Category Archives: ERISA Litigation Index

Plaintiffs File 8th Circuit Brief in Tussey v. ABB, Inc.

On Monday, May 13, the Plaintiffs in Tussey v. ABB, Inc. filed their response brief in the 8th Circuit Court of Appeals in support of the judgment entered for them on March 31, 2012. After clearing the clerk’s office, it became available online today. Here are links to all of the briefs filed so far before the 8th Circuit:

Of interest, the Department of Labor has also requested to file an amicus brief in the case in support of the Plaintiffs. That brief is due June 17, 2013. We will have it here when it becomes available.

The following summary is taken directly from the Plaintiffs’ brief:

I. The district court properly found ABB breached its duties by allowing Fidelity to receive excessive recordkeeping compensation through revenue sharing in the amount of $13.4 million. The evidence clearly shows ABB’s blatant conflict of interest in allowing Fidelity to receive these fees to benefit itself and altogether failing to monitor Fidelity’s compensation. This excessive compensation violated the IPS and ERISA’s strict fiduciary duties. The court’s calculation of Plan losses was reasonable and based on substantial evidence, including Defendants’ own evidence.

II. The district court properly found ABB breached its duties by moving all participant investments from the stellar-performing Wellington Fund into the untested Fidelity Freedom Funds for no prudent and loyal reason and in violation of the IPS. Instead, this move was part of ABB’s conflict in benefitting Fidelity and itself through corporate services provided by Fidelity to ABB at a loss. This claim is not time-barred because the last action constituting a part of this breach—the transfer of participant investments—occurred within the limitations period. The court reasonably calculated Plan losses by comparing the Plans’ performance in Fidelity’s Freedom Funds to how they would have performed in the Wellington Fund.

III. The district court properly found ABB breached its duties by selecting higher-cost share classes of Plan mutual funds for the purpose of benefitting Fidelity, violating the IPS and ERISA’s duties of loyalty and prudence.

IV. The district court properly found Fidelity breached its fiduciary duties by earning income from Plan assets as they floated between accounts. Fidelity’s argument under other legal theories that float was not a Plan asset fails in light of ERISA’s and DOL’s clear delineation of the plan asset status of funds from the point they leave the employer’s account to the point they enter an investment fund’s account or a distributee-participant’s personal account. This claim was not time-barred because these breaches occurred within the limitations period. The court reasonably calculated Plan losses by relying on the testimony of Plaintiffs’ expert witness and Fidelity’s own witness.

V. The district court properly awarded Plaintiffs’ attorneys fees that totaled only a small fraction of Defendants’ attorneys’ fees. The court awarded a blended
hourly rate that was supported by substantial evidence and was reasonable. The court properly held Fidelity jointly liable for these fees because Fidelity breached
its fiduciary duties and jointly defended this entire case with ABB and argued against the merits of the claims on which Plaintiffs succeeded.


If you know of other cases that you would like tracked here, please email Tom at

Follow us on Twitter @PlanTools or subscribe via email to receive all future updates about these cases and others we are tracking on the ERISA Litigation Index. We will post information as soon as possible after it becomes available.

New Lawsuits Claim $2.1+ Billion in Damages – “Catholic” Hospitals Not Entitled to Church Plan Exemption Under ERISA – UPDATED

Over the last 5 weeks, the law firms of Keller Rohrback, LLP and Cohen Milstein Sellers & Toll, PLLP have filed individual lawsuits against four mega non-profit hospital conglomerates alleging that they are not entitled to the Church Plan exemption under ERISA. Each defendant is alleged to have violated the minimum funding, notice, plan document, trust, and fiduciary rules of ERISA in sponsoring their defined benefit pension plans. In the simplest terms, plaintiffs are alleging that the defendants purposely ignored each and every requirement of ERISA that is meant to protect plan participants by “improperly” claiming to be exempt Church Plans. In total, the plaintiffs allege at least $2.1+ billion in underfunding, plus unspecified other damages, in the following lawsuits:

  1. Overall v. Ascension Health – Eastern District of Michigan (March 28, 2013)
    • $444 million underfunded
  2. Chavies v. Catholic Health East – Eastern District of Pennsylvania (March 28, 2013)
    • $438 million underfunded
  3. Rollins v. Dignity Health – Northern District of California (April 1, 2013)
    • $1.2 billion underfunded
  4. Kaplan v. Saint Peter’s Healthcare System – District of New Jersey (May 7, 2013)
    • $77 million underfunded

