ERISA litigation is the overarching category for pension and benefits litigation under the federal law governing employee benefits, the Employee Retirement Income Security Act of 1974 (“ERISA”). We prosecute ERISA litigation cases in large employee group actions (100+ employees) and related class actions. These include:
ERISA FIDUCIARY DUTIES
ERISA governs nearly all areas of employee benefits, from pensions to group health plans and arrangements. The key unifying factor of all these areas of ERISA litigation is the all-important fiduciary duty requirement. Plan sponsors and fiduciaries must discharge duties with respect to a plan–
solely in the interest of the participants and beneficiaries and—
(A) for the exclusive purpose of:
(i) providing benefits to participants and their beneficiaries; and
(ii) defraying reasonable expenses of administering the plan.
A fiduciary must act–
With the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.
If an ERISA fiduciary fails in its duties, participants and beneficiaries in the plan may bring a lawsuit to enforce their rights under the plan and/or for monetary recovery. (see FAQ)
If your pension plan (defined benefit plan or 401(k) plan) is invested in a Collective Investment Trust, there is a high likelihood that your investments include compex products.
The key for pension plan participants is, of course, that you understand the assets in your plan, together with their risks–especially the complex products that may be embedded in your plan without your knowledge. This is essential for a participant to exert appropriate influence over the direction of plan investments.
Complex products (investments) are defined by FINRA as “any product with multiple features that affect its investment returns differently under various scenarios is potentially complex. This is particularly true if it would be unreasonable to expect an average retail investor to discern the existence of these features and to understand the basic manner in which these features interact to produce an investment return.”
The definition of “complex products” overlaps with the definition of “alternative assets“). Both definitions are aimed at the same basic problem–investment assets whose values are opaque, and that react to normal market forces in ways that are difficult to understand–particularly for retail investors and pension plan participants. See FAQ.
“Any product with multiple features that affect its investment returns differently under various scenarios is potentially complex.”
ERISA LITIGATION FOCUS AREAS
Defined benefit plans are the traditional pension plans offered by an employer for decades in the US. While new DB plans are hardly ever offered any longer, many legacy plans exist, particularly for union employees and legacy companies. See here for discussion about red flags to watch for concerning traditional pension plans.
As most people know, 401(k) plans now are the investing vehicle of choice offered by employers. Typically, a participant is offered a menu of investing options from which to choose from. But the US Supreme court has been clear that a pension fiduciary must regularly review options offered by a plan, and must remove under-performing investments. See here for discussion about red flags to watch for concerning individual contribution plans.
Group Health Litigation
Welfare benefit plans largely involve group insurance offered by an employer. Group health plans now intersect with the Affordable Care Act, passed in 2010. As the ACA is incredibly complicated, with many moving parts, insurance companies and related third parties have been hard at work to find loopholes, to extract higher premium payments and provide fewer actual benefits (notwithstanding the ACA requirements). By any measure, this exploitation has gotten far out of hand, and requires litigation to course correct. See here for discussion about red flags to watch for concerning insurance and other welfare benefit plans.
Bankruptcy Adversary Proceedings
When a plan sponsor of a traditional pension plan files for bankruptcy, it is virtually certain that company will try to jettison its pension plan. Specific bankruptcy code sections have been adopted to address this problem. We are experienced in navigating pension plan bankruptcy problems for employee groups.
Healthcare sharing is a benefit arrangement in which individuals share medical expenses in accordance with their religious beliefs. In this sense, healthcare sharing bypasses health insurance laws and provides an exemption for individual mandates to purchase insurance.
Healthcare sharing is a an attractive and affordable alternative to health insurance for many people. But due diligence into a chosen provider is highly recommended.
Have Questions about your Pension or Benefits Plan?
“Our firm’s greatest differentiating value is to understand and simplify ERISA litigation complexities.”
The complexity of financial investments has increased tremendously in recent years. The majority of pension money is no longer held in traditional mutual funds (that are easy for a participant to understand), but are held in “collective investment trusts” and similar layered structures that are difficult to understand or see behind. Banks and investment managers often taken advantage of complex investment trust structures to make money for themselves–at your expense.
Our firm’s greatest differentiating value is to understand and simplify pension and financial complexities.
In our experience, when large financial institutions are confronted with a simple and clear attack on self-dealing investment behaviors, litigation is often settled favorably and quickly.
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 Law PC at a fraction of the cost than our opponents.
What Type of Lawsuits Can be Brought under ERISA?
ERISA lawsuits include claims involving defined benefit plans (traditional pension plans); and defined contribution plans (401(k) and 403(b) plans; and health and welfare plans and arrangements.
What is the Statute of Limitations for an ERISA Claim?
An ERISA lawsuit must be brought within four years of a fiduciary breach of duty by an ERISA fiduciary.
What Legal Remedies are Available in an ERISA Lawsuit?
ERISA allows two remedies: (1) recovery of financial losses resulting from a fiduciary breach; and (2) declaratory relief that a fiduciary has committed an ERISA breach (such as failing to describe plan benefits and limitations in plain English) and must correct that breach.
What are examples of complex products?
A non-exclusive list of complex products includes:
— Asset-backed securities that are secured by a pool of collateral such as mortgages, payments from consumer credit cards or rent payments.
— Products that include an embedded derivative component that may be difficult to understand.
— Products whose repayment of principal or payment of yield depends upon an OTC reference asset, such that information about the performance of the reference asset is not readily available.
— Products that have different stated returns throughout the lifetime of the product.
— Products under which the investor might incur a capital loss as a result of the fall in the value of the reference asset without being able to participate in an increase in its value.
— Products in which a change in the performance of the reference asset can have a disproportionate impact on the repayment of capital or on the payment of return.
— Products with contingencies in gains or losses, particularly those that depend upon multiple mechanisms, such as the simultaneous occurrence of several conditions across different asset classes.
— Structured notes.
— Investments tied to the performance of markets that may not be well understood by many investors.
— Products with principal protection that is conditional or partial, or that can be withdrawn by the product sponsor upon the occurrence of certain events.
— Product structures that can lead to performance that is significantly different from what an investor may expect, such as products with leveraged returns that are reset daily.
— Products with complicated limits or formulas for the calculation of investor gains.
(See, FINRA explanation page: https://www.finra.org/rules-guidance/notices/12-03 for detailed discussion.)
Why might complex products be in my pension plan?
Complex products may offer higher returns in a stable or growing economy–but not so much in a volatile or falling economy. So its critical to understand what your pension plan is invested in at any point in a market cycle.
Complex products are intended for sophisticated investors and institutions. The investment manager or sponsor of your plan is such a sophisticated investor (even if you are likely not). Therefore, the investment manager is expected to understand these complex products and protect your interests accordingly.
Who is responsible to plan partipants for investments in complex products?
The plan fiduciary is accountable to you for overseeing all investments in your plan–even the ones that are difficult for an average person to understand, such as complex products.
Have Questions about your Pension or Benefits Plan?