Capitol News

Art by Hye Jin ChungCourt Approves Settlement In Fifth Third Stock Drop Suit
A federal district court has preliminarily approved a settlement in the case of Dudenhoeffer v. Fifth Third Bancorp. The settlement agreement calls for

$6 million to be placed into an account to be distributed to all class members in the case, minus certain fees.

In addition, the agreement calls for Fifth Third to make design changes to its retirement plan, including freezing the Fifth Third Stock Fund so that no new money will be put into it. However, plan participants are allowed to transfer out of the fund if they wish. The recordkeeper of the plan will send an annual notice to participants who have more than 20% of their account invested in the Fifth Third Stock Fund and educate them about the benefits of asset allocation and diversification.

Kodak Settles Stock Drop Suit
Subject to a court’s final approval, Kodak and a group of employees suing the company have reached a settlement agreement that includes a cash payment of $9.7 million. Participants in the Eastman Kodak Employees’ Savings and Investment Plan (SIP) and/or the Kodak Employee Stock Ownership Plan (ESOP) sued the company after it filed for bankruptcy in 2012. The participants alleged that Kodak fiduciaries violated the Employee Retirement Income Security Act (ERISA) by permitting the plans to offer Kodak stock as an investment option after objective Information revealed that Kodak was in extreme financial distress and that its stock was a risky investment imprudent for retirement asset investment.

Court Denies Motions to Dismiss Fidelity, Putnam Fee Cases
U.S. District Judge William Young of the U.S. District Court for the District of Massachusetts has denied motions to dismiss excessive fee lawsuits filed against Fidelity Management Trust and Putnam Investments, respectively. In a combined order, Young said that in factually complex Employee Retirement Income Security Act (ERISA) cases such as those against Fidelity and Putnam, dismissal is often inappropriate.

The case against Fidelity involves a stable value fund, the Fidelity Group Employee Benefit Plan Managed Income Portfolio Commingled Pool, which, the complaint says, at all relevant times had such low investment returns and high fees that it was an imprudent retirement investment.

Putnam is accused of self-dealing in its own employee retirement plan, to promote that firm’s mutual fund business and maximize profits at the expense of the plan and its participants.

Fiduciary Who Filed Bankruptcy Still Owes Plan Contributions
A plan fiduciary ordered to restore unremitted contributions to his now-defunct company’s retirement plan may not discharge this debt in bankruptcy, a court has ruled.

In December 2009, the Department of Labor (DOL) filed a complaint in U.S. District Court for the Middle District of Pennsylvania alleging that the fiduciaries of the Dalton Mechanical SIMPLE IRA [savings incentive match plan for employees individual retirement account] Plan, including Scott Louis Slocum and Dalton Mechanical Inc., breached their statutory duties to the plans’ participants under the Employee Retirement Income Security  Act (ERISA). From 2006 through 2009, the plan trustees specifically failed to ensure employee contributions were remitted to the plan as the act required. The total due to the participants, including lost interest, was determined to be $41,093.

Last August 24, Slocum filed chapter 7 bankruptcy, and the department filed an adversary action. On April 4 this year, the court entered a default judgment declaring Slocum’s debt to the plan nondischargeable in bankruptcy.

ICI Supports Bill Against Fiduciary Rule
In a letter to Speaker of the House Paul Ryan, R-Wisconsin, and House Minority Leader Nancy Pelosi, D-California, Investment Company Institute (ICI) President and CEO Paul Schott Stevens said that Congress should continue advancing bipartisan legislation to adopt a best interest standard in law, rather than through the “cumbersome contractual regime” imposed by the Department of Labor (DOL) in its final fiduciary rule. Stevens wrote to support H.J. Res. 88, which disapproves and nullifies the DOL definition of the term “fiduciary” and the conflict of interest rule with respect to retirement investment advice.