The Church Plan Exemption

The discussions of the Church Plan exemption are essentially, if not exactly, the same in all four complaints. For those that are not aware, ERISA as passed in 1974 exempted “church plans” from the major provisions of ERISA, including the minimum funding and fiduciary rules. At the time, ERISA defined a Church Plan as a plan “established and maintained for its employees by a church or by a convention or associations of churches.” The church plan exemption was amended in 1980, which is at the center of the allegations in the cases. For those interested in the exact legal argument being made by the plaintiffs in these cases, we strongly suggest you click here and read the Complaint against Ascension Health starting at paragraphs 44 through 57 and 96 through 114. It is highly technical. However, the basic argument goes like this:

  1. None of the plans sponsored by the collective defendants are plans “established and maintained” directly by churches as defined by 29 U.S.C. §1002(33)(A) or “pension boards” as defined by 29 U.S.C. §1002(33)(C)(i),
  2. Nor are the plans established or maintained by organizations that are “associated with” a church as defined by 29 U.S.C. §1002(33)(C)(ii)(II), such as a school or hospital, such that the employees of these organizations could be defined as employees of a church. To be “associated with” a church means the organization “shares common religious bonds and convictions with that church or convention or association of churches” as defined by 29 U.S.C. §1002(33)(C)(iv). The defendants that have been sued do not share these common religious bonds with the Catholic Church, and
  3. Informal guidance by the IRS and the Department of Labor have incorrectly interpreted the statute to allow a non-church organization to sponsor its own Church Plan as long as the organization is controlled by or associated with a Church. This violates the plain language of the statute which only allows two types of Church Plans, those established or maintained by a church or by a pension board (see 1 above).

Finally, the plaintiffs argue that even if these plans could be established as Church Plans, this would violate the Establishment Clause of the First Amendment of the United States Constitution.

In order to establish that the defendant hospitals do not share common religious bonds and convictions with the Catholic Church, the plaintiffs in the case against Ascension Health allege in paragraph 6 of the Complaint:

In short, Ascension operates in most respects like other non-profit hospital conglomerates. It expressly chooses not to prioritize the convictions of the Catholic Church (i) when it hires its employees—who become Ascension Plan participants, (ii) when it partners with joint venture partners, (iii) when it performs or authorizes medical procedures forbidden by the Catholic Church, (iv) when it selects its business investments, and (v) when it encourages its clients to contact myriad ministers, rabbis or spiritual advisors.

The Claims

To further explore the specific violations of ERISA alleged, click here and read paragraphs 131 through 206 of the Complaint filed against Ascension Health, which alleged:

  1. Count 1 – Claim for Equitable Relief Pursuant to ERISA Section 502(a)(3)
  2. Count 2 – Claim for Failure to Provide Notice of Reduction in Benefit Accruals under ERISA Section 204(h)
  3. Count 3 – Claim for Violation of Reporting and Disclosure Provisions
  4. Count 4 – Claim for Failure to Provide Minimum Funding
  5. Count 5 – Claim for Failure to Establish the Plans Pursuant to a Written Instrument Meeting the Requirements of ERISA Section 402
  6. Count 6 – Claim for Failure to Establish a Trust Meeting the Requirements of ERISA Section 403
  7. Count 7 – Claim for Civil Money Penalty Pursuant to ERISA Section 502(a)(1)(A)
  8. Count 8 – Claim for Breach of Fiduciary Duty
  9. Count 9 – Claim for Declaratory Relief That the Church Plan Exemption Violates the Establishment Clause of the First Amendment of the Constitution, and Is Therefore Void and Ineffective

Of interest, the other three cases allege all of the same counts except Count 2, which is only alleged against Ascension Health. There, the plaintiffs have alleged they received only four days’ (just one business day’s) notice that their defined benefit pension plan would be frozen in violation of ERISA §204(h), which currently requires 45 days’ notice.

Also of interest, Keller Rohrback, LLP previously filed a case in the District of Minnesota in 2010, entitled Thorkelson v. The Publishing House of the Evangelical Lutheran Church of America, alleging that their defined benefit pension plan was not entitled to the Church Plan exemption. A copy of the complaint can be found here. The complaints filed in the recent cases are significantly more detailed than the 2010 complaint, and do not contain any allegations of state law violations. Ultimately, the district court in Thorkelson dismissed the ERISA claims finding that the plan could claim the exemption. A copy of the order can be found here. However, the parties later settled for $4.5 million with judgment in the case entered just last month on April 9, 2013.

