The Employee Retirement Income Security Act of 1974 (ERISA), the federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans, was meant to provide uniform national standards. The current system however, yields inconsistent rulings on the same fiduciary issues. Broadcast Retirement Network’s Jeffrey Snyder discusses how to address these concerns with Kevin Walsh, Principal, Groom Law Group
Jeffrey H. Snyder, Broadcast Retirement Network
(0:04) This morning on BRN, a special ERISA court to reduce legal uncertainties. (0:10) Joining me now to help break it all down, Kevin Walsh, is a principal with Groom Law Group. (0:15) Kevin, always great to see you.
(0:17) Thanks for joining us on the program this morning.
Kevin Walsh, Groom Law Group
(0:20) Thanks for having me on, Jeff. (0:20) It’s always good to talk to you and your viewers.
Jeffrey H. Snyder, Broadcast Retirement Network
(0:22) You and your colleague, David Levine, are always in the know when it comes to what’s going on with benefits, legislation, regulation, arbitration, so much more. (0:34) I always joke about that with you guys. (0:37) Let’s talk about something that I think is really important that maybe gets discussed but isn’t at the top of the list.
(0:45) That’s plan sponsor litigation risk. (0:48) As you and David know, there’s been a lot of court cases over the years, but there have been some developments or at least some different thinking as it relates to litigation.
Kevin Walsh, Groom Law Group
(0:59) Jeff, that’s a big topic and that’s a whole lot to talk about, so I don’t think we’re going to get into all of it today. (1:05) If we look at plan sponsor litigation, I think one thing we know is that ERISA imposes the highest standard under law. (1:10) It’s a good thing that we want to have companies and the plan futures at them be protective of and make thoughtful and informed decisions for their participants.
(1:22) On the other hand, what we have seen has been litigation over the past 15 years where I joke with plan sponsors when they ask me what can they do to avoid being sued. (1:32) I can tell them they can stop offering a plan or they can get smaller. (1:35) It seems like the key to avoiding or what causes you to get sued is essentially if you’re big or if you’ve been around for a while.
(1:46) That’s kind of led to a focus on the Hill, on the regulatory front and elsewhere on would it make sense to reform the litigation rules around ERISA so that meritorious claims go forward, but that there has to be more to it before you get sued, before you incur discovery costs, before you start facing the pain of being accused. (2:12) Should there be higher bars that you have to clear just so that the burden isn’t only on the defendant here?
Jeffrey H. Snyder, Broadcast Retirement Network
(2:19) Very interesting, Kevin. (2:21) We’ve talked over the years about all the different types of cases and they seem to evolve. (2:25) Is there precedent here?
(2:27) I mean, do we do this in other, obviously ERISA, fiduciary, very important, as you said, one of the highest standards, if not the highest standard. (2:35) Is there precedent for what you’re discussing, what you’re hearing on the Hill?
Kevin Walsh, Groom Law Group
(2:41) Yeah, so I’ve heard a couple of approaches and there’s some precedent for that. (2:45) One approach that we’ve heard would be to require more specific pleading. (2:49) So when you go in as a plaintiff and you say they acted imprudently, you would have to say more than, you know, they acted imprudently, I lost money.
(2:59) You’d have to say they acted imprudently by doing X, Y, or Z. (3:03) And what they should have done is, you know, one, two, and three. (3:07) That’s one approach that’s being pitched on the Hill.
(3:09) And we’ve seen pleading standards adjusted elsewhere. (3:12) In securities law, there were changes to the pleading standards a few years back. (3:15) A second approach that we’ve seen kind of discussed in recent days would be, you know, ERISA.
(3:22) I mean, I’m an ERISA lawyer, so I could say this ERISA is boring and it’s complex. (3:28) And one thing that that kind of contributes to the litigation morass is that when the judges who get ERISA cases get ERISA cases, they’ve got to get up to speed on it because, you know, they’re busy dealing with criminal cases. (3:41) They’re busy dealing with contract breach cases.
(3:43) They’re busy dealing with, you know, constitutional law cases and criminal. (3:47) So they’ve got a whole bunch of other types of cases they’re dealing with. (3:51) And when the ERISA case comes around and you get bogged down into 404 and 406 and 408 and all these numbers and letters, we may get kind of more varied outcomes or slower movement in cases because the judges just don’t see them or they’re not as familiar with them.
(4:12) And the approach that we’ve seen for that has been there’s been suggestions that, you know, maybe we should create a specialty court that hears just ERISA cases. (4:23) And, you know, your question was, has this been done elsewhere? (4:26) You know, so there’s there’s a tax court.
(4:29) We’ve got immigration courts. (4:31) The SEC has in-house courts for certain matters. (4:35) So, you know, it’s been done.
(4:37) We have bankruptcy courts. (4:38) So it’s been done with other areas of law. (4:42) Whether it will work here.
(4:44) I mean, I think we’d have to see more bones on the proposal. (4:47) But, you know, that that is an approach that could lead to more consistent and also just judges who are able to look at these more quickly and say, you know, this one makes some sense. (4:56) Let’s get to discovery.
(4:57) Whereas, you know, this other case, this doesn’t make any sense. (5:01) Defendant, you don’t have to incur costs.
