<nobr>Aug 6, 2009</nobr>

ERIC Urges Appeals Court to Uphold District Court Ruling Against Alleged 401(k) Fiduciary Breach Claims

Washington, D.C. -- The ERISA Industry Committee (ERIC), the Washington, D.C.-based trade association representing America's major employers, yesterday filed with the U.S. Court of Appeals for the Second Circuit an amicus brief urging the court to uphold an earlier ruling that United Technologies Corp. did not breach its fiduciary duties under the Employee Retirement Income Security Act (ERISA) in selecting and managing investment options for its Section 401(k) plan (Taylor v. United Technologies Corporation).

The U.S. District Court for the District of Connecticut ruled in March 2009 that United Technologies Corp. did not breach its fiduciary duties by selecting mutual funds for its tax code Section 401(k) plan that allegedly charged unreasonable and excessive fees, finding that the fiduciaries complied with the "prudent person" standard of ERISA.

The brief on behalf of ERIC was filed by Attorneys Gregory Braden and James Bayles, Jr., of Morgan, Lewis, & Bockius LLP.

ERIC's brief rebuts Plaintiffs' appeal to overturn the district court opinion by arguing that ERISA's prudence requirement cannot be reduced to simplistic cost-based rules that require plan fiduciaries to offer only certain types of investment options, and that ERISA's standard of fiduciary conduct cannot be reduced to a single cookie-cutter rule requiring fiduciaries to offer to participants only the lowest cost investment options.

This case is one of at least 15 lawsuits filed between September 2006 and August 2007 by a single firm challenging the common practices of virtually all 401(k) plans.

ERIC President Mark Ugoretz said "this case appears to be another in the many baseless claims against 401(k) plan fiduciaries. The courts should not entertain a barrage of armchair quarterbacks descending on the federal courts to second-guess reasonable and responsible fiduciary decisions. If they do, dockets will be clogged with vexatious litigation, capable persons will be discouraged from serving as ERISA fiduciaries, and the interests of plan participants seeking to save for retirement will be in jeopardy. Congress clearly did not intend ERISA to have these consequences."

According to ERIC's brief, ERISA's standard for prudence requires that plan fiduciaries act with the same level of care, skill, prudence and diligence exhibited by other fiduciaries acting in similar enterprises. The practices and products challenged by the Plaintiffs are virtually universal among 401(k) plans among companies that in 2006 sponsored 466,000 401(k) plans covering 58.4 million employees. This prevalence confirms that they are objectively reasonable and responsible practices. Indeed, the brief points out that the fiduciaries of these plans and plan participants themselves seek out the products and practices that Plaintiffs challenge.

It further argues that this and similar litigation threaten the fiduciaries of more than 90% of the nation's defined contribution plans that now include the common every day investment products that the Plaintiffs want outlawed. Adopting the Plaintiffs' rationale would set a dangerous and far-reaching precedent, subjecting virtually all 401(k) fiduciaries to costly litigation that ultimately will harm participants throughout the United States.

Ugoretz further said that, "we strongly urge the Second Circuit to uphold the district court's ruling, and join the Seventh Circuit's decision in Hecker v. Deere by making clear that these cases are nothing but dangerous fishing expeditions that are undermining the confidence of both employers and participants in their retirement programs."

A link to ERIC's brief is below.

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For more information:
Ted Godbout
Manager, Communications
The ERISA Industry Committee
1400 L Street, NW, Suite 350
Washington, DC 20005
Phone: 202-789-1400
Fax: 202-789-1120
tgodbout@eric.org
www.eric.org

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The ERISA Industry Committee (ERIC) is a non-profit association committed to representing the advancement of the employee retirement, health, and compensation plans of America's largest employers. ERIC's members provide benchmark retirement, health care coverage, compensation, and other economic security benefits directly to tens of millions of active and retired workers and their families. ERIC has a strong interest in proposals affecting its members' ability to deliver those benefits, their cost and their effectiveness, as well as the role of those benefits in the American economy.

Text Files:

ERIC Brief in Taylor v. United Technologies Corp.

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