ruling that Brady’s legal team essentially went into the court proceedings with a loaded deck.

And Brady’s legal team, led by Jeffrey Kessler at Winston & Strawn, had to have always known this. They had to have known that they were holding a straight flush, or bringing a gun to a knife fight (pick your own cliché). And they wisely advised their client accordingly, by all appearances. Brady and his team clearly understood they held winning cards, and that, unless the NFL buckled in settlement, they should let the judicial process run its course. And that is lesson number one for lawyers and people who hire them: the lawyers need to know the case, the relevant law and the facts well enough to make those kind of calls, and have the experience and expertise to wisely counsel their clients in that regard. If not, what exactly is a client paying for?

The other lessons come from the flip side, which is the NFL’s sound defeat. How could the NFL’s lawyers not have seen the same thing, and understood that the arbitration proceedings had been so flawed that they would have trouble convincing a court to affirm the arbitration rulings? Did they not know? I find that hard to believe. I understand that hindsight is 20/20, and I completely understand the fog of war that can make it hard for lawyers, in the middle of litigating a case, to see clearly every crook and turn of a case in advance. But here, the NFL’s experienced lawyers had to have identified these problems and known that they posed a risk for their client. And although I have no idea what the actual dynamic was that led to the NFL still riding off to Little Big Horn under those circumstances, I have certainly been at this business long enough to identify the possible causes and the lessons they teach. Since the NFL’s lawyers had to have recognized the risks, the question becomes whether they firmly and clearly advised Goodell and the NFL about them. If they did, then the loss is on the client, who is certainly free to decide to move forward with litigation despite knowing about those risks. But the more worrisome question, given the dynamic between lawyers and very prominent clients, is whether the NFL was told firmly and clearly of the risk they were running, or whether their lawyers were instead unwilling to speak that truth to power. Lawyers don’t want to lose clients, especially prominent ones like the NFL. A lawyer gains all sorts of benefits from a client like that, ranging from the financial gain of the billings of that client, to the marketing kick of having a client like that on their roster, to the ego boost of representing such a client. But – and I emphasize that I have no idea what actually happened here – that dynamic can make outside counsel afraid to tell such a client that the client or its case, like the emperor in the famous story, has no clothes.

And in this risk – which as I say, I don’t know whether or not it played a role here – is the lesson for lawyers and, again, the people who hire them. Clients aren’t served, and lawyers aren’t doing their job, in that circumstance. Clients do not benefit from lawyers who are so beholden to them that they won’t tell them the truth, and lawyers are not living up to their obligations if they are afraid to tell the client the truth. Certain relationships require brutal honesty to work well, and the lawyer/client relationship – in both directions – is one of them.

And this then brings into focus a particular facet of Judge Berman’s ruling that really troubles me, both in terms of arbitration tactics and the decision making of those involved here, which is the Court’s focus on the fact that the NFL’s general counsel edited the Wells report (which is, at heart, essentially the prosecutorial findings on which the sanction against the accused rested) but was not required to testify in the arbitration. I am not going to pass judgment here on whether or not the general counsel, Pash, should have been required to testify or whether, instead, the arbitrator could have properly denied a request for his testimony. As I said, hindsight is 20/20 and, from this vantage point, after Judge Berman has spoken, it is easy to say that the arbitrator erred by denying a request for Pash’s testimony. In the course of a particular arbitration, however, there are valid arguments both ways as to whether testimony of a particular witness should be allowed, and I am not certain it is fair to say that, in real time during the arbitration, the answer to that question was always clear.

What I am concerned about, though, is the very fact that the NFL’s general counsel involved himself in this way in the development of the evidence and findings against Brady, i.e., of the Wells report itself. Why in the world would you allow such a senior executive, the legal centerpiece of a major corporation, to insert himself into the process in that way? Pash and his legal department had to have understood that they were putting him in harm’s way, and making him a potential witness in the arbitration. Worse yet, they had to have – or if not should have – seen that this would create the dynamic where either he would have to testify or the arbitrator would be put in the position of precluding his testimony, thereby creating grounds for having the arbitration ruling overturned by a court (as in fact happened). Everyone involved here is too experienced not to have seen this risk from a mile away – as trial lawyers like to say, this was no one’s first rodeo (this is a cliché lawyers at trials usually resort to so as to reassure the trial judge that the lawyers can be trusted to work something out among themselves without the judge’s involvement). So how was this allowed to occur? Was Pash’s team of lawyers afraid to speak truth to power and tell him to keep his distance, whether those were the lawyers in his own department or instead the NFL’s outside lawyers? Or did Goodell, essentially the CEO of a huge corporation, want him involved in that way and his general counsel didn’t want to tell him no?

