PLANSPONSOR - March - April 2023 - 7

its assets; to compensate the DOL for its
action; and to order any further relief.
Participants' retirement plan balances
not distributed as of May 3, 2022, totaled
approximately $805,732 for 43 workers,
the suit says. ACS discontinued contributions
to the plan and ceased operations in
2019; Richard Cole, the company's president,
treasurer, secretary and director,
died in April 2022.
The DOL brought a separate profitsharing
plan lawsuit against another
company in January.
TDF Complaint Against
Microsoft Gets Dismissed
A U.S. District Court judge, February
7, dismissed a lawsuit against Microsoft
Corp. The suit claimed that the
BlackRock LifePath Index Funds suite
of target-date funds was an imprudent
investment choice for Microsoft's retirement
plan participants.
Plaintiffs, who were participants in
the retirement plan, accused the company
of selecting and retaining as plan investments
BlackRock TDFs that offered lower
fees but were allegedly underperforming
comparative TDFs. This was one of a string
of lawsuits filed by the Miller Shah law
firm against companies that offered the
TDFs, including Booz Hamilton, Cisco,
Citigroup and Stanley Black & Decker.
U.S. District Judge James Robart,
presiding in the Western District of Washington,
in Seattle, accepted Microsoft's
motion to dismiss the case, Beldock v. Microsoft
Corp., with leave to amend by February
17. In the decision, Robart sided with the
defendants in part by agreeing that the
plaintiffs failed to prove that comparative
TDFs outperformed the BlackRock suite
and that it is not clear that the plaintiffs
would have invested in a different TDF if
other options had been given.
" Whether [the plaintiffs] would have
vintages if
invested in pre-retirement
plaintiffs were unable to support claims
that Microsoft breached its fiduciary duty
under the Employee Retirement Income
Security Act by not divesting from the
BlackRock TDFs. Robart wrote that the
plaintiffs alleged no facts indicating that
staying with the TDFs violated fiduciary
duties.
The plaintiffs' complaint in this case,
resembling the others still pending, argued
that the defendants appear to have chased
low fees, which, they say, is " currently in
vogue, " and did not consider the BlackRock
TDFs' ability to generate returns.
Neither Microsoft nor Miller Shaw
immediately responded to a request for
comment.
Rollover Advice Guidance
Is Struck Down
A U.S. District Court judge recently ruled
against Department of Labor guidance that
made rollover recommendations count
as fiduciary investment advice: The court
granted summary judgment against the
agency in American Securities Association
v. United States Department of Labor, et al.
Judge Virginia M. Hernandez
Covington of the U.S. District Court for
the Middle District of Florida, Tampa Division,
ruled that the DOL's Employee Benefits
Security Administration was " arbitrary
and capricious " in its interpretation of the
five-part test used for determining when
recommendations count as investment
advice under the Employee Retirement
Income Security Act and the amended
Internal Revenue Code of 1986.
" While an offer to provide future
advice may, as the department suggests,
be the beginning of a relationship, that
relationship is inherently divorced from
the ERISA-governed plan, " Covington
wrote. " Because any provision of future
advice occurs at a time when the assets are
no longer plan assets, it is not captured by
the 'regular basis' analysis. "
The Administrative Procedures Act
is federal law that governs the procedures
by which agencies develop and issue regulations.
It empowers courts to set aside
agency actions found to be without observance
of procedures required by law.
In April 2021, EBSA published a
series of responses to frequently asked
questions, to provide guidance on Prohibited
Transaction Exemption 2020-02.
The FAQ bulletin set forth the circumstances
under which financial institutions
and investment professionals who
provide fiduciary investment advice to
retirement
investors may receive otherwise
prohibited compensation.
" The court ruled that FAQ [No.] 7
essentially
violates
the Administrative
Procedure Act, " says John Schuch, a
partner in law firm Dechert LLP, which
was not involved in the litigation.
Labor Secretary Walsh
Departs Cabinet Post
U.S. Secretary of Labor Marty Walsh
resigned his cabinet post to become
the next executive director of the NHL
Players' Association, according to
the NHL and Department of Labor.
Walsh will serve as Labor secretary until
mid-March, and Deputy Secretary of Labor
Julie Su will then serve as acting secretary,
a DOL spokesperson has reported.
The move will put Walsh, who served
as mayor of Boston from 2014 to 2021,
back atop a labor organization: From 2011
to 2013, he led the Boston Building Trades
Council. In a resignation letter to DOL
colleagues, Walsh referred to his childhood,
growing up in a union family, and
emphasized the department's work in
support of labor organizations.
" Serving as secretary of Labor and
being given this unique opportunity to
help working people is itself a privilege, "
Walsh wrote. " But to do so for the most
pro-worker and pro-union president and
administration in our nation's history has
been the ultimate honor. " -PS
the plan had offered one of the comparator
TDFs is purely conjectural, " Robart
wrote in the order. He also wrote that the For in-depth coverage of these topics and more, go to PLANSPONSOR.com/compliance.
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