ERