RECENT DEVELOPMENTS IN EMPLOYEE BENEFITS LAW

"7 Plaintiffs also included additional derivative claims.8 On appeal, the Second Circuit first considered plaintiffs' prudence claim.9 After looking to decisions from its sister circuits, the Second Circuit officially joined the Third, Fifth, Sixth and Ninth Circuits in adopting the Moench...

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Bibliographic Details
Published in:Tort trial & insurance practice law journal 2012-09, Vol.48 (1), p.169-185
Main Authors: Rose, Jonathan G., Costin, Emily Seymour, Hootkins, Emily C.
Format: Article
Language:English
Subjects:
Age
Defendants
Disclosure
Employee benefits
ERISA
Federal court decisions
Federal district courts
Labor legislation
Life insurance
Litigation
Motions to dismiss
Plaintiffs
Retirement benefits
Retirement plans
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Summary:"7 Plaintiffs also included additional derivative claims.8 On appeal, the Second Circuit first considered plaintiffs' prudence claim.9 After looking to decisions from its sister circuits, the Second Circuit officially joined the Third, Fifth, Sixth and Ninth Circuits in adopting the Moench presumption of prudence for both eligible individual account plans (EIAPs) and employee stock ownership plans (ESOPs).10 It rationalized that the Moench presumption "provides the best accommodation between the competing ERISA values of protecting retirement assets and encouraging investment in employer stock. "11 In determining the boundaries of the presumption, the Second Circuit endorsed the Ninth Circuit's "guiding principle" test whereby judicial scrutiny should increase with the degree of discretion a plan gives its fiduciaries to invest. [...]a fiduciary's failure to divest from company stock is less likely to constitute an abuse of discretion if the plan's terms require - rather than merely permit - investment in company stock.12 The Second Circuit also joined those circuits applying the Moench presumption at the motion to dismiss stage, noting that the presumption "is not an evidentiary presumption; it is a standard of review applied to a decision made by an ERISA fiduciary.
ISSN:1543-3234
1943-118X