DOL Weighs in on Fee Disclosure

Written by: Nick Curabba

With all the recent attention to fee disclosure regulations and legislation, it may have been tempting to forget about all those law suits currently pending against plan sponsors and service providers.  After an initial flurry of activity, many of those cases have settled into discovery mode, where they will skip along under the radar for several months before any notable developments. 

One exception is Hecker v. John Deere, currently before the 7th Circuit on appeal from the Western District of Wisconsin.

The case is notable not only for its speed in getting to an appellate review, but because is marks the debut of the Department of Labor's involvement as unofficial litigant in these fee disclosure cases.  The litigating arm of the DOL, the Office of the Solicitor, filed an amicus brief with the 7^th Circuit last month arguing, among other things, that the district court was wrong to conclude that ERISA's statutory provisions exhaustively enumerate the information fiduciaries must disclose to participants.  Rather, depending on the circumstances, the Department argued that ERISA's general fiduciary obligations of prudence and loyalty may require that additional information be provided to participants and their beneficiaries.  The Department's brief noted that a fiduciaries duties of prudence and loyalty "forbid fiduciaries from misleading plan participants about their plans and can, in certain circumstances, require fiduciaries to disclose information that participants need to know to exercise their rights under the or protect their interests in the plan."

Apart from that somewhat expected position, the Department's brief is exceptional in its restrained and measured tone.  Rather than galloping into the fee disclosure fray fully supporting plaintiff's arguments, the Department pointedly took issue with some of the primary assertions in the complaint.  Plan service and investment providers will likely find much to like about the Department's brief, but one passage to love is its flat rejection of the argument that revenue sharing payments are always made from plan assets.  Just as the Department signaled in the preamble to the final Form 5500 revisions, it asserted again in the Hecker amicus that the receipt of revenue sharing payments does not confer fiduciary status on the recipient because the "sums paid do not constitute plan assets."

We suspect this will not be the last utterance by the Department's litigators in fee disclosure cases. But with a start like this, more from the Department might actually be a good thing.