Dr. Lee Heavner Joins Dr. Susan Mangiero to Discuss Derivatives and Fiduciary Duty

As a follow-up to my January 12, 2017 announcement about retirement plan risk management education with the Professional Risk Managers' International Association ("PRMIA"), I am delighted to announce a co-presenter for the March 2, 2017 learning event. Distinguished economist Dr. Lee Heavner will join me to talk about hedging techniques, the valuation of derivatives and structured products and the monitoring of investment-related risk as part of "Use of Derivatives in Pension Plans." Click here to read Lee Heavner's impressive bio as a managing principal and financial expert with Analysis Group, Inc. Dr. Heavner and Dr. Mangiero have worked on multiple investment disputes and are the authors of "Economic Analysis in Fiduciary Monitoring Disputes Following the Supreme Court's 'Tibble' Ruling" (Bloomberg BNA Pension & Benefits Daily, June 24, 2015).

Session Two will convene from 10:00 am EST to 11:15 am EST live this Thursday. If you cannot make it in real time, the event can be downloaded for later viewing. It is the second event of four CPE-qualified events. Speakers will examine risk management for retirement plans from both a governance and economics perspective. Topics to be discussed include the following:

  • Current usage of derivatives by retirement plans for hedging purposes;
  • Financially engineered investment products and governance implications;
  • Fiduciary duties relating to monitoring risks and values of derivatives and structured products; and
  • Suggested elements of a Risk Management Policy Statement.

Join us for this talk about an important issue - risk management for retirement plans!

Investment Monitoring, Post Supreme Court Decision

As mentioned in "ERISA Litigation and Investment Monitoring" (October 22, 2015), Dr. Susan Mangiero, Attorney James Fleckner and Dr. Lee Heavner will discuss economic and governance ramifications of the U.S. Supreme Court "Tibble" decision on December 3, 2015 from 11:00 am to 12:30 pm EST.

To register for this educational webinar entitled "Life After Tibble: Investment Monitoring and Litigation Defense Considerations for ERISA Fiduciaries," click here. The sponsor, Bloomberg BNA, has arranged for continuing legal education ("CLE") credits to be offered.

Educational objectives are listed below:

  • Identify the main tenets of the Tibble decision and understand the implications of likely future litigation and enforcement;
  • Distinguish investment monitoring done in-house or by third parties;
  • Discover preemptive measures for effective investment monitoring;
  • Learn how to mount a defense against lawsuits; and
  • Cover the components of economic damage estimates as part of an investment monitoring lawsuit or regulatory enforcement action.

Given the importance and relevance of the topic, there are numerous individuals who can benefit by attending this program such as:

  • Asset manager and financial service company attorneys;
  • Auditors;
  • Banks that sell to ERISA plans;
  • Corporate board members;
  • Corporate counsel;
  • ERISA fiduciaries;
  • ERISA fiduciary liability insurers;
  • ERISA litigators;
  • ERISA transactional attorneys;
  • Financial analysts;
  • Financial regulators;
  • Financial industry journalists;
  • Investment advisors and consultants;
  • Mutual fund directors;
  • ERISA plan policymakers; and
  • ERISA plan researchers.

ERISA Litigation and Investment Monitoring

Please save the date for an educational program entitled "Life After Tibble: Investment Monitoring and Litigation Defense Considerations for ERISA Fiduciaries." Produced by Bloomberg BNA, this webinar event will take place on December 3, 2015. Speakers are listed below:

  • James O. Fleckner, Esquire - Chair - ERISA Litigation, Goodwin Procter LLP;
  • Dr. D. Lee Heavner - Managing Principal, Analysis Group, Inc.; and
  • Dr. Susan Mangiero - Managing Director, Fiduciary Leadership, LLC.

