PLANSPONSOR - April/May 2019 - 11

Court-when making its own second
ruling-mistook a general directive to
reconsider key elements in the case in an
open-minded manner as, instead, definitive
instructions on how to measure plan
losses. As a result, the Appeals Court
ruled, the District Court had inappropriately
entered its second judgment in favor
of the ABB fiduciaries, despite finding that
they did breach their duties.
One of the earliest
in a spate of
401(k) plan fee
and disloyalty
lawsuits filed by
the Schlichter
firm ...
In the rejected decision, the District
Court had found that fiduciaries to the
ABB 401(k) plan indeed abused their
discretion when making an investment
lineup change, but because the plaintiffs
had failed to calculate damages using
the type of specific approach the District
Court mistakenly thought the Appeals
Court expected, it entered a judgment that
benefited the fiduciaries.
Other milestones in this longrunning
case include the District Court's
original decision from March 2012-a
mixed ruling that found that fiduciaries
were jointly and severally liable for some
$36 million in damages. In 2014, during
the same session that delivered the influential
Supreme Court decision in Tibble
v. Edison, the Supreme Court declined to
weigh in on Tussey. The appeal to the high
court actually came from the plaintiffs'
side and was based on arguments that the
defendant-fiduciaries should have been
held liable for certain alleged breaches,
which the 8th Circuit had rejected.
-John Manganaro
From Washington
And the Courts
Proxy Voting and ESG
Investing Programs
On April 10, the White House issued an
executive order on the evolving topic of
proxy voting and environmental, social
and governance (ESG) investing programs
being adopted by retirement plans subject
to the Employee Retirement Income
Security Act (ERISA). In the order, the
Trump administration said its intent is
to " promote energy infrastructure and
economic growth. " To this end, the order
covers 10 sections that describe the administration's
vision for greater development
of natural resources " to make energy more
affordable, while safeguarding the environment
and advancing our nation's economic
and geopolitical advantages. "
Section 5 is most significant for the
retirement industry. As the text notes,
most financing in the U.S. is conducted
through our capital markets. According
to the order, the U.S. capital markets have
" thrived under the principle that companies
owe a fiduciary duty to their shareholders
to strive to maximize shareholder
return, consistent with the long-term
growth of a company. "
After laying this out, the order
goes on to say: " To advance the principles
of objective materiality and fiduciary
duty, and to achieve the policies
[as to promoting private investment in
the nation's energy infrastructure] set
forth in subsections 2(c), (d) and (f) of
this order, the secretary of Labor shall,
within 180 days of the date of this order,
complete a review of available data filed
with the Department of Labor [DOL]
by retirement plans subject to [ERISA]
in order to identify whether there are
discernible trends with respect to such
plans' investments in the energy sector. "
Further, within 180 days of the date
of the order, the secretary " shall provide an
update to the assistant to the president for
economic policy on any discernable trends
in energy investments by such plans. "
IRS Updates Operational
Compliance List
The IRS has updated its Operational
Compliance (OC) list as provided according
to Revenue Procedure 2016-37, Section 10.
The procedure changed the IRS' determination
letter program for tax-qualified
individually designed plans and the
requirements for when plan amendments
must be adopted under Internal Revenue
Code (IRC) Section 401(b). It also ended
the remedial amendment cycle system
and replaced it with a new approach to the
remedial amendment period.
The OC list identifies circumstances
that may call for either mandatory
or discretionary plan amendments,
depending on the particular plan, and
may reference other significant guidance
that affects daily plan operations.
The IRS notes that, to be qualified, a
plan must comply operationally with each
relevant qualification requirement, even
if that does not appear on the OC list. A
plan also must comply with any change
in qualification requirements from the
change's effective date.
The updated OC list includes items
effective in years 2016 through 2019.
Changes effective this year include
Bipartisan Budget Act of 2018, Sections
41113 and 41114, which relate to hardship
withdrawals. For one provision, a distribution
requested for hardship will be treated
as a hardship distribution even if the
employee has not first borrowed against his
retirement plan; the act also expands the
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