Compliance December 29, 2010

Supermarket Stock Drop Case Remains Alive

A federal judge in Pennsylvania has cleared the way for a 401(k) participant to pursue his claim that plan trustees violated their fiduciary duties.
Reported by

U.S. District Judge Berle M. Schiller of the U.S. District Court for the Eastern District of Pennsylvania issued the ruling in plaintiff Gerald Alderfer’s suit alleging wrongdoing under the Employee Retirement Income Security Act (ERISA) in the operation of the Clemons Market Inc. Retirement Savings and Profit Sharing Plan.

Schiller held that Alderfer can move forward with claims the fiduciaries acted imprudently by not liquidating company real estate holdings when market conditions were more favorable as well as by not properly monitoring the impact of the value of those real estate holdings on the value of the plan’s company stock.

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Schiller contended that it was premature to decide the issue of whether the trustees prudently managed the plan and its company stock holdings because it was yet to be determined whether the trustees were entitled to the  presumption of prudence frequently granted in similar stock-drop litigation.

The court likewise permitted Alderfer to proceed with his claim that the plan trustees misrepresented to participants the relationship between the company’s real estate assets and the plan’s value. The company, a supermarket chain, eventually sold its assets to a competitor. The suit alleges the value of company stock held by the plan fell from $3 million in 2007 to $1.8 million in 2010.

The case is  Alderfer v. Clemens Markets Inc., et al. E.D. Pa., No. 10-4423.

Compliance December 28, 2010

IRS Corrects Hybrid DB Plan Rule

Federal officials have issued a corrected document on final regulations for hybrid defined benefit plans since a previous version contained errors “that may prove to be misleading and are in need of clarification."
Reported by

The Internal Revenue Service corrections for TD 9505 were contained in a document published Tuesday in the Federal Register that become effective immediately and applicable on October 19, 2010 when the original version was first published (see IRS Issues Rules on Hybrid Retirement Plans ). 

The corrections to the Hybid Plan rules are at http://origin.www.gpo.gov/fdsys/pkg/FR-2010-12-28/pdf/2010-32539.pdf .

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Further information is available by calling Neil S. Sandhu, Lauson C. Green, or Linda S.F. Marshall at (202) 622–6090.

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