Washington – The U.S. District Court for the Central District of California reversed an earlier ruling against AT&T in a lawsuit over how its 401(k)-plan disclosed certain recordkeeping fees. The ERISA Industry Committee (ERIC), joined by the SPARK Institute and other coalition allies, had filed an amicus brief supporting AT&T’s position in Alas v. AT&T.
The case involved AT&T’s Retirement Savings Plan and a “brokerage window,” which lets employees choose investments beyond the plan’s standard menu. Through that window, the plan’s recordkeeper, Fidelity, may receive payments from mutual funds, known as indirect compensation. Federal law requires such arrangements be “reasonable,” including disclosures sufficient for plan fiduciaries to evaluate that compensation.
The plaintiffs argued that Fidelity’s disclosure of a range of rates, rather than fund-by-fund figures, was too vague to meet that standard, and the Court initially agreed. On reconsideration, it reversed course, ruling that a range of rates can satisfy the law because a recordkeeper cannot know in advance which of the thousands of available funds employees will choose.
“This ruling recognizes a basic reality of how brokerage windows work,” said Doug Hinson, Executive Director of the ERIC Legal Center. “A recordkeeper cannot predict which of the thousands of funds available through a brokerage window employees will pick, so the law needs to allow for practical disclosure methods, not perfection. Employers who offer these options to give workers more choice deserve a workable compliance standard, and this decision confirms that the industry practice in place for years is sufficient.”
The Court’s opinion specifically credited the amicus brief’s explanation of how brokerage windows operate in reaching its decision. The ruling also confirmed that AT&T’s original 2012 disclosure letter was timely, correcting an earlier finding to the contrary. The case is not entirely resolved, but potentially damaging mistakes have been corrected by the Court.
“The ERIC Legal Center is proud to have been of help to the Court” Hinson continued. “We exist to protect and defend plan sponsors, and to help ensure the best possible environment for employers to choose to offer high-value benefits to employees.”
Read the Court’s order here.