Law Commons^™

Did The Superbowl Ad Curse Heighten Defined Contribution Plan Fiduciary Duties?: Deciphering The Legal And Ethical Landscape Of Cryptocurrency Options In 401(K)S, Lauren K. Valastro

University of Michigan Journal of Law Reform

Regulating cryptocurrency’s place in America’s most popular retirement savings vehicle generates thorny legal, ethical, and social justice dilemmas. Too little regulation could hurt those at highest risk of underfunded retirement. Too much could exacerbate existing racial, ethnic, and gender inequities.

Though recent regulatory efforts suggest 401(k) administrators violate their fiduciary duty of care by offering cryptocurrency investment options to plan participants, the established fiduciary regime protects 401(k) plan participants from cryptocurrency risk while respecting their savings preferences. Yet, the current framework falls short of ethically and equitably serving all plan participants, particularly members of underserved communities— a problem largely unaddressed …

Clashing Canons And The Contract Clause, T. Leigh Anenson, Jennifer K. Gershberg

University of Michigan Journal of Law Reform

This Article is the first in-depth examination of substantive canons that judges use to interpret public pension legislation under the Contract Clause of the U.S. Constitution and state constitutions. The resolution of constitutional controversies concerning pension reform will have a profound influence on government employment. The assessment begins with a general discussion of these interpretive techniques before turning to their operation in public pension litigation. It concentrates on three clashing canons: the remedial (purpose) canon, the “no contract” canon (otherwise known as the unmistakability doctrine), and the constitutional avoidance canon. For these three canons routinely employed in pension law, there …

Public Pensions And Fiduciary Law: A View From Equity, T. Leigh Anenson

University of Michigan Journal of Law Reform

Controversies involving fund management may be the next frontier of public pension litigation. Recent scandals involving fraud, bribery, and corruption of public pension officials and other third parties have drawn the public eye toward the management of retirement assets. Individual and entity custodians, including pension boards of trustees, are charged with making investment and other decisions relating to pension funds. Unlike private pensions, there is no federal oversight of asset managers or others in control of retirement funds. Yet these funds hold more than three trillion dollars in assets. Until now, the guardians of these monies have operated almost invisibly …

Eliminating Arbitrary Age Descrimination In 401(K) And Pension Plan Eligibility Requirements: A Simple Fix To Encourage Younger Workers To Save For Retirement, Andrew J. Clopton

University of Michigan Journal of Law Reform Caveat

Current federal law allows companies to exclude their youngest workers from participating in 401(k) and other pension plans. Public policy should encourage young workers to contribute to retirement as early as practicable, rather than impose obstacles to saving. Workers who begin saving even a few years earlier improve their retirement security and reduce the likelihood they will be dependent on the government later in life. While “age discrimination” is conventionally thought of as the mistreatment of older workers, this concept applies equally to employees who are differentiated based solely on their young age. Thus, Congress should amend the Internal Revenue …

Broker-Dealers And Investment Advisers: A Behaviorial-Economics Analysis Of Competing Suggestions For Reform, Polina Demina

Michigan Law Review

For the average investor trying to save for retirement or a child’s college fund, the world of investing has become increasingly complex. These retail investors must turn more frequently to financial intermediaries, such as broker-dealers and investment advisers, to get sound investment advice. Such intermediaries perform different duties for their clients, however. The investment adviser owes his client a fiduciary duty of care and therefore must provide financial advice that is in the client’s best interests, while the broker-dealer must merely provide advice that is suitable to the client’s interests—a lower standard than the fiduciary duty of care. And yet …

A Public Pensions Bailout: Economics And Law, Terrance O'Reilly

University of Michigan Journal of Law Reform

In several states, public pension plans are at risk of insolvency within a decade. These risks are significant, and the solutions currently contemplated are likely to fall short of what is necessary to contain the problem. If public pension plans do become insolvent, it seems likely the federal government will bail them out. This Article proposes that the federal government prepare for the prospect of federal financial support of public pension plans by instituting an optional regulatory regime for public pensions. If a state elects not to participate, its public pension plans would be ineligible for federal financial support. In …

Retirees Beware: Don't Worry About The British, 'Taxmageddon' Is Coming, Douglas A. Kahn, Lawrence W. Waggoner

Articles

"Taxmageddon" is coming. Unless Congress extends the current rates or reaches an agreement on tax reform, dividends will then be taxed as ordinary income at a marginal rate as high as 39.6 % and net capital gains will then be taxed at 20%. For high-income taxpayers, a 3.8% Medicare surtax will be added to the taxation of net capital gains, dividend income, interest, and other investment income, bringing the highest marginal rate to 43.4%.

