PLANSPONSOR - October/November 2019 - 14

Rules & Regulations
setting the credited rate artificially low
and retaining the difference as profit; and
charging excessive fees. The 10th U.S.
Circuit Court of Appeals agreed with the
district court ruling that Great-West was
not a fiduciary in this matter and that
the plaintiff had not adduced sufficient
evidence to impose liability on Great-West
as a nonfiduciary party in interest.
The question before the Supreme
Court is: May an ERISA plan participant
or beneficiary seek disgorgement
of unreasonable profits derived from a
plan contract from a nonfiduciary party
in interest?
Safeguarding Accounts
A former participant in the Esteé Lauder
401(k) plan has sued the company's plan
sponsor and plan providers for failing
to safeguard her retirement account.
According to the complaint, in September
and October 2016, an unknown person
stole the participant's retirement savings
by withdrawing a total of $99,000 in
three separate unauthorized distributions
from her account in the plan. The lawsuit
names as defendants Esteé Lauder Inc.;
Alight Solutions LLC, whose predecessor,
Hewitt Associates, was then recordkeeper
to the plan; and State Street Bank & Trust
Co., the plan's custodian.
Alight Solutions said it has no
comment. Esteé Lauder and State Street
did not respond to a request for comment.
The lawsuit claims that the defensafeguard
plan assets against unauthorized
withdrawals; and failing to monitor
other fiduciaries' distribution processes,
protocols and activities. Among other
things, the suit seeks an order that the
defendants restore to the participant's
plan account $99,000, plus investment
earnings thereon from the distribution
dates to the date of judgment.
" ... an unknown
person stole the
participant's
retirement savings
by withdrawing a
total of $99,000 ... "
Calculation of Early
Retirement Benefits Suit
dants breached their fiduciary duties
of loyalty and prudence by: causing or
allowing the unauthorized distributions
of plan assets; failing to confirm authorization
for distributions with the plan
participant before making distributions;
failing to provide timely notice of distributions
to the plan participant by telephone
or email; failing to identify and
halt suspicious distribution requests such
as requests for multiple distributions
to accounts in different banks; failing
to establish distribution processes to For in-depth coverage of these topics and more, go to plansponsor.com/compliance.
Former participants in the AT&T Pension
Benefit Plan have sued AT&T and the plan,
claiming their benefits were reduced due
to the way the company calculates benefits
for those who retire before age 65.
According to the complaint, the plaintiffs
and proposed class members are forced
to forfeit a portion of accrued, vested
pension benefits if they retire before 65
and/or receive their pension benefit in
the form of a joint and survivor annuity.
They say this is because the plan's terms
reduce these alternative forms of benefits,
using " early retirement factors " and " joint
and survivor annuity factors, " which
result in plan participants receiving less
than the actuarial equivalent of their
vested accrued benefit, as required by the
Employee Retirement Income Security
Act (ERISA).
The plaintiffs explain that a participant's
pension benefit is expressed as
14 PLANSPONSOR.com October - November 2019
a monthly pension payment beginning
at " normal retirement age " -65 under
the AT&T plan. This monthly payment
is a single life annuity because it pays a
monthly benefit to the participant for his
entire life. Under ERISA, " if an employee's
accrued benefit is to be determined as
an amount other than an annual benefit
commencing at normal retirement age ...
the employee's accrued benefit ... shall be
the actuarial equivalent of such benefit. "
Thus, the complaint says, ERISA requires
that if a plan allows a participant to retire
early with a reduced monthly pension, the
value of that pension must be actuarially
equivalent to his monthly pension benefit
commencing at age 65. The case concerns
two ways in which, allegedly, the AT&T
plan reduces pension benefits, in violation
of ERISA's actuarial equivalence rules.
Guidance for IndividualCoverage
HRAs
The IRS has issued a notice of proposed
rulemaking to clarify how to apply the
Internal Revenue Code (IRC)'s employer
shared responsibility provisions and
certain nondiscrimination rules to
several types of group health plans. The
affected plans are health reimbursement
arrangements (HRAs) and other accountbased
group health plans that are integrated
with individual health insurance
coverage or Medicare. The rulemaking
also provides certain safe harbors with
respect to applying the provisions to individual
coverage HRAs.
In June, the departments of Health
and Human Services, Labor and the
Treasury issued a final regulation that
will expand the use of HRAs. Under the
rule, starting this coming January, an
employer will be able to use individual
coverage HRAs to give its workers taxpreferred
funds to purchase health insurance
coverage. -PS

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PLANSPONSOR - October/November 2019

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