Kevin McBride
Pension & Benefits Litigation
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Pension & Benefits Litigation
McBride PC represents plan participants in pension & benefits litigation under ERISA (the Employee Retirement Income Security Act of 1974). We primarily focus on breach of fiduciary duty cases involving 401(k) individual contribution plans, as they affect plan performance and value.
The most pressing pension issue today, in the wake of the Silicon Valley Bank failure, is mis-marking of the value of alternative assets found in most 401k plan options. In a falling market, marking assets at net asset value creates the illusion that plans are more valuable than they are. Creating (and perpetuating) this valuation illusion is a breach of duty by plan fiduciaries.
A 401k fiduciary owes three primary duties to plan participants:
First, a duty to prudently select the menu of investment alternatives offered to participants;
Second, a duty to regularly monitor those investment alternatives, removing under-performing investments from the menu of choices presented to participants; and
Third, to give plan participants sufficient information about each investment alternative to allow informed decisions in individual account management.
Of particular concern in any investment menu are investment alternatives that are confusing to plan participants and involve risks that are not easily understood–particularly highly leveraged investments where leverage is hidden from view. The US Supreme Court the problem of investment menu confusion in its most recent ERISA case, Hughes v. Northwestern University.
Nowadays, most pension and 401(k) plans hold one or more categories of leveraged complex products inside a collective investment trust structure that are so devoid of information that participants cannot reasonably make informed decisions about investments or understand the leverage risk. Many (if not most) plan fiduciaries take little care to assign a correct valuation of these complex products inside plans they manage; or to explain the characteristics and risks of the assets they have decided to put inside a plan.
The net result is that a pension plan may be loaded with risky alternative investments that generate high profits for investment managers–but at an undisclosed, high risk to plan participants.
Our primary work is to protect pension and benefit rights for employees — to challenge employers and plan sponsors who would use investment trust structures and alternative investments money for their own financial gain.
We have an enviable track record of success in major financial litigation against large companies.
In our work, we apply the blueprint for small-group conflict strategy that allow small litigation teams to succeed against large opponents. The principles applicable to litigation are simplicity, preparation and innovation.
Key among these is simplicity–keeping a litigation plan clear and objectives focused, while disregarding ancillary claims and arguments.
CONTACT US
McBride typically associate other firms and lawyers as co-counsel, on a case-by-case basis.
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We are Highly Evidence Driven.
Litigation is discovering the truth, and cases are won or lost based on the evidence presented. In ERISA cases, we work hard to identify and uncover evidence of self-dealing. Self dealing is a siren call that a great many investment managers cannot ignore–and this always harms the plan’s returns. We focus intently on developing this evidence to ensure victory for our clients.
We give Close Personal Attention.
Our advantage over other large firms is our approach to cases. We dedicate ourselves to every aspect of the case and don’t rely on junior associates to research, write, and argue for us.
We are Cost Effective.
There’s no reason to pay hefty costs to firms when you can obtain equal or better quality litigation work from McBride PC at a fraction of the cost than our opponents.
Case Studies
Financial litigation cases are won based on deep research of applicable facts that tell a story of liability. The following are examples of McBride’s litigation work across various areas of our litigation practice:
Pension Litigation
We won a $42 million pension increase for 574 retired United Airlines Pilots in ESOP appeal to Pension Benefit Guarantee Corp (PBGC), the largest pension increase for any employee group in 20 years.
Vaccination Mandate Litigation
We currently represent 683 Los Angeles County Firefighters in a challenge to a vaccination mandate under the California Constitution. With over a year of hard-fought litigation behind us, not one of our firefighter clients has been forced to take a Covid vaccination and not one has been fired for refusing a vaccination.
Derivatives Litigation
We represented a corporate client against Citibank to recover $12 million in derivative-based investment losses. After identifying alleged self-dealing, with a prop trading desk apparently taking both sides of trades that resulted in losses to our client, we settled the case for $7.5 million early in litigation.
Structured Notes
We advised high net-worth individual investors on structured notes recommended by a JPMorgan Securities advisor. The notes referenced a complex set of underlying securities with significant redemption and liquidity limitations. This problem, incidentally, is rampant in many pension and 401k investments offered today under the structure of a “collective investment trust.”
Unfair Competition
We worked as co-counsel with Boies, Schiller & Flexner, representing a mid-sized software company in an unfair competition claim against IBM. The case settled for $14.25 million. The case was settled when we identified internal emails at IBM showing a “public position” on a partnership offering and an “internal position” for IBM internal use only. Faced with this discrepancy, IBM chose to settle the case.
Railway Labor Act Representation
We represented 1000+ United Parcel Service Pilots in staging a union election under the Railway Labor Act. This resulted in every pilot flying for UPS leaving the Teamsters Union and joining the new union we organized, the Independent Pilots Associaton.