The Federal Common Law Of Vicarious Fiduciary Liability Under Erisa, Colleen E. Medill

University of Michigan Journal of Law Reform

The Employee Retirement Income Security Act of 1974 ("ERISA"), the federal law that regulates employer-sponsored benefit plans, has a rich history of judiciallycreated federal common law. This Article explores the theoretical, policy, statutory, and stare decisis grounds for the development of another area offederal common law under ERISA-the incorporation of respondeat superior liability principles to impose ERISA fiduciary liability ("vicarious fiduciary liability") upon a corporation for the fiduciary activities of its employees or agents. The Article proposes that the federal courts should adopt a federal common law rule of vicarious fiduciary liability under ERISA based on the traditional scope of …

Encouraging Savings Under The Earned Income Tax Credit: A Nudge In The Right Direction, Vada Waters Lindsey

University of Michigan Journal of Law Reform

During 2007, 3.6 million or 9.7% of people in the United States age 65 or older were below the poverty level. In light of the number of elderly people living below the poverty level, it is important that everyone, including low-income workers, have the opportunity to save for retirement. Low-income workers face many challenges to saving for retirement. The barriers to saving include the lack of access to retirement plans and lack of investment savvy. For example, only 42 % of workers employed in service occupations in the private industry have access to employer retirement plans. The percentage drops to …

The Use Of Efficient Market Hypothesis: Beyond Sox, Dana M. Muir, Cindy A. Schipani

Michigan Law Review

This Article focuses on the regulatory use of finance theory, particularly the efficient market hypothesis ("EMH"), in two areas where securities pricing is at issue: shareholder appraisal cases and the use of employer stock in benefit plans. Regarding shareholder appraisal cases, the Article finds that the Delaware courts seem to implicitly respect the principles of EMH when ascertaining the fair value of stock, but recognize that markets cannot operate efficiently if information is withheld. Regarding employer stock in benefit plans, it concentrates on the explicit adoption of EMH by the Department of Labor to exempt directed trustees from traditional duties …

Divorcees Turn About In Their Graves As Ex-Spouses Cash In: Codified Constructive Trusts Ensure An Equitable Result Regarding Erisa-Governed Employee Benefit Plans, Sarabeth A. Rayho

Michigan Law Review

A revocation-by-divorce statute essentially nullifies a devise in a divorced decedent's will when the devise bequeaths property to the decedent's ex-spouse and the will was executed during their marriage. Until recently, state revocation-by-divorce statutes unquestionably applied not only to wills but also to will substitutes, including ERISA-governed employee benefit plans. In 2001, the Supreme Court held in Egelhoff v. Egelhoff ex rel. Breiner that ERISA preempts traditional state revocation-by-divorce statutes as applied to ERISA-governed employee benefit plans. In the wake of the Egelhoff decision, plan administrators may automatically pay proceeds to the listed beneficiary, even an ex-spouse, regardless of the …

The Four Pillars Of Work Law, Orly Lobel

Michigan Law Review

In our contemporary legal landscape, a student wishing to study the law of the workplace has scarce opportunity to encounter an integrated body of scholarship that analyzes the labor market as the subject of government regulation, contractual duties, collective action, and individual rights. Work law developed in the American legal system as a patchwork of common law doctrine, federal and state statutes, and evolving social norms. Typical law school curricula often include courses relating to the four pillars of work law: "employment law," "labor law," "employment discrimination," and some variation of a tax-oriented "employee-benefits law." Employment law, in most categorizations, …

Stock Market Volatility And 401 (K) Plans, Colleen E. Medill

University of Michigan Journal of Law Reform

Many workers today depend on their 401(k) plan to provide them with an adequate income during retirement. For these workers to achieve retirement income security, their 401(k) plan investments must perform well over their working lifetime. Employers' selection of investment options for the 401(k) plan, a fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA), plays a critical role in determining investment performance. In this Article, Professor Medill uses a series of hypothetical litigation scenarios to illustrate how interpretation of the employer's duty of prudence and duty of loyalty under ERISA present different policy choices for the …

Federal Common Law And Gaps In Federal Statutes: The Case Of Erisa Plan Limitation Periods For Section 502(A)(1)(B) Actions, Jim Greiner

Michigan Law Review

This Note argues that federal courts should adopt a uniform national rule that upholds plan provisions modifying the limitation period for a section 502(a)(l)(B) action. Part I examines the reasoning of those courts that have borrowed state law to determine the validity of modifications of the limitation period applicable to actions arising under BRISA section 502(a)(l)(B) and under other federal statutes. Part I argues that those courts may have incorrectly characterized the validity of plan limitation periods as an issue of limitation law. As a consequence of this characterization, those courts have followed the Supreme Court's rule that, when borrowing …