UPDATE: May 28, 2013

A fifth lawsuit was filed on May 10, 2013: Medina v. Catholic Health Initiatives in the District of Colorado. Similar to the previous four lawsuits. Plaintiffs allege $892 million in underfunding. A copy of the complaint can be found here.



If you know of other cases that you would like tracked here, please email Tom at

Follow us on Twitter @PlanTools or subscribe via email to receive all future updates about these cases and others we are tracking on the ERISA Litigation Index. We will post information as soon as possible after it becomes available.

Are target date funds really the next focus of ERISA litigation?

Much has been written about whether target date funds (“TDFs”) will be the next focus of ERISA litigation. For example, this article suggests that TDFs are potentially risky because (1) they may provide “advice” to participants, (2) the underlying investments may violate a plan’s investment policy statement, and (3) the glide path, or debt to equity ratio, can be improper. Another article addresses the debate over whether TDFs should be managed “to versus through” the target date. The increased focus is not a surprise considering that one survey suggests that 75% of responding plans offer a TDF.

In our personal experience, we have seen evidence that plan sponsors are not giving the subject enough attention. For example, after analyzing a family of TDFs added by one of our clients, we concluded that more than a handful of the TDFs’ underlying actively managed mutual funds had recently been removed as core funds from the plan for underperformance and other issues. Their re-arrival in the plan came as quite a surprise to the plan sponsor.

Of the cases in the ERISA Litigation Index, three have allegations specific to TDFs:

Tussey v. ABB, Inc.

In Tussey, the plan fiduciaries were found to have violated ERISA when they selected the Fidelity Freedom Funds because (1) they failed to employ a winnowing process, (2) the funds consistently underperformed, and (3) the funds were chosen to provide additional revenue sharing to Fidelity, which in turn benefited ABB by reducing the amount of hard dollar expenses it was required to reimburse. For a copy of the trial order, click here. As we’ve previously written about, this case is currently on appeal to the 8th Circuit Court of Appeals with response briefs to be filed by the plaintiffs this month.

Krueger v. Ameriprise Financial, Inc.

In Krueger, the plaintiffs have alleged that the plan’s fiduciaries added the RiverSource, later Columbia, family of TDFs purely for the benefit of Ameriprise, which owned the funds. They have alleged that (1) the plan fiduciaries used the plan to “seed” the funds when they were first created, (2) the funds had no performance history, (3) the funds had no Morningstar ratings, and (4) the funds were significantly more expensive than other established TDF families. For a copy of the latest amended complaint, click here. The allegations were also discussed in the district court’s denial of Ameriprise’s motion to dismiss.

Bilewicz v. FMR LLC (Fidelity Investments)

In this brand new case filed against Fidelity Investments by a participant in its in-house retirement plan, the complaint includes allegations regarding the Fidelity branded Freedom Funds. The plaintiffs allege that (1) the Freedom Funds exclusively invest in high cost Fidelity branded actively managed mutual funds rather than low cost index funds and (2) the plan fiduciaries could have invested in the Pyramis Lifecyle Index Funds, a lower cost index-based series of TFDs offered by Fidelity’s subsidiary that creates institutional products. For a copy of the complaint, click here.


In light of all of this activity, the Department of Labor (“DOL”) has recently published informal guidance entitled “Target Date Retirement Funds – Tips for ERISA Plan Fiduciaries.” The DOL suggests an 8 step process for plan fiduciaries:

  1. Establish a process for comparing and selecting TDFs.
  2. Establish a process for the periodic review of selected TDFs.
  3. Understand the fund’s investments – the allocation in different asset classes (stocks, bonds, cash), individual investments, and how these will change over time.
  4. Review the fund’s fees and investment expenses.
  5. Inquire about whether a custom or non-proprietary target date fund would be a better fit for your plan (for example, Blue Prairie Group, a respected RIA out of Chicago has had success in designing custom target date funds for their clients).
  6. Develop effective employee communications.
  7. Take advantage of available sources of information to evaluate the TDF and recommendations you received regarding the TDF selection.
  8. Document the process.