In the aftermath of the U.S. Supreme Court "Tibble" decision, there are numerous questions as to what exactly comprises effective investment monitoring from a procedural prudence perspective. Given the newness of this important legal decision and little formal guidance from the High Court, the panel will present economic perspectives about what ERISA fiduciaries should do to assess, and possibly improve, their current investment monitoring process. Attention will be paid to related topics that include the delegation of investment monitoring to third parties (such as advisors, asset managers and consultants) and the kinds of information that should be communicated to plan participants about investment monitoring activities. The role of the economic expert and the factors that need to be considered in estimating damages will be addressed, along with a discussion of available industry resources. The panel will use examples from casework to illustrate some of the key points.

Further details will be posted shortly.

Investment Fiduciary Monitoring, Economic Damages and Tibble

Following the publication of "An Economist's Perspective of Fiduciary Monitoring of Investments" by yours truly, Dr. Susan Mangiero (Pensions & Benefits Daily, May 26, 2015), I decided to write a second article on the topic as there is so much to say. This next article is co-authored with Dr. Lee Heavner (managing principal with the Analysis Group) and continues the discussion about investment monitoring from an economic viewpoint. Entitled "Economic Analysis in Fiduciary Monitoring Disputes Following the Supreme Court's 'Tibble' Ruling" (Pensions & Benefits Daily, June 24, 2015), we address the case-specific nature of investment monitoring by fiduciaries and the complexities of quantifying possible harm "but for" alleged imprudent monitoring.

Noting the discussion of changed circumstances by the High Court as part of its Tibble v. Edison International decision, it is imperative to understand that investment monitoring involves multiple steps, each of which takes a certain number of days to complete. "In the world of dispute resolutions, every complaint, expert report, and decision by a trier of fact is specific to a date or period of time. Time is no less a crucial variable with regard to the creation and implementation of an adequate investment monitoring program." While "changed circumstances" are likely to vary across plans and plan sponsors, exogenous events can spur further monitoring. "The departure of a key executive, a large loss, or a government investigation for malfeasance are a few of the events that may lead plan fiduciaries to subject an investment to enhanced scrutiny."

The expense of monitoring is another issue altogether, one that is nuanced, important and necessary to quantify. We point out that (a) there are different types of costs (b) expenses occur at different points in time and (c) some costs may be difficult to assess right away. "For example, when monitoring leads to a change in vendor or investment that in turn results in participant confusion, blackout dates, account errors, or a lengthy delay in setting up a new reporting system, the true costs may not be known until well after the transition is completed."

There are no freebies. There is a cost to taking action as the result of monitoring. There can be a cost to inaction as well. Investment selection and investment monitoring are different activities. Categories of investment monitoring costs include: (a) use of third parties (b) search costs (c) change costs and (d) opportunity costs. Any or all of these categories may come to bear in a calculation of "but for" economic damages. As a result, "there may be substantial variation to when prudent fiduciaries would act let alone how long it would take an investment committee to complete each action." An assessment of economic damages - whether for discovery, mediation, settlement or trial purposes - requires care, consideration and an understanding of the complex investment monitoring process.

For further insights and to read about this timely topic, download our article by clicking here.

ERISA Litigation Costs

After having just blogged about the April 13-14, 2015 American Conference Institute program about ERISA litigation in Chicago, it was somewhat coincidental that an article on the same topic crossed my desk today, painting a grim picture of what could happen to a plan sponsor in the event of a lawsuit.

While only two pages long, "An Ounce of Prevention: Top Ten Reasons to Have an ERISA Litigator on Speed Dial" invites readers to consider the advantages of staying abreast of increasingly complex rules and regulations as part of a holistic prescription for mitigating legal risk. Authors Nancy Ross and Brian Netter (both partners with Mayer Brown) cite "heightened interest" in ERISA by U.S. Supreme Court justices, a rise in U.S. Department of Labor enforcement and court decisions about the importance of having a prudent process. They add that de-risking compliance, disclosure requirements, conflicts of interest, large settlements and attorney-client privilege restrictions are other potential landmines for a public or private company that offers retirement benefits.

