PLANADVISER - May/June 2018 - 12

compliance news
Legislative and Judicial Actions
5th Circuit Vacates
DOL Fiduciary Rule
The U.S. Court of Appeals for the
5th Circuit ruled, by a two-to-one
majority, to vacate the Department
of Labor (DOL) fiduciary rule, based
on arguments put forward by the
U.S. Chamber of Commerce and the
Securities Industries and Financial
Markets Association (SIFMA).
This latest decision comes nearly
a year after a Texas district court
judge roundly rejected the investment
industry
advocacy
groups'
arguments
that the DOL exceeded
its authority in crafting the fiduciary
rule. Exactly what this latest move
spells for the regulation's future
under
the Trump administration
is yet unclear, especially given that
the 10th Circuit issued an essentially
opposite ruling, determining
in no uncertain language that the
DOL's fiduciary rulemaking process
has played out properly and within
the confines of the regulator's broad
existing authority. Experts are still
grappling with the question of how
the conflicting rulings should be
interpreted, particularly on the point
of whether an appeal to the Supreme
Court could occur.
Ropes & Gray tax and benefits
partner Josh Lichtenstein warns that
the 5th Circuit's decision to vacate
the DOL's fiduciary rule in its entirety
creates " a new round of uncertainty
in the ongoing saga of the rule. "
" The 5th Circuit is now at odds
Southern District of Illinois, participants
of the Philips North America
LLC 401(k) plan noted that, as
of December
31,
2014,
offered 11 Vanguard mutual funds,
Vanguard collective trust targetdate
funds (TDFs) and three nonVanguard
mutual funds.
Plaintiffs' first bone of contenExperts
are still
grappling with the
question of how
the conflicting
rulings should
be interpreted,
particularly on the
point of whether
with multiple other courts that
have upheld the rule, including the
10th Circuit, " he says. " While the
government decides whether to request an en banc review
of the ruling, appeal the case to the Supreme Court, or take
no action, financial institutions are forced to decide how to
react, especially if part of their operations is located in the
5th Circuit. "
Settlement Reached in Excessive Fee Lawsuit
One day after the filing of an Employee Retirement Income
Security Act (ERISA) excessive fee lawsuit, the parties signed
a settlement agreement.
In the complaint filed in the U.S. District Court for the
an appeal to the
Supreme Court
could occur.
tion was that the company offered
the " microscopically low-yielding "
Vanguard Prime Money Market
Fund, rather than a stable value
fund that would have provided
better returns while preserving
capital and liquidity without any
greater increase in risk compared
with money market
investments.
The complaint suggests most 401(k)
plans offer stable value funds.
As for other funds offered in the
plan, the complaint said that, rather
than taking advantage of the plan's
economies of scale, as required by its
investment policy statement (IPS),
to reduce the investment expenses
charged to plan participants, Philips
North America selected and maintained
high-priced share classes of
mutual funds, instead of identical
lower-cost share classes of those
same mutual funds, which were
readily available to the plan.
DOL Wins Restitution
Of Misused 401(k) Assets
The U.S. District Court for the Middle
District of Tennessee has ordered
eye-care company Eye Centers of
Tennessee LLC, its owner, Dr. Larry
E. Patterson, and its office administrator,
Raymond K. Mays, to pay
$971,622 in restitution to the company's 401(k) plan after an
investigation by the Department of Labor (DOL)'s Employee
Benefits Security Administration (EBSA) found violations of
the Employee Retirement Income Security Act (ERISA).
This amount is in addition to the $788,850 the defendants
paid to the plan in May 2016 as restitution in a related
criminal matter. The court also ordered that Eye Centers of
Tennessee, Patterson and Mays be removed as fiduciaries
and permanently enjoined from serving as fiduciaries to any
future employee benefit plans.
The EBSA investigation found that Patterson and Mays-
the plan
12 | planadviser.com may-june 2018
Art by Jennifer Xiao
http://www.planadviserdigital.com/planadviser/may_june_2018/TrackLink.action?pageName=12&exitLink=http%3A%2F%2Fplanadviser.com
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