(For full disclosure purposes, FRA/PlanTools was hired to build and maintain The Allianz Global Investors Target-Date Tool Set™ which addresses many of the steps indicated by the DOL. More information can be found here.)

In conclusion, we cannot say for certain whether additional cases will focus on TDFs, especially given the more unique allegations in the Tussey and Krueger cases. Nonetheless, our suggestion is to not become a test case (and the next entry in this blog). We advise our readers in the strongest sense to thoroughly read and implement the DOL’s Tip’s for Plan Fiduciaries.


If you know of other cases that you would like tracked here, please email Tom at

Follow us on Twitter @PlanTools or subscribe via email to receive all future updates about these cases and others we are tracking on the ERISA Litigation Index. We will post information as soon as possible after it becomes available.

New Cases Added to the ERISA Litigation Index – May 2013

Since the launch of the ERISA Litigation Index, the response from the industry at large has been overwhelming. We sincerely appreciate the messages of support, as well as the numerous suggestions for additional cases.

Here is a summary of the cases added in the last week:

Abbott v. Lockheed Martin Corporation – Southern District of Illinois

This is one of the original excessive fee cases filed by Schlichter Bogard & Denton on September 11, 2006.
Issues outstanding in the case are:

(1) whether excessive fees paid by the plans provide a basis for plaintiffs’ fiduciary breach claim;
(2) whether the Stable Value Fund (“SVF”) was properly disclosed to plan participants and was a prudent investment option for them; and
(3) whether the Company Stock Funds (“CSF”) were a prudent investment option for plan participants.

On September 24, 2012, the district court granted class certification of the plaintiffs’ excessive fees claim, denied class certification for plaintiffs’ SVF claim, and partially granted class certification of plaintiffs’ claim regarding the CSF. A copy of the order can be found here.

Plaintiffs filed an interlocutory Rule 23(f) appeal to the 7th Circuit Court of Appeals, which they allowed to be heard. Briefing by the parties has been completed and oral arguments are set before the 7th Circuit on May 29, 2013. The decision by the 7th Circuit could have wide ranging ramifications for ERISA cases seeking class certification filed in that circuit, and potentially other circuits that follow the 7th Circuit’s lead.


Healthcare Strategies v. ING Life Insurance and Annuity Co. – District of Connecticut

Plaintiff Healthcare Strategies, Inc., as the plan administrator of two 401(k) plans, brought this action on behalf of itself and other similarly situated plans against ING Life Insurance and Annuity Company (“ILIAC”). A copy of the amended complaint can be found here. The plaintiff alleges that

(1) ILIAC has included certain mutual funds as investment options based on the funds’ revenue sharing payments to ILIAC rather than the funds’ potential to benefit the plans,

(2) ILIAC’s receipt of revenue sharing payments constitute prohibited transactions under ERISA 406(b)(3), and

(3) The fees charged by ILIAC to the plans do not bear a meaningful relationship to the cost of the services provided, and they thus constitute excessive compensation to ILIAC, and

(4) By taking as its compensation the spread between the guaranteed payment and the investment performance of assets in fixed accounts and guaranteed accumulation accounts, ILIAC has retained excessive compensation and engaged in self-dealing.

On January 19, 2012, the district court partially granted ILIAC’s motion to dismiss, striking allegations related to the fixed accounts and guaranteed accumulations accounts. A copy of the order can be found here.

On September 27, 2012, the district court granted plaintiffs’ motion for class certification under Rule 23(b)(3), certifying a class of plan administrators of all plans that have a group annuity contract or group funding agreement with ILIAC. A copy of the order can be found here.

On January 10, 2013, ILIAC answered the amended complaint and counterclaimed against the plaintiffs, as limited in the court’s September 27, 2012 order. A copy of the answer and counterclaim can be found here.

Since then, the plaintiffs have filed a motion to dismiss ING’s counterclaims and ILIAC has filed a motion for summary judgement and a motion to decertify the class. All motions remain pending. We will update the ERISA Litigation Index as soon as any orders become available.

Of interest, the issues in this case are similar enough to those in Santomenno v. Transamerica Life Ins. Co. and Leimkuehler v. American United Life Insurance Co., where in each case, the defendant is an insurance company. Also of interest, the plaintiffs in Leimkuehler have stated their intention to file a petition for rehearing to the 7th Circuit Court of Appeals. As such, we can say with certainty that nothing seems certain about these types of cases. Stay tuned.


