Pillsbury Winthrop Shaw Pittman

Perspectives — Supreme Court rejects presumption of prudence for ESOP fiduciaries; and more

This issue of Perspectives focuses on recent ERISA fiduciary and tax decisions — three from the US Supreme Court and one from the Eighth Circuit — which have special importance to plan sponsors and plan fiduciaries.

First is a discussion of the US Supreme Court’s recent decision in Fifth Third Bancorp v Dudenhoeffer, which unanimously held that the ‘presumption of prudence’ for ESOP fiduciaries has no basis in ERISA law and stated that ESOP fiduciaries are subject to the same fiduciary standards as other ERISA fiduciaries, other than the exception for ESOPs from the duty to diversify plan investments.

Second is an article on breach of fiduciary duty claims due to the payment of excessive mutual fund fees and record-keeping fees. Over the past few years, a number of Circuit Court cases have addressed the role of 401(k) plan fiduciaries in selecting mutual funds with disparate levels of fees. Recently, the Court of Appeals for the Eighth Circuit held in Tussey v ABB that the 401(k) plan record-keeping fees being funded with fees on the mutual funds were excessive. The court held the ABB fiduciaries responsible for alleged unreasonable record-keeping payments to Fidelity that were being used to subsidise other services being provided to the plan sponsor…

Click on the link below to read the rest of the Pillsbury briefing.

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