Bankruptcy Adversary Proceedings
We have represented multiple parties in bankruptcy adversary proceedings, including a challenge to pension valuation in the United Airlines Bankruptcy. Our valuation analysis was later used by lawyers for American Airlines pilots, resulting in the bankruptcy court’s refusal to allow American to terminate its pension plan–saving millions of dollars for American employees.
Healthcare Sharing Law
We currently represent a national healthcare sharing organization in compliance, litigation and lobbying. Our work has included successful lobbying in Texas, Montana, Colorado and Arizona involving the constitutionality of the Affordable Care Act’s religious exemption.
Why choose McBride PC?
Our greatest differentiating value is to understand and simplify pension financial complexities. We bring a singular clarity to the right claims, the right words, and the right concepts that makes a case stand above the ordinary.
This is why you should choose McBride.
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McBride has been the “go to” lawyer for United Airlines Pilots on pension issues. He accomplished a $42 million pension increase representing 574 retired pilots in PBGC action when Union would not represent them. He also represented the pilots in two other actions; both involving the UAL mandated employee buyout. McBride is fearless in challenging corporation treatment of employees.
FAQs
FAQ
Alternative Pension Investments
What are alternative investments in a pension plan?
Alternative investments are investments in non-standard assets like cryptocurrencies, hedge funds, private equity funds and complex products.
A distinguishing feature of alternative assets is the valuation method. Importantly, alternative assets typically do not have a readily available trading market and are therefore valued at “net asset value.”
Compare this to “standard” investments held in pension plans, such as stocks, bonds and mutual funds that are bought and sold at an established “fair market value” on a public securities market.
What’s the difference between “fair market value” and “net asset value," and why should I care?
For assets valued at “fair market value,” the current asset value can be readily determined at least daily, as published by a stock ticker on a public securities market (such as NYSE).
But for assets valued at “net asset value,” the current asset value is not published on a public securities market and must be approximated from book value, or some other valuation method the pension plan’s board establishes “in good faith.”
Therefore, net assete value is inherently less reliable than fair market value, and the valuation process takes longer. So, 401(k) plan investors needing to access cash from plan assets may face a difficult time accessing the actual current value of their plan assets if valued at net asset value than if valued at fair market value.
Are alternative investments safe?
Alternative investment assets are more risky than standard assets (such as mutual funds).
But each 401(k) investor has his or her own risk profile. Therefore, alternative assets are neither “bad” nor “good.” It all depends on market conditions and the investor’s desired risk profile.
In a stable or rising stock market, the risk inherent in alternative investments is relatively low. “A rising tide lifts all boats,” as the saying goes.
But in a volatile or falling stock market, alternative investments may underperform and cause liquidity problems that will make it difficult to withdraw your money when you need it.
The important thing is to understand the risk profile of the investment assets held in your 401k plan, so you can make an informed decision.
FAQ
Collective Investment Trust
What is a Collective Investment Trust in a pension plan?
A Collective Investment Trust (“CIT”) is entity that pools pension money from multiple different pension plans, and then buys investment assets in the name of the trust. Each contributing pension plan holds a beneficial interest in its share of the pooled CIT assets.
Who Owns a Collective Investment Trust?
A Collective Investment Trust is typically held in the name of a large bank as trustee for multiple pension plans (the beneficiaries of the trust) that have pooled their pension money in the trust.
The most prominent large banks that actively provide Collective Investment Trusts access and management services to pension plans are JP Morgan, Citibank, Wells Fargo and Bank of New York Mellon.
Is the Trustee (Bank) of a Collective Investment Trust Directly Responsible to Individual Pension Plan Participants?
Typically, no. The large banks that own Collective Investment Trusts are not held directly accountable to plan participants in a pension plan.
Who is Responsible to Plan Participants for Investments in Collective Investment Trust?
The ERISA Fiduciaries of a pension plan must answser to plan participants. An ERISA fiduciary must do two things:
First, the Fiduciary must regularly review the investment options offered in a 401(k) plan and must remove under-performing investments. In a volatile or falling stock market, Collective Investment Trusts are likely to underperform, since they typically lack liquidity. This was the problem in the 2022 UK pension plan crisis–book value of investments remained high, but the investments could not be readily converted to cash.
Second, the Fiduciary must explain the Collective Investment Trust to plan participants in plain English, so that the participant can make an informed choice to include the CIT, or not, in his or her own 401(k) plan.
What Type of Assets are Typically Held in a Collective Investment Trust?
It is common for Collective Investment Trusts to hold high-risk assets in alternative investments such as cryptocurrencies, hedge funds, structured notes and other complex products.