PLANSPONSOR - April/May 2018 - 7

Compliance Update
Summaries of the latest news from Washington and the courts
The Fiduciary Rule Is Dead
The 5th U.S. Circuit Court of Appeals,
which in March vacated the Department
of Labor (DOL) fiduciary rule expansion,
has flatly denied a series of motions filed
at the end of April by the attorneys general
of California, New York and Oregon to
rehear the case. The court also denied a
separate request by the AARP to reconsider
the decision, seemingly putting
another measure of finality around the
fate of the doomed DOL rulemaking. The
attorneys general had noted that three
federal district courts and the 10th U.S.
Circuit Court of Appeals had upheld the
fiduciary rule process. They said that, by
vacating the rule, the 5th Circuit Court of
Appeal's decision " will deprive millions
of Americans of basic safeguards as they
seek financial advice about their retirement
investments. " This latest decision
now leaves the Securities and Exchange
Commission (SEC)'s proposed new
impartial conduct standards for financial
advisers and broker/dealers (B/Ds), which
that agency set forth on April 18, as the
lead alternative to the DOL fiduciary rule.
Court Finds DB Plan
Change Helped Plaintiff
Northern Trust amended its defined
benefit (DB) plan formula in 2012 and
provided a transitional benefit that
assumed salary increases of 1.5% per
year. A participant alleged that the
2012 amendment reduced his accrued
benefit because he expected his salary
to continue increasing at more than 5%
a year, as it had done since he was hired
in 1998. A federal appellate court found
expectations of larger salary increases
was not part of an accrued benefit. The
appellate court noted that the plaintiff
conceded he would not have a complaint
if, instead of amending the plan in March
2012, Northern Trust had terminated the
plan, calculated the plaintiff's accrued
benefit, and deposited that sum in a new
plan with additions to come under the
new formula. The 7th Circuit found that
what actually happened is more favorable
to him-he gets the vested benefit
as of March 2012, plus an increase in the
(imputed) average compensation of 1.5%
a year for pre-2012 work for as long as he
continues working.
HSA Limit Changes Again
The Internal Revenue Service (IRS)
has issued Revenue Procedure 2018-27
reversing the $50 reduction to the
maximum deductible health savings
account (HSA) contribution that could
be made by an individual with a family
high-deductible health plan (HDHP).
Rev. Proc. 2018-18, issued on March 2,
had reduced the annual limitation under
Section 223(b)(2)(B) to $6,850 for this
year. Stakeholders informed the IRS that
implementing the $50 reduction would
impose numerous unanticipated administrative
and financial burdens. Specifically,
stakeholders noted that some individuals
with family coverage under an HDHP
made the maximum HSA contribution for
the 2018 calendar year before the issuance
of Rev. Proc. 2018-18, and that many other
individuals made annual salary reduction
elections for HSA contributions through
their employer's cafeteria plan based on
the $6,900 limit.
Suit Points Out Differences
Of 401(k) and 403(b) Plans
The American Council on Education and
other higher education associations have
filed a brief of amici curiae in the 3rd
U.S. Circuit Court of Appeals in support
of the University of Pennsylvania in a
case, recently dismissed, claiming the
For in-depth coverage of these topics and more, go to plansponsor.com/compliance.
PLANSPONSOR.com April-May 2018 7
plan had violated its fiduciary duties
under the Employee Retirement Income
Security Act (ERISA) by causing 403(b)
plan participants to pay excessive fees
and by offering an array of investment
choices, many of which, the plaintiff
said, underperformed. The council says
the retirement system for higher education
has always looked different than the
system for industrial, corporate America.
It says that, whereas American industry
preferred a pension system that incentivized
a lifelong relationship between
employers and their workers, colleges
and universities implemented a system
of annuities that achieved a similar
guarantee of lifelong income without
hampering the movement of personnel
that, it says, is essential to academic life.
DOL Offers (More)
Guidance on ESG Investing
A new Field Assistance Bulletin (FAB),
No. 2018-01, from the Department of
Labor (DOL) clarifies how environmental,
social and governance (ESG)
investment considerations should be
made under the Employee Retirement
Income Security Act (ERISA) if an ESG
policy is included in an investment policy
statement (IPS) and when choosing a
qualified default investment alternative
(QDIA). This guidance is intended to
help answer plan fiduciaries', and other
interested stakeholders', questions about:
1) the exercise of shareholder rights and
written IPSs in relation to these investments,
and 2) Interpretive Bulletin (IB)
2015-01, which aimed to expand the use
of ESG investing principles. In the FAB,
the DOL says, " ERISA fiduciaries must
always [prioritize] the economic interests
of the plan in providing retirement
benefits. " (See Saxon Angle, page 87, for
further coverage on this topic.) -PS
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PLANSPONSOR - April/May 2018

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