There is a cliché relevant to both representing corporations as outside counsel and to being an in-house lawyer, which concerns the fear – sometimes legitimate – of business folk that the lawyers just say no about everything they want to do, rather than telling them how to do what they want to do. As I mentioned, this is sometimes a legitimate concern that non-lawyers have about their lawyers, whether outside counsel or resident in the corporation itself. But it is also true that there are times when lawyers – again whether in-house or outside counsel – have to say no, and have to advise their clients that what they want to do is a bad idea. I have no idea how Pash, an extraordinarily senior officer of a multi-billion dollar corporation, ended up in the middle of this mess as, of all things, a fact witness, but it should never have happened. Somewhere along the line, someone abdicated their responsibility of just plain saying no, it’s a bad idea.
 

What’s worse than playing games with your employees’ retirement savings? Well, probably not much, from both a moral and legal perspective. The heavy hand of the plaintiff’s bar, and possibly the Department of Labor, will come looking for you if you do.

But one thing that makes such an event worse for a plan sponsor or fiduciary, from a legal and liability perspective in any event, is retaliating against the employee who ratted you out in the first place.  This is because ERISA includes an anti-retaliation provision, section 510, by which a plan participant can sue for damages if retaliated against for seeking to recover, obtain or protect his or her benefits under an ERISA governed plan.

Now, in my experience, participants in a plan who have been engaged in long disputes with a plan administrator over benefits or plan administration often come to believe that they are being targeted by a hostile administrator in response and are therefore being retaliated against. In some cases, those participants are right in their perceptions. But contrary to what many participants caught in that scenario may believe, they are almost never sitting – despite what complaints, often legitimate, they may have about the conduct of a plan sponsor or administrator – on a viable claim for retaliation under ERISA. Instead, a viable cause of action under ERISA for retaliation requires, to succeed, a strong linkage between a job action or other harmful decision and the participant’s request for benefits or effort to protect those benefits. Most of the typical disputes that go on day after day between participants and plan administrators don’t rise to this level, no matter how it feels to the particular participant trapped in the dispute.

Instead, a viable ERISA claim for retaliation looks much more like the facts of this case, in which the Department of Labor recovered several hundred thousand dollars in back pay and other damages for a trio of employees and plan participants who blew the whistle on malfeasance by a plan fiduciary and cooperated with a federal criminal investigation. As Planadvisor summed up in an article on the case:

Prior to her termination, Robbins complained internally that Scott Brain, a trustee and business manager for Cement Masons Local Union 600, was violating the federal Employee Retirement Income Security Act (ERISA). In 2011, she cooperated with a federal criminal investigation into Brain’s activities. Upon learning of her cooperation, the joint board of trustees voted to place Robbins on administrative leave, until such time that her department was outsourced.

Later, "when the company outsourced Robbins’ department to a third-party administrator, Robbins was the only employee not retained by the new employer."

Now that’s retaliation in violation of ERISA. And from the perspective of a plan sponsor or administrator, that is just plain making a bad situation worse.
 

I can’t even recall how many times I have written – on this blog and elsewhere – on what I call “defensive plan building,” which is the idea that plans should be designed, built out and operated with the risk of litigation and liability exposure carefully considered and planned for, with the goal of eliminating as many risks as possible. The idea is to think – not after being sued but when a plan is written, a vendor selected, funds chosen, an investment committee put together, and the like – how best to limit the liability risks of the plan sponsor and the plan’s fiduciaries.

