Proprietary Funds in 401(k) and Retirement Plans: A View From the Trenches

Navigating Prohibited Transaction Rules, Fiduciary Duties, and the Recent Surge in DOL Investigations and Civil Litigation

Recording of a 90-minute premium CLE webinar with Q&A

Conducted on Wednesday, August 9, 2017

Recorded event now available

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Program Materials

This CLE webinar will discuss the legal issues arising from the offering of proprietary or affiliated products in ERISA-covered retirement plans sponsored by financial services companies. The panel will discuss the rise in regulatory and litigation challenges to proprietary funds, and explain how plan sponsors and fiduciaries can avoid or mitigate the additional risk these offerings create.

Description

Financial services companies typically offer their own products—mutual funds, insurance contracts, collective trusts—to their employees in their company-sponsored 401(k) and retirement plans. These proprietary, or affiliated, products can create additional risks for sponsors and fiduciaries and raise complicated issues under ERISA’s prohibited transaction and fiduciary rules.

These complex issues have recently moved front and center in both the regulatory and litigation arenas as private plaintiffs and the government challenge the prudence and performance of these investments and associated fees and expenses. These challenges raise the specter of a finding of imprudence related to a sponsor’s own products that are marketed to the sponsor’s customers, an unenviable situation that can expose a plan sponsor to costly litigation or regulatory action.

Listen as our experienced panel of ERISA attorneys discusses the legal issues that can arise from the offering of proprietary or affiliated products in ERISA-covered retirement plans sponsored by financial services companies. The panel will discuss the rise in regulatory and litigation challenges to proprietary funds and explain how plan sponsors and fiduciaries can avoid or mitigate the additional risk these offerings create.

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Outline

  1. Prohibited Transaction Exemption PTE 77-3 and the residual duties of prudence and loyalty
  2. Related problems of 12b-1 fees and sales commissions
  3. Problems with “seeding” newly established proprietary products
  4. DOL investigative initiative and the surge in class action complaints
  5. Strategies for reducing litigation risk

Benefits

The panel will review these and other key issues:

  • What are the peculiar problems associated with the offering of proprietary funds, and the varied—and peculiar—legal standards governing their use?
  • How might a finding of a fiduciary breach impact the sponsor’s business model?
  • What steps can be taken to avoid problems before they erupt into a DOL investigation and/or an ERISA class action?

Faculty

Jeremy P. Blumenfeld
Jeremy P. Blumenfeld
Partner
Morgan Lewis & Bockius

Mr. Blumenfeld represents defendants on a range of employee benefit litigation matters, including numerous ERISA class...  |  Read More

Brian T. Ortelere
Brian T. Ortelere
Partner
Morgan Lewis

Mr. Ortelere is a Partner in the New York and Philadelphia offices, and is Co-Chair of the ERISA Litigation Practice at...  |  Read More

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