Employment Discrimination Claims Under Erisa Section 510: Should Courts Require Exhaustion Of Arbitral And Plan Remedies?, Jared A. Goldstein

Michigan Law Review

This Note examines whether courts should require section 510 claimants to exhaust either plan-based or arbitral remedies before seeking judicial relief. It begins by comparing the basis for an exhaustion requirement with respect to benefits claims with the basis for such a requirement with respect to statutory claims - like those under section 510. Part I examines the rationale courts have offered for requiring exhaustion of plan remedies for benefits claims. Part I concludes that federal courts have correctly determined that Congress intended individuals bringing benefits claims to exhaust the remedies provided by the plan before seeking judicial relief. Part …

Employer Recapture Of Erisa Contributions Made By Mistake: A Federal Common Law Remedy To Prevent Unjust Enrichment, J. Daniel Plants

Michigan Law Review

This Note investigates more fully the policies animating ERISA in order to ascribe an appropriate construction to the mistaken contribution section. Part I analyzes the Ninth Circuit's anomalous implied cause of action theory. Searching the legislative history as well as ERISA's language and structure, this Part finds lacking the requisite expression of congressional intent to support a statutorily implied remedy. As an alternative, Part II explores the appropriateness of common law relief. Part II defends the creation of common law relief by the federal courts as consistent with the direct and indirect evidence suggesting that Congress envisioned judicial supplementation of …

Augmenting Erisa With Market Discipline: Transforming Pension Plan Interests Into Securities, Keir N. Dougall

University of Michigan Journal of Law Reform

Part I of this Note provides general background information about pension plans and details the problems that ERISA creates because of its dependence on trust law. Part II canvasses recent problems in pension plan governance that courts and pension plan members have faced in takeover defense and social investment contexts, demonstrating that ERISA's use of trust law cannot respond adequately to these problems. Parts I and II draw on an analysis of ERISA presented by Professors Fischel and Langbein but argue that their proposals for changing ERISA inadequately address the problems they identify. Part III argues that the economic realities …

Changing The Rules Of The Game: Pension Plan Terminations And Early Retirement Benefits, Dana M. Muir

Michigan Law Review

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's 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 …

Erisa-The First Decade: Was The Legislation Consistent With Other National Goals?, Alicia H. Munnell

University of Michigan Journal of Law Reform

Although ERISA explicitly sanctioned defined contribution plans as a legitimate form of retirement saving, this Article focuses almost exclusively on defined benefit plans. ERISA aimed at changing the basic provisions of defined benefit plans, not at modifying the nature of defined contribution plans. Therefore, although a study of the consistency of pension plan provisions with national economic goals would necessarily include an analysis of both defined benefit and defined contribution plans, a study of the impact of ERISA seems appropriately limited to defined benefit plans.

Introduction, Theodore J. St. Antoine

University of Michigan Journal of Law Reform

Introduction to the 1985 Journal of Law Reform symposium, The Employee Retirement Income Security Act of 1974: ERISA.

Erisa Enforcement: Mandate For A Single Agency, Beverly M. Klimkowsky, Ian D. Lanoff

University of Michigan Journal of Law Reform

In Part I, this Article reviews the aspects of pensions that justify the attention of Congress during consideration of budgets and the federal deficit. Part II documents the initial administrative problems created by the congressional compromise that divided administrative responsibility between the Department of Labor and the Internal Revenue Service. Although Reorganization Plan No. 4 solved some of the initial problems, the remaining problems are not amenable to resolution within a system of responsibility divided between separate agencies. The specific problems associated with enforcement are discussed in Part III, which identifies the total failure of enforcement as a major threat …

A National Retirement Income Policy: Problems And Policy Options, Phyllis C. Borzi

University of Michigan Journal of Law Reform

This Article examines the need for a national retirement income policy, identifies the major components of such a policy, and briefly discusses some of the policy options for private pension plans. This Article is an overview of several critical policy areas. It is not an exhaustive policy analysis, nor does it provide a definitive series of options for achievement of a particular policy. Its focus will be on the private pension system, rather than on federally provided benefits such as social security or Medicare, or employer-provided pensions for state, local, or federal employees. The issues discussed are a starting point …

Women's Pension Reform: Congress Inches Toward Equity, Anne Moss

University of Michigan Journal of Law Reform

In the workplace and in the home, women suffer economic injustices. The inequities of our private and governmental pension systems compound their financial problems, leading to inadequate retirement income for many older women. For example, only ten percent of women age sixty-five and over received private pensions or annuities in 1982, as compared to twenty-nine percent of men age sixty-five and over. Women receiving pensions likewise get much less than men, averaging $1,520 in 1982. The average for men in 1982 was $2,980.

