Default Settings in Defined Contribution Plans – a Comparative Approach to Fiduciary Obligation and the Role of Markets

Both the United States and Australia have increased the use of default settings in defined contribution (DC) plans such as 401(k)s. However, policy makers in the two countries have taken different approaches to important aspects of default investment products. This article discusses the regulation of those default investment products particularly regarding the assignment of fiduciary responsibility. It concludes that Australia’s approach offers two lessons for the U.S. First, disclosure to and education of participants who are defaulted into investment products appears to be of limited value to those participants. Second, to the extent possible, the locus of fiduciary responsibility for default investment products should be on those who are expert on and manage those products.http://deepblue.lib.umich.edu/bitstream/2027.42/89594/1/1168_Muir.pd

Changing the Rules of the Game: Pension Plan Terminations and Early Retirement Benefits

This Note examines whether early retirement benefits are included among the liabilities that an employer must satisfy before that employer can receive a reversion of excess assets. Part I reviews the background of plan terminations and how they affect early retirement benefits. It also discusses the general structure of ERISA. Part II examines the controversy surrounding whether ERISA\u27s definition of accrued benefits includes early retirement benefits. ERISA requires that employees receive all of their accrued benefits before the employers receive any reversions. However, the circuits have disagreed as to whether early retirement benefits are accrued benefits and, therefore, covered by this requirement. Even if early retirement benefits are not accrued benefits, an alternative theory suggests that the distribution requirements of section 4044(a)(6) require payment of those benefits to employees. Part III analyzes the requirements of ERISA section 4044(a)(6). Section 4044(a) establishes a priority scheme for distribution of assets upon plan termination. The distribution scheme is composed of six categories, the last of which allocates assets to all other benefits under the plan. The circuits are split as to whether category six of section 4044(a) covers employees\u27 benefit expectations including early retirement benefits. Part IV explores the public policy considerations relevant to the issue of whether BRISA should require employers to pay early retirement benefits prior to receiving a reversion of excess assets

Two Hats, One Head, No Heart: the Anatomy of the Erisa Settlor/Fiduciary Distinction

ERISA, the comprehensive employee benefits reform statute, created a strict fiduciary standard for those involved in the administration or management of employee benefit plans or their assets, a standard that requires such actors to make decisions solely in the interests of the plan’s participants and their beneficiaries. The courts, however, have held that employer decisions on whether to adopt or terminate a plan, or how to design the provisions of a plan, are plan “settlor” functions, akin to a grantor’s design of a trust under the common law, and thus not subject to ERISA’s fiduciary duties. While the settlor/fiduciary doctrine has worked well and is not controversial in routine cases, the article shows that the doctrine has permitted employers in some cases to bypass express and implied ERISA requirements through artful plan drafting and, perhaps more troubling, has also permitted employers to exploit ERISA’s broad preemption of state law to insulate plans actions from judicial or state legislative oversight, even in areas where there is broad national consensus, such as limits on claim subrogation and liability for negligent medical decision-making. The article suggests three limiting principles that courts could use to provide a more nuanced approach to balancing employer and employee interests in and related to ERISA plans. These principles would leave intact the core of the doctrine while mitigating its most troubling effectshttp://deepblue.lib.umich.edu/bitstream/2027.42/106537/1/1233_Muir.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/106537/4/1233_Muir.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/106537/5/1233_Muir_Jan2015.pdfDescription of 1233_Muir.pdf : Cover fix, use this.Description of 1233_Muir_Jan2015.pdf : January 2015 revisio

Groundings of Voice in Employee Rights

http://deepblue.lib.umich.edu/bitstream/2027.42/39916/3/wp531.pd

Regulation of the Financial Services Industry: Whose Money is at Risk?

The financial crisis will result in far-reaching reform of the regulatory system affecting the U.S. financial services industry, financial markets, and government interactions with the markets. This Article considers the effect that regulatory reform will have on the regulation of retirement savings accounts, which have been devastated by market losses. In the financial services arena, reformers have evaluated the approaches used by the United Kingdom and Australia as potential paradigms for the U.S. but have failed to consider the way those countries integrate regulation across various types of investment accounts. The current system of retirement savings regulation in the U.S. is as much a historical anachronism as is the regulation of the financial services industry and markets. Although reformers recognize the fragmentation of regulatory authority, and the problems with that fragmentation, that has developed for financial services regulation, reform proposals fail to recognize the fractured nature of regulation of retirement savings accounts. The unique contributions of this Article are (1) to explain why financial services reform must recognize and address the regulation of retirement savings accounts, and (2) to suggest principles on which to base the division of regulatory authority.http://deepblue.lib.umich.edu/bitstream/2027.42/61513/1/1126_DMuir.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/61513/4/1126_DMuir_march09.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/61513/6/1126_DMuir_march09r.pd

Choice Architecture and the Locus of Fiduciary Obligation in Defined Contribution Plans

The insights of choice architecture have led to expanded use of default settings in defined contribution (DC) plans in both the United States and Australia. The two countries have taken somewhat similar approaches to the content of default investment products. However, they differ significantly in how they allocate the legal responsibilities associated with those default investment products. This paper compares the two approaches, particularly regarding the role of disclosure and the assignment of fiduciary responsibility. It concludes that Australia’s approach offers two lessons for the U.S. First, disclosure to and education of participants who are defaulted into investment products is inadequate to negate conflicts of interest and investment risk. Second, fiduciary responsibility for default investment products should be co-located with investment expertise and management. The paper suggests development of a new investment product, Safe Harbor Automated Retirement Products (SHARPs), based on these lessons.http://deepblue.lib.umich.edu/bitstream/2027.42/94547/1/1183_Muir.pd