PLANADVISER - May/June 2019 - 11

ment Income Security Act (ERISA) by
allowing excessive administrative and
investment fees to be charged.
According to the complaint, for
each year from 2013 through 2017, the
administrative fees charged to plan
participants were greater than 90% of
peer plan fees when calculated as cost
per participant. And for each of those
years but one, the administrative fees
were greater than 90% of peer fees
when calculated as a percent of total
assets. The lawsuit says financial information
for 2018 is not yet available.
The lawsuit also alleges that, as
of December 31, 2017, the fees for the
investment options then in the plan
were up to three times more expensive
than available alternatives in the same
investment style; further, the mutual
fund options that were in the plan in
previous years but removed before that
date also had excessive fees relative to
comparable investments.
Archdiocese Evaded ERISA,
Plaintiffs Say
Former employees of Saint James
Hospital of Newark, New Jersey, filed
a lawsuit in that state's Essex County
Superior Court against the Roman
Catholic Archdiocese of Newark, over
pension plan benefits.
The case is similar to others that
have been filed on the federal level
challenging a pension's " church plan "
status, but this complaint alleges
that the actions taken by the archdiocese
violate New Jersey contract and
trust law.
According to the complaint, filed on
behalf of approximately 135 individuals,
the archdiocese promised guaranteed
benefits for life, but the benefit
payment for the plaintiffs and other
affected retirees stopped in 2017. This
was due to the archdiocese's failure to
fund the plan.
The pension plan was operated
under the Employee Retirement Income
Security Act (ERISA) after the act's passage
in 1974. In 1988, the archdiocese
notified past and present employees
that it intended to terminate the plan,
but the Pension Benefit Guaranty
Corporation (PBGC) denied the termination,
as the plan lacked sufficient
assets
to pay all
covered benefits.
That is when, the plaintiffs allege,
" the archdiocese developed a strategy
to escape PBGC scrutiny and the protections
of ERISA. " In 1990, the archdiocese
sent a letter to the IRS asking it to deem
the pension plan a church plan under
ERISA. The IRS granted the request.
Eaton Vance Settles
Self-Dealing Suit
The parties in a lawsuit against Eaton
Vance Corp. and its 401(k) plan investment
committee have reached a
settlement.
The settlement agreement calls for
a payment of $3.45 million, with $1.5
million to cover plaintiff's attorney
fees. In March, the plaintiff asked for a
stay of the case while a settlement was
being negotiated.
The lawsuit alleged that, instead
of leveraging its investment expertise
to select prudent investment options
on the open market, defendants filled
the Eaton Vance Profit Sharing and
Savings Plan with funds the firm
itself managed. Of the plan's 42 nonmoney-market
investments strategies,
35 were managed by one of the Eaton
Vance defendants. Moreover, the firm's
" proprietary funds were the exclusive
actively managed investment strategies
available on the plan. " The lawsuit
claimed that 80% of the plan's
$434,848,484 in assets under management
(AUM) were invested in Eaton
Vance funds.
The settlement agreement did
not call for Eaton Vance to change its
plan's investment menu but says it was
" entered into solely for the purpose
of avoiding possible future expenses,
burdens, or distractions of litigation ... "
Plaintiffs in UPenn Suit
Get a Second Chance
The 3rd U.S. Circuit Court of Appeals
has revived a lawsuit against fiduciaries
of the University of Pennsylvania's
403(b) plan, which had been fully
dismissed by a district court in 2017.
The Appellate Court agreed with
the dismissal of most claims, but when
it came to those about excessive fees
and improper investments, it found the
plaintiff had plausibly alleged a breach
of fiduciary duty under the Employee
Retirement Income Security Act
(ERISA). It said the plaintiff's factual
allegations are not merely " unadorned,
the-defendant-unlawfully-harmed-me
accusations, but are numerous and
specific factual allegations that the
university did not perform its fiduciary
duties with the level of care, skill, prudence
and diligence to which plan participants
are statutorily entitled.
" [Plaintiff Jennifer] Sweda offered
specific comparisons between returns
on plan investment options and readily
available alternatives, as well as practices
of similarly situated fiduciaries to
show what plan administrators 'acting
in a like capacity and familiar with
such matters would do in the conduct
of an enterprise of a like character
and with like aims,' " the court opinion
states. In addition,
the 3rd Circuit
found the allegations plausibly allege
that the university failed to " defray
reasonable expenses of administering
the plan " and otherwise failed to " discharge
its duties " according to the prudent
man standard of care.
FINRA Fines AXA for
Misrepresentations
The Financial Industry Regulatory
Authority (FINRA) has fined AXA Advisors
$600,000 and ordered it to pay
restitution in the amount of $172,461
to 401(k) plans for misrepresenting the
credit quality of certain bond funds
offered within group annuity contracts
for 401(k) plans.
In a letter of acceptance, waiver and
consent signed by AXA, which did not
admit or deny FINRA's findings, the
regulatory authority claimed that, from
September 2010 through November
2015, investment options, particular
enrollment forms and other documents
created by AXA's affiliated life insurance
company misrepresented that
certain bond funds were " investment
grade " when they were not.
In addition, FINRA accused AXA
of failing to establish, maintain and
enforce a supervisory system to determine
whether the documents distributed
to plan sponsors and participants
accurately described the credit quality
of the bond funds. -PA
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PLANADVISER - May/June 2019

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