Elsewhere, Employee Benefit Adviser contributor, Paula Aven Gladych, predicts that the U.S. Supreme Court review of Tibble v. Edison International ("Tibble") could increase ERISA litigation risk for plan sponsors, regardless of its decision. In "Edison decision could be 'slippery slope' for plan fiduciaries" (February 26, 2015), she writes that "the court focused its attention on duty to monitor fees and investments, generally by investment committees and plan administrators of 401(k) plans." Interested readers can download the February 24 2015 Tibble hearing transcript.

Recent events reflect multi-million dollar resolutions, even when an ERISA litigation defendant feels strongly that it is in the right. In "Settlements offer lessons in breach suits" (Pensions & Investments, February 23, 2015), Robert Steyer reports that publicly available documents can shed light about what types of disputes are being settled, the dollar amounts involved and any non-monetary requests made by the plaintiffs. Competitive bidding as part of selecting a vendor is one example. He goes on to say that regulatory opinions are thought to be particularly helpful when they are viewed by the retirement industry as de facto guidance.

I will report back after attending the ERISA litigation conference in a few weeks although I suspect that judges, litigators and corporate counsel who speak will convey a similar message with respect to fiduciary scrutiny. As Bob Dylan sang, "the times they are a-changing."

ERISA Litigation Conference Addresses Timely Fiduciary Issues

Dr. Susan Mangiero announces the sponsorship of a forthcoming conference about ERISA litigation and regulatory issues by Fiduciary Leadership, LLC. Produced by the American Conference Institute ("ACI"), this mid-April event pairs attorneys (including corporate counsel) with jurists to address timely topics that include, but are not limited to, the following:

  • Excessive fees;
  • Church plan lawsuits;
  • Fiduciary liability insurance;
  • Use of independent fiduciaries;
  • Enforcement risk;
  • Ethics;
  • Employee Stock Ownership Plan ("ESOP") litigation;
  • Proceedings related to company stock in ERISA plans; and
  • Health care mandates and related compliance.

Interested readers of www.goodriskgovernancepays.com or www.pensionriskmatters.com can read more about the program, speakers and venue by downloading the ERISA litigation conference brochure. There is a $200 discount off the current price for any blog reader who calls 888-224-2480 or visits http://www.americanconference.com/ERISA.

I look forward to seeing you in the Windy City in a few weeks. With the just announced push by the White House for fiduciary conflict of interest rules, U.S. Supreme Court activity in Tibble v. Edison International and news of multi-million ERISA litigation settlements, this conference is expected to be informative and important.

Tibble v. Edison and ERISA Fiduciary Breach Issues

Speedy and insightful as always, ERISA attorney Stephen Rosenberg has commenced a series of blog posts that describes his view of the "hot off the press" conclusions made by the United States Court of Appeals for the Ninth Circuit in Tibble v. Edison. Click to access the March 21, 2013 Tibble v. Edison opinion. This ruling will no doubt receive much attention in the coming days as jurists and ERISA fiduciaries digest its content. Some will view this adjudication as yet another reminder that prudent process must be undertaken and can be demonstrated with respect to a host of issues (although the outcome is mixed in terms of plaintiff versus defendant "wins"). Issues include the selection of investment choices and the fees paid accordingly. Click to access the amicus brief filed by the U.S. Department of Labor in support of the plaintiffs.

In his first post about yesterday's opinion, Attorney Rosenberg points out that the timeline that determines ERISA's six-year statute of limitations was deemed to have started "when a fiduciary breach is committed by choosing and including a particular imprudent plan investment" and did not continue by virtue of the investment mix remaining in the plan. He further asserts that defendants will want the clock to begin on the day an investment option is first introduced and that "any breach of fiduciary duty claims involving that investment that are filed later than six years after that date are untimely."

I will leave court commentary to the legal experts. Click to access the Boston ERISA & Insurance Litigation Blog for his analysis about this case and many more.