PLANSPONSOR - June/July 2018 - 8

Compliance Update
Summaries of the latest news from Washington and the courts-what's coming,
what's contemplated and what's critical for plan sponsors to know
Court Tosses Suit
Over Including
Former-Parent Stock
A federal district court has dismissed
a lawsuit against the Phillips 66
Savings Plan investment committee for
continuing to offer stock in the company's
former parent, ConocoPhillips, in the
plan's investment menu. The U.S. District
Court for the Southern District of Texas
disagreed with the committee's argument
that it is exempt from the Employee
Retirement Income Security Act (ERISA)'s
diversification requirement because the
ConocoPhillips shares retained their
character as employer securities after
the spinoff of Phillips 66, under ERISA
Section 407(d)(1)8. It did agree, however,
that the plaintiffs had failed to plead facts
to state a claim for breach of the duties to
diversify and of prudence. Among other
arguments, the judge found the plaintiffs'
citation of Internal Revenue Service
(IRS) Private Letter Ruling 201427024-
which supported the argument that, as
ConocoPhillips ceased to be the plan
participants' employer after the spinoff,
its shares were no longer employer securities
with respect to the plan-to be persuasive.
The judge also quoted Fifth Third v.
Dudenhoeffer in which the Supreme Court
held that " where a stock is publicly traded,
allegations that a fiduciary should have
recognized from publicly available information
alone that the market was over- or
undervaluing the stock are implausible as
a general rule, at least in the absence of
special circumstances. "
Small Business Access
To Health Plans
The Department of Labor (DOL) has finalized
regulations meant to help small businesses
offer employment-based health
insurance. Under the DOL's new rule,
8 PLANSPONSOR.com June-July 2018
that 400,000 previously uninsured people
will gain coverage under AHPs.
The 5th Circuit's
final mandate
leaves the
Securities and
Exchange
Commission in
the driver's seat
when it comes to
the issuance of
any new conflict of
interest regulations.
employers in a city, county, state or a multistate
metropolitan area, or in a particular
industry nationwide, can form an organization
through which to offer what is called
a small business health plan, aka association
health plan (AHP). Sole proprietors as
well as their families will be permitted to
join such plans. Besides providing more
choice, the new rule makes insurance
more affordable for small businesses. The
Congressional Budget Office (CBO) estimates
that millions of people will switch
their coverage to more affordable and more
flexible AHP plans and save thousands of
dollars in premiums. CBO also estimates
Art by Annabel Keijzer
Appeals Court Vacates
The DOL Fiduciary Rule
The 5th U.S. Circuit Court of Appeals
issued a final mandate certifying its midMarch
decision in a case that has now
successfully derailed the Department
of Labor (DOL)'s long-running effort to
expand the definition of fiduciary advice
under the Employee Retirement Income
Security Act (ERISA). The 5th Circuit's
final mandate leaves the Securities and
Exchange Commission (SEC) in the driver's
seat when it comes to the issuance of
any new conflict of interest regulations
that could impact the retirement planning
marketplace.
K - 12 403(b) Plan Sponsors
Have New Fiduciary Duties
The Connecticut legislature has passed
a law that will bring non-Employee
Retirement Income Security Act (ERISA)
403(b) plans closer to their ERISA counterparts.
The state decided to pass the
law after Connecticut teachers expressed
concerns about having invested in certain
products without first being informed
about their fees and other charges. The
new law requires the plans to disclose the
fee ratio and returns, net of fees, for each
investment offered to participants, as well
as fees for third-party providers.
IRS Announces 2019
HSA Contribution Limits
The IRS issued Revenue Procedure 201830,
which announces the 2019 inflationadjusted
amounts for health savings
accounts (HSAs) as determined under
Section 223 of the Internal Revenue
Code (IRC). For calendar year 2019, the
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PLANSPONSOR - June/July 2018

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