PLANSPONSOR - December 2018/January 2019 - 6

Insights
No Rubber-Stamps
R
ecently I spent two weeks on the road, traveling to five cities
for our annual Best of the PLANSPONSOR National
Conference (PSNC) roadshow event, speaking to, and
with, plan sponsors and advisers. In every city, the opening topic
was litigation and regulation, and that session touched on several
cases and their implications.
One of the most emphasized was the suit brought against
New York University (NYU) by Jerry Schlicter on behalf of NYU
employees, and I think it has important lessons for plan sponsors.
As Judge Katherine B. Forrest, for the Southern District of
New York, observed in her opinion, this case was the first to go
to trial " of at least 11 groups of plaintiffs-all represented by the
same counsel-asserting ERISA [Employee
Retirement Income Security Act] claims
against their university employers. "
The bench trial was held in late spring
and the decision released in July. Twenty
witnesses testified including-of note for
this column-plan committee members and
their plan adviser.
The plaintiffs claimed that the plan
from a guilty verdict: Cammack and Tina Surh, who was NYU's
chief investment officer (CIO) and a committee member from
2010 through 2014. " Surh appeared to be very knowledgeable
[about] investing generally, " the judge wrote, stating that Surh
read materials and met with portfolio managers at TIAA, and also
Cammack team members, to discuss market trends, investment
options, and NYU's investment policy statement (IPS). Surh also
testified that she " questioned [Cammack] and discussed ... the
basis for [its] views " on the plans' investment options.
The Cammack adviser, who served as a co-fiduciary,
" No fiduciary
committee failed to fulfill certain of its fiduciary
obligations under ERISA, causing losses
to the plan of more than $358 million. (For
more about the allegations, visit plansponsor.
com.) For the short answer to " What happened?, " in her decision,
Forrest wrote, " plaintiffs have not proven that the committee acted
imprudently or that the plans suffered losses as a result. "
This column could stop here and simply accept the good news
that the plan sponsor prevailed. However, I think that would be
missing the moral of the story. Let's start with the beginning
of the quote I excerpted from, above: " While there were deficiencies
in the committee's processes-including that several
members displayed a concerning lack of knowledge relevant to
the committee's mandate-plaintiffs have not proven ... " The
judge consistently used words such as " concerning " and " troubling "
regarding committee members and their testimony. One
did " not demonstrate the depth of knowledge [to be] expect[ed]
from a fiduciary, " and another seemed to lack " a satisfactory
understanding of key documents and her role ... "
These were committee members who testified, for example,
that being a fiduciary/committee member was not her real job, or
that he was unsure whether he was a fiduciary. The judge, who,
at times, asked questions of the witnesses directly, was surprised
at the lack of basic investment knowledge some expressed.
Yet, there was a silver lining, what probably saved the school
4 PLANSPONSOR.com December 2018 - January 2019
information
provided by
a co-fiduciary. "
may passively
rely on
" displayed deep knowledge and understanding of the NYU plans
as well as the offerings and capabilities of TIAA and Vanguard, "
Forrest wrote. The adviser was a retirement
plan specialist, able to use his and Cammack's
industry perspectives to provide advice.
Between Cammack's advice and
the guidance of the more well-equipped
committee members, " the court is persuaded
that the committee performed its role
adequately, " she wrote.
This could have easily gone the other
way, though, many expert attorneys noted at
our conferences, after which they reminded
plan sponsor attendees of the importance of
fiduciary training for committee members.
And while the presence of the retirement plan specialist
adviser was noted as a positive, the judge disagreed with a point
made in committee member testimony-that " they could defer
virtually entirely to Cammack for expertise and information and
rely on its recommendations. "
For plan sponsors, it's important to note Judge Forrest's
explanation that " No fiduciary may passively rely on information
provided by a co-fiduciary. " To fulfill its duties, the committee
needed to vet Cammack's advice and make informed but independent
decisions.
You as plan sponsors, of course, hire advisers for their expertise.
But that doesn't mean you still don't have fiduciary responsibilities-including
being trained about what those responsibilities
are and engaging with your third-party experts to ensure you
are decisively making plan decisions.
At this time of planning for 2019, perhaps you should ask
your adviser, ERISA attorney or other third-party expert about
scheduling fiduciary training for the committee. And during
those committee meetings, encourage discussion so any recommendations
are properly understood and your plan fiduciaries
don't just rubber-stamp them. -Alison Cooke Mintzer

http://www.plansponsordigital.com/plansponsor/december_2018-january_2019/TrackLink.action?pageName=4&exitLink=http%3A%2F%2Fplansponsor.com http://www.plansponsordigital.com/plansponsor/december_2018-january_2019/TrackLink.action?pageName=4&exitLink=http%3A%2F%2Fplansponsor.com http://www.plansponsordigital.com/plansponsor/december_2018-january_2019/TrackLink.action?pageName=4&exitLink=http%3A%2F%2FPLANSPONSOR.com

PLANSPONSOR - December 2018/January 2019

Table of Contents for the Digital Edition of PLANSPONSOR - December 2018/January 2019