Here’s an easy example. A couple of weeks ago I spoke on a Strafford webinar on the duty to monitor plan investments after the Supreme Court and the Ninth Circuit’s rulings in Tibble. One of my slides concerned a favorite topic of mine, which is the risk of corporate officers who are not directly involved in a plan’s operations being dragged into a dispute over the plan on the ground that they are functional fiduciaries of the plan (how this can happen, how it can be avoided, the status of the law on this issue under a wide variety of fact patterns, and the creativity of plaintiffs’ lawyers with regard to this issue are a subject for another day, one that perhaps warrants an entire article). Often, such officers and executives were not directly involved with the plan and, moreover, did not understand themselves to be occupying a role that could expose them to liability for the plan’s operations based on a claim that they were functional fiduciaries. As I explained in my presentation, getting dragged in this tangential way into class actions brought against a plan is not a good use of a senior executive’s time and focus, and likely not good for the longevity of the lawyer who designed the plan in a way that left a senior officer at risk of being named a defendant in such a claim. The point of “defensive plan building” is to look ahead at risks like this and design the plan in such a way that this doesn’t occur by accident, by insulating such senior officers from involvement that could drag them in as defendants. Multiply this by a thousand fold, concerning all of the other exposures that a plan can bring, and you have the idea of “defensive plan building:” look ahead when building and operating a plan at your potential exposures, and avoid the ones you want to avoid.

Now this is all nice as a theory, but there is no doubt it is hard to pull off. Plans are amazingly complicated machines, with a thousand moving parts. Worse yet, new theories of liability arise all the time, and one cannot predict whether certain actions taken today will run afoul of theories of liability crafted in the future. Just look, for instance, at excessive fee cases: the cost of funds certainly wasn’t on the radar screens of most plan sponsors and their lawyers several years ago, but it would be negligent of them to ignore those costs in designing a plan today.

I will have more of an opportunity to expand on this idea in November, when I will be speaking at the American Conference Institute’s conference on plan compliance issues in New York. The actual title of the conference is “Minimizing Legal Risks in the Design, Implementation and Administration of Employee Benefit Plans,” which could almost serve as a definition for the term “defensive plan building.” Peter Kelly, who is the Deputy General Counsel of Blue Cross and Blue Shield Association, Ed Berrios of Chubb and I will be speaking as a panel on fiduciary liability and employee benefit risks, and dozens of others will be speaking on a range of other issues central to operating a well-run plan. If you are interested in attending, you can get a special bargain by contacting Joe Gallagher at the American Conference Institute by the end of the month, at 212-352-3220 x 5511 or j.gallagher@americanconference.com, and mentioning my name.
 

Robert Wood, in Jackson Lewis’ Benefit Law Advisor, asks – and implies an answer to – the simple question of whether group employee life policies and plans are worth the risk for mid-size and smaller employers. He points out that conversion and related rights granted by such plans to employees place a significant administrative burden on employers that, if performed poorly, can give rise to fiduciary liability. Having litigated such cases, I would second his thought, which is why I am passing along his post. There are certain features of such group policies, related to the rights of employees to convert the group coverage to individual coverage, that are difficult for employers to administer successfully, and about which they are often relatively uninformed. As a result, they may find themselves exposed to fiduciary liability based on a plan benefit about which they knew little and/or which they were ill prepared to administer.

I am not saying that smaller employers shouldn’t provide such benefits; benefits are important, including group life. Indeed, I have lost track of the number of benefit cases in which I have been involved where the only life insurance available to a surviving spouse was that provided by the deceased spouse’s employer. What I am saying, though, is that if an employer is going to provide that benefit, they need to understand exactly what it provides and proactively plan for how the employer is going to administer that benefit. Learning about the complexity of that particular form of benefit only after the fact is a recipe for an employer to incur fiduciary liability.
 

When you read in the paper about a large settlement in an excessive fee case or other claim involving a 401(k), ESOP or other ERISA governed plan, do you think about what happens next, and about how to distribute the money among the plan participants? I do, in cases where I have represented the class, but also in cases where I have defended the plan or its fiduciaries. As this article from Plan Advisor discusses, there are a lot of issues that go into deciding how to distribute the settlement among current plan participants and those who have left the plan. The article gives a good overview, and drives home a key point: there is a lot of complexity behind the scenes in figuring out how to distribute the money, which the media, reporting on the large figures of the settlement itself or on the large award to class counsel (which are both sexy subjects), tend to ignore or simply be unaware of, because it just isn’t that interesting to the public as a whole. But in real life, this part of a settlement is crucially important, and creates a fair amount of work for those who administer class action settlements and those who administer plans themselves.