Jeffrey H. Snyder, Broadcast Retirement Network
(5:03) Yeah, well, certainly the skill set that you have. (5:06) I mean, it is a it is a you have to have you have to have knowledge. (5:10) You have to understand how these these plans work.
(5:13) I think, as you described, it’s very different than criminal law or constitutional law. (5:18) It’s don’t take this the wrong way, but it’s kind of a niche expertise and therefore probably makes a lot of sense. (5:24) Kevin, how would how would this something be?
(5:28) Would these courts be something that the Department of Labor establishes? (5:31) Or do you actually have to go to Congress to get to pass a bill to establish these courts? (5:38) Because I know it’s part of the judiciary.
(5:41) So I don’t know how how they would go back in about enacting such a change.
Kevin Walsh, Groom Law Group
(5:47) Yeah. (5:47) So realistically, you need legislation to do this. (5:50) The agency could attempt to create in-house courts that deal with certain matters.
(5:56) But, you know, those courts have really been disfavored by the Supreme Court recently. (6:00) There have been a handful of cases that have criticized the SEC. (6:02) So, you know, you would need the Congress to weigh in and create these and appoint judges.
(6:09) You know, if you’re a private litigant. (6:13) You know, you think that it’s actually broken. (6:16) You want to have your day in court and your day in court is typically, you know, an article three court, a court that Congress created instead of a regulatory court.
(6:26) So, you know, absent legislation. (6:31) You’re going to need legislation to do this.
Jeffrey H. Snyder, Broadcast Retirement Network
(6:33) And Kevin, I mean, just given everything that’s going on in the Congress. (6:36) And again, you and David are on the Hill talking to staffers and and, you know, among and your clients as well. (6:43) I mean, is there is this palatable in terms of all the things that Congress has to get done?
(6:47) We just had the fight over the continuing resolution that kept the government open. (6:52) Retirement seems to be a bipartisan issue. (6:55) But I could see this thing not having one party or another having some disagreements over this particular issue.
(7:01) So is it is it tenable that this could happen in 2025 or 2026?
Kevin Walsh, Groom Law Group
(7:05) Well, so 2025 is pretty tricky because we’ve got two reconciliation bills or one reconciliation bill, depending on how Republicans choose to structure their efforts. (7:15) That’s going to, you know, tax reform. (7:18) That’s going to eat up the congressional calendar for at least the first half of the year.
(7:23) If we look at it kind of longer term, you know, I think people make a mistake when they look at retirement provisions individually. (7:30) When retirement bills tend to pass, it tends to be part of a bigger thing like the Pension Protection Act, Secure 1.0, Secure 2.0. And this could be part of the flotsam and jetsam that get assembled into that next raft of legislation. (7:44) But, you know, we have to wait and see.
(7:46) Some of it comes down to whether there are strong champions. (7:49) And then the other hand, it’s also our is this something that that is palatable enough that folks aren’t saying it can’t go on?
Jeffrey H. Snyder, Broadcast Retirement Network
(7:57) And Kevin, we’re going to have a new EBSA secretary, Employee Benefit Security Act secretary. (8:04) I believe it has to get Senate confirmation that that person has to get Senate confirmation. (8:09) Could something like this come up in a potentially in a hearing?
(8:12) I mean, it’s a hypothetical, but I just put it out there to ask, is this something that could come up in conversation if the Senate has a vice of consent?
Kevin Walsh, Groom Law Group
(8:19) It is, you know, so Dan Aronowitz has been nominated as the next head of the Employee Benefit Security Administration. (8:28) His hearing hasn’t been scheduled yet, but, you know, when he has his hearing, I think we can expect that there will be questions about different policy matters. (8:36) And, you know, whether they would make sense as things that Congress should pursue and, you know, get his thoughts on where he is on those proposals.
(8:46) So, you know, Jeff, that’s a great question. (8:48) And in confirmation hearings, we typically see questions about nominees views on matters like this.
Jeffrey H. Snyder, Broadcast Retirement Network
(8:55) Yeah, I’ll be checking out C-SPAN because I’m a nerd and like you’re you’re a risk nerd. (9:01) I am, too, but not to the level you are. (9:03) But I’m also a confirmation nerd.
(9:04) I like watching confirmation hearings and hearing the back and forth. (9:07) I think it gives you insight into how senators or what they’re thinking about and what they’re being lobbied to think about. (9:14) Just my cynical point of view.
(9:16) Kevin, we’re going to have to leave it there. (9:17) It’s always great to see you. (9:19) Give my best to your colleague, David Levine.
(9:21) And look, we look forward to having you both back on the program again very soon.
Kevin Walsh, Groom Law Group
(9:25) Yeah. (9:25) Thank you, Jeff. (9:26) It’s always great talking to you and have a great weekend, viewers.
Jeffrey H. Snyder, Broadcast Retirement Network
(9:29) And don’t forget to subscribe to our daily newsletter, The Morning Post, for all the news in one place. (9:34) Details, of course, at our website and your subscription helps support all this great BRN content. (9:41) And don’t forget, we’re back again tomorrow for another edition of BRN.
(9:44) Until then, I’m Jeff Snyder. (9:45) Stay safe, keep on saving and don’t forget, roll with the changes.
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