Gradually, policymakers are recognizing the shortcomings of pension systems. In the past few years, federal legislation has …

Erisa Preemption: Judicial Flexibility And Statutory Rigidity, Leon E. Irish, Harrison J. Cohen

University of Michigan Journal of Law Reform

This Article attempts to describe the ways in which, and the reasons why section 514(a) has caused the courts and Congress so much difficulty. Part I reviews the legislative history of section 514(a), with emphasis on the ambivalence Congress has shown toward its 1974 draftsmanship. Part II attempts to provide a coherent description of the case law that has developed under section 514(a). Part III completes the legislative history by examining the two instances in which experience compelled Congress to revise section 514. Finally, Part IV discusses examples of problems courts have faced when crafting a federal common law of …

Erisa: To Sue Or Not To Sue-A Question Of Statutory Standing, Constance L. Bauer

University of Michigan Journal of Law Reform

This Note examines the conflicting authority regarding the scope of section 502(a) of ERISA. There is a fundamental split among the United States Courts of Appeals concerning whether parties not specifically enumerated in section 502(a) have standing to bring civil actions to enforce ERISA's provisions. The Ninth Circuit has held consistently that non-enumerated parties are entitled to sue under ERISA. The Second Circuit, however, repeatedly has held that parties not explicitly specified in section 502(a). do not have standing to bring an action under the Act. This Note addresses the question of whether employers and pension funds, as non-enumerated parties, …

Pension Plan Terminations And Asset Reversions: Accommodating The Interests Of Employers And Employees, Carl A. Butler

University of Michigan Journal of Law Reform

This Note focuses on the problems that often arise for plan participants when an overfunded defined benefit plan is terminated and the employer recaptures excess assets. Part I explains the relative ease with which employers can terminate plans and receive excess assets under current pension law. Part II argues that pension law must be reformed because its shortcomings threaten American workers' retirement income security, it allows for sham terminations that remove assets from plans that are, in fact, ongoing, and it usually allows excess assets to go to employers rather than employees. Part III discusses two reforms proposed for plan …

Erisa Retirement Plans In Individual Bankruptcy, John Minton Newell

University of Michigan Journal of Law Reform

When an employee covered by an ERISA retirement plan files a petition in bankruptcy, the court is presented with a number of complex issues regarding the relationship among ERISA, the Bankruptcy Code (Code), and the state law of creditors' rights. Three issues have emerged in these cases, and the courts have divided on the proper resolution of each of these issues. First, is the debtor's interest in an ERISA retirement plan "property of the estate," and thus available for distribution to creditors? Second, if the debtor's interest is property of the estate, and the debtor uses the state exemption scheme, …

Exemption Of Erisa Benefits Under Section 522(B)(2)(A) Of The Bankruptcy Code, Michigan Law Review

Michigan Law Review

This Note argues that the two federal statutes are exempting statutes under section 522(b)(2)(A), and thus BRISA funds should be exempt in a bankruptcy action when the debtor uses the state exemption scheme. Part I argues that standard principles of statutory interpretation, as applied to the language of the bankruptcy statute, refute the possibility that Congress intended the list of statutes in the legislative history to be exclusive. Having established that statutes other than those listed may be included under section 522(b )(2)(A), Part II first refutes the argument that the absence of BRISA from the list of exempting statutes …

Protecting Retired Workers From Inflation: Collective Bargaining For Retiree Benefits, Richard M. Bank, Thomas C. Woodruff

University of Michigan Journal of Law Reform

The purpose of this article is to explore whether the collective bargaining process in its present form, or with certain modifications, can provide workers with meaningful protection against inflation. Part I evaluates the adequacy of the collective bargaining process by examining the internal dynamics of unions, the interests of employers and the application of the doctrine of fair representation to collective bargaining. After concluding that the current system inadequately protects retirees, Part II proposes alternative methods to strengthen the role of retirees in the collective bargaining process.

Employee Stock Ownership Plans, Voting Rights, And Plant Closings, Jonathan Barry Forman

University of Michigan Journal of Law Reform

After examining the structure and tax consequences of ESOPs, this note will argue that ESOPs should guarantee employees full voting rights over securities transferred to them under such plans. This note will also propose that ESOPs can be used in employee takeovers of corporations as part of a plan to help prevent plant closings.