Brown v. Fidelity Management and Trust Co. – District of Massachusetts

This is the fourth “float” case filed against Fidelity along with the sister cases of KelleyBoudreau, and Columbia Air Service, Inc. The same attorneys representing the plaintiff in Boudreau is representing the plaintiff here. The claim is brought on behalf of the General Motors Personal Savings Plan (for hourly employees), a plan with nearly $6 billion in plan assets.

We anticipate that more individual float cases will be filed against Fidelity. We also anticipate that the district court will grant all of the plaintiffs’ motion to consolidate these cases under one master case as simultaneously litigating four or more cases is inefficient. If that happens, we will let you know and adjust the ERISA Litigation Index accordingly.


If you know of other cases that you would like tracked here, please email Tom at

Follow us on Twitter @PlanTools or subscribe via email to receive all future updates about these cases and others we are tracking on the ERISA Litigation Index. We will post information as soon as possible after it becomes available.



Decision Against Transamerica Criticizes Fiduciary Warranties (and Pretty Much Everything Else) – UPDATED

A little reported decision out of the Central District of California, Santomenno v. Transamerica Life Ins. Co., No. 12-2782, has the opportunity to cause great heart burn (or worse) to insurance company platforms for retirement plans. A plan participant from two different retirement plans filed a class action lawsuit against Transamerica Life Ins. Co. (“TLIC”) seeking to represent a class of over 15,000 retirement plans serviced by TLIC. A copy of the complaint can be found here.

In a sweeping decision on TLIC’s motion to dismiss, the court found that plaintiffs have plausibly alleged numerous fiduciary violations of ERISA including that TLIC, because of the facts and circumstances alleged, may be a fiduciary with responsibility to monitor its own compensation.


The following claims survived TLIC’s motion to dismiss:

  • Fees TLIC charges in excess of the fees charged by an underlying mutual fund are excessive.
  • TLIC’s investment management fees on separate accounts are excessive.
  • TLIC receives “fee income” or “Revenue Sharing Payments” from Plaintiffs’ investments, ranging from 15 to 25 bps.
  • TLIC breached its ERISA fiduciary duties by
    • Failing to invest in the lowest cost share class of the mutual funds underlying separate account investment options, even though TLIC had the leverage to do so.
    • Failing to use its economic leverage to negotiate lower fees for collective trusts and traditional separate accounts.
  • TLIC committed prohibited transactions under ERISA § 406(b), 29 U.S.C. § 1132(a)(3), by paying advisory fees from employees’ accounts to affiliates Transamerica Investment Management, LLC (“TIM”) and Transamerica Asset Management, Inc. (“TAM”) for advising or subadvising certain mutual funds, collective investment trusts, or traditional separate accounts.

The court also criticized the fiduciary warranty included in the plan’s contracts. “Based on the allegations before the court, it appears that the Fiduciary Warranty amounts to insurance provided by TLIC to employers against law suits by employees for breach of fiduciary duty, but this insurance is paid for by the fees assessed on the employees’ assets. The court has found no indication that the employers pay TLIC separately for such insurance. Thus, instead of an insurance company bargaining with a party seeking to obtain the best rate for itself in its insurance purchase, the insurer is bargaining with a party who is not in fact bearing the financial burden of the insurance, though it will reap the benefits. Because the contract does not appear to have been negotiated at arm’s length, TLIC may not shield itself behind the contract from an alleged breach of duty.” Order at 15.

“Plaintiffs may be able to show that TLIC used the promise of the fiduciary warranty to direct employers to select TIM- and TAM-managed accounts,” which the court found could be a prohibited transaction. Order at 26.

Immediate Appeal:

TLIC has filed a 1292(b) motion asking the district court to certify the following question for immediate appeal to the 9th Circuit Court of Appeals. (such appeals are rarely asked for and even more rarely granted):

Whether a service provider is a fiduciary with respect to fees charged to an ERISA plan where the plan’s named fiduciary agreed to the fees before the service provider charged and collected them.

The district court has yet to rule on this motion. We are tracking the case and you will hear about any developments here first.

UPDATE April 25, 2013 6:00pm Central: The district court has denied Defendants’ motion. Barring any other maneuvers, the case will now proceed to the discovery phase.


Continue reading Decision Against Transamerica Criticizes Fiduciary Warranties (and Pretty Much Everything Else) – UPDATED