January 21, 2004
In this issue:
- DOL Files Brief in WorldCom Case
- Medicare Chairman Thomas Issues Letter to HHS Secretary Thompson
DOL Files Brief in WorldCom Case
In an amicus (friend of the court) brief filed January 20 in the WorldCom 401(k) plan class-action litigation, the Department of Labor (DOL) stated that those who appoint plan fiduciaries have a duty to monitor them and to ensure their compliance with ERISA. The brief outlines a position similar to one taken by DOL in an earlier brief filed in an Enron 401(k) lawsuit. However, the DOL clarifies several points in this new brief.
The brief says that it is the DOL's long-held position that individuals who appoint trustees or other pension plan fiduciaries (such as the members of the board of directors that are defendants in the lawsuit) are themselves fiduciaries. However, the brief indicates that the DOL has never suggested "that the duty to monitor requires the appointing fiduciary to second-guess every decision of its appointee, or to guarantee the wisdom of the appointee's decisions."
The DOL's brief goes on to say that "appointing fiduciaries are not charged with directly overseeing the investments and thus duplicating the responsibilities of the investment fiduciaries they appoint. At a minimum, however, the duty of prudence requires that they have procedures in place so that on an ongoing basis they may review and evaluate whether investment fiduciaries are doing an adequate job."
The DOL brief further clarified that a corporation's ability to appoint fiduciaries and the board of directors' supervisory authority over the corporation do not make the individual board members fiduciaries, "absent any allegation that the Board had specifically retained or assumed any such fiduciary responsibilities to the Plan."
Finally, the brief stated that to the extent courts have treated fiduciary claims based on misrepresentations as fraud claims (requiring proof of specific elements of a common-law claim for fraud), they have been in error.
For more information, contact Jan Jacobson, Council director, retirement policy, at (202) 289-6700.
Medicare Chairman Thomas Issues Letter to HHS Secretary Thompson
On January 16, House Ways and Means Committee Chairman Bill Thomas (R-CA), who chaired the Medicare conference, wrote a letter to Tommy Thompson, the Secretary of Health and Human Services, clarifying congressional intent regarding the new employer drug subsidy. The letter was intended to refute an article in the Wall Street Journal on January 8 that claimed companies would be entitled to the federal subsidy even if all or substantially all of the cost of the plan was passed on to the retirees. Chairman Thomas stated that the Medicare statute "clearly states that only those plans that are at least actuarially equivalent to the standard Medicare benefit are entitled to the new subsidy." The Council also issued a letter [link] to the editor in response to the Journal article, which highlights that "once this program gets underway, any prescription drug coverage where the retiree pays for most, or all, of the value of the benefits under the plan will surely be determined under the agency's guidance to be lower in value than Medicare's drug benefit and therefore ineligible for federal subsidies."
Under the new Medicare drug benefit, employers that sponsor a retiree prescription drug plan may receive a subsidy for 28 percent of eligible paid claims between $250 and $5,000 for each eligible Medicare beneficiary. To be eligible for the subsidy, the employer plan must be at least actuarially equivalent or greater in value to the Medicare prescription drug benefit. For more information, contact Paul Dennett, vice president of health policy, at (202)289-6700.
The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.