Here are a few things I have observed and lessons I have learned over the years. First, the class definition in the litigation and which is used by the court in approving the settlement is hugely important. In class action litigation involving these types of plans, the class of affected participants is typically defined by the litigants and eventually approved by the court. If the parties and the court really focus on the definition, its terms can provide a great deal of guidance to the administrator with regard to exactly which current and former plan participants should receive distributions. Often, though, the class may have been superficially defined, in a manner that the lawyers feel will be sufficient to win court approval, but which may not, in fact, be precise enough to guide distribution of the proceeds and provide real guidance in that regard to the plan administrator. A focus on this issue by the lawyers negotiating the terms of a class action settlement can make a real difference when it comes time for the administrator to do the hard work of allocating the settlement proceeds.

Similarly, settlement documents in a class action, negotiated by the parties as part of closing a deal and obtaining court approval of the settlement, are usually replete with detailed explanations of as many facets of the settlement as the lawyers for both sides can think to cover. This is often, I hate to say, more often due to self-interest of the lawyers involved than to any higher motivation, as a detailed, comprehensive explanation of the settlement is often crucial to winning court approval of the settlement and to defeating objectors to the settlement who are part of the settlement class. There is nothing wrong with that per se, in that the class action system, with its awards of attorneys fees out of settlement proceeds and the checks and balances imposed by court oversight, is designed both to be driven by self-interest and to tamp down its unchecked excesses (I should note here that unlike many of its critics but like many of those who, like me, actually toil in the orchards of class action litigation, I find that this aspect of the system works pretty well in the vast majority of cases). A focus in these papers on settlement allocation – perhaps by including a subsection expressly directed at describing allocation of the proceeds in as exquisite of detail as possible – can greatly aid the administrator later on in distributing the settlement proceeds.
 

Well, I am not sure how much new there is in this Washington Post article, “A Retirement Storm is Coming,” but I liked it nonetheless. It’s a good story on the problems in retirement financing people face and possible solutions. What I liked most about it are a few points. First of all, people cannot hear often enough that most of them are going to be on their own when it comes to retirement finances; too many people think that social security, the tooth fairy, or pensions of the types their parents had (but not they) are going to finance their retirement, when it is likely that none of these are any more likely than the next to do so. I lump social security in with two things that are seldom spotted – the tooth fairy and pensions – in this regard because, as the article points out, financial realities make it ill-advised for anyone mid-career or younger to assume a particular amount of social security payout in projecting retirement incomes.

I also like the article’s rejection of two things that are, in essence, wishful thinking by many future retirees – that traditional, private employer pensions will come back into vogue or that government programs will be created to solve the retirement crisis. As the author makes clear, the former isn’t coming back, ever, and the latter, given the political climate, is a barely more likely occurrence.

The author looks at these points and comes to the only conclusion that anyone weighing the evidence could come to: that each worker is responsible for his or her own retirement finances, and will have to self-finance retirement. This means a couple of things. First, people should not even begin to think they either can, will, or should be retiring in their early to mid-60s. Even leaving aside the question of whether it is a healthy thing for a healthy person to do, the finances won’t support it for almost every member of the 99%: the time in retirement that needs to be funded will, knock on wood, be too long for most people.

Second, successful retirement investing while working is crucial, and this makes the focus on the costs in 401(k) plans and the risk of conflicted advice by financial advisors important. Anything that makes it more likely that a working person saving for retirement will end up paying more than is necessary for a return on investment that is lower than it should be makes it even harder for people to prepare for retirement. This point could drive an article all on its own, covering topics ranging from fee disclosures mandated by the Department of Labor, to the proposed new definition of fiduciary, to class action litigation over the costs of investment options in 401(k) plans. A topic for another day, but for now, I wanted to pass along these macro level thoughts on the Post’s article.

(By the way, did you catch the allusion in the title of this post? Its our musical moment for Monday).