14 | planadviser.com may–june 2017
Art by Kyle Stecker
Legislative and Judicial Actions
CHOICE Act Targets
The Financial Services Committee
has approved the Creating Hope and
Opportunity for Investors, Consumers
and Entrepreneurs (CHOICE) Act for
consideration by the full House of
Representatives, a move considered by
some to be the first real step toward
Congressional repeal of Dodd-Frank
regulations and the Department of
Labor (DOL) fiduciary rule.
The legislation is sweeping and
would undo or replace many Dodd-Frank Wall Street reforms adopted by
Democrats when they held significant
majorities in the wake of the 2008
through 2009 financial crisis.
Interestingly, the executive summary of the CHOICE Act, published by
the Republican members of the Financial Services Committee, has only one
brief, single-bullet-point mention of the
fiduciary rule—and this comes at the
very end of the document. It is probably
too much to read into that symbolic
detail, but the CHOICE Act’s impact on
the fiduciary rule, and even on particular elements of Dodd-Frank, could
potentially be renegotiated by the full
House and Senate.
Acosta Named Head of DOL
The U.S. Senate has quietly approved
President Donald Trump’s Secretary
of Labor nominee, Alexander Acosta,
following a previously failed effort by
the administration to install fast-food
executive Andrew Puzder to the position. Acosta’s appointment was more or
less a nonevent from the perspective of
the wider media and the general political conversation, which seems more
focused on tax reform proposals and
geopolitical tensions, particularly those
involving China, North Korea and Iran.
However, for the retirement planning
marketplace, the appointment represents a significant development.
Acosta, working with whomever
is named to fill the role of head of the
Employee Benefits Security Adminis-
tration (EBSA), will oversee the imple-
mentation of the Department of Labor
(DOL) fiduciary rule reforms cham-
pioned by the Obama White House.
Numerous attorneys, executives and
analysts have told PLANADVISER they
have been eager to get to this point;
without a labor secretary in place, there
has been a lack of clarity from within
the DOL as to what the future of the
rulemaking might be.
A federal district court judge has denied
most motions to dismiss filed by Amer-
ican Airlines in a case accusing the
company of including affiliated funds
in its retirement plan investment lineup
even though they were more expensive
and lower-performing than others.
The core of the plaintiffs’ claims
relate to the use of American Beacon
Funds in the plan. AMR Corp., American
Airlines’ parent company, created a line
of mutual funds that were managed
by another subsidiary of AMR Corp.
This fund manager was later renamed
American Beacon Advisors Inc., in 2005.
The mutual funds were then known as
American Beacon Funds.
According to the court opinion,
AMR Corp. sold American Beacon Advi-
sors in 2008 to Lighthouse Holdings
Inc. As a part of this deal, AMR Corp.
received an equity stake in Lighthouse
Holdings. Plaintiffs contend this sale
was premised on American Airlines’
continued use of American Beacon
Funds in the plan. Although American
Airlines employed an independent
third party to approve the continued
use of the funds in the plan, plaintiffs
allege this was done merely to “white-
wash” American Airlines’ actions.
Plaintiffs claim that the defendants
breached their fiduciary duties to the
plan because: a prudent fiduciary
would not retain the American Beacon
Funds, as they were more expensive
than similar alternatives; the funds
underperformed compared with other
similar investments; and the funds
were not included in other 401(k) plans.
Bank of America Prevails
In ERISA Challenge
An opinion handed down by the U.S.
District Court for the Western District
of North Carolina, Charlotte Division,
ruled in favor of the defendant, Bank
of America, which had been accused
of profiting from imprudence and
disloyalty in the management of a cash
The case has had a lengthy and
complicated procedural history, which
stretched back to a time before Bank
of America even existed as such and
called out cash balance plan design/
administration decisions made by then-
(SEAL) Act would
give workers who
leave their jobs
time up until they
file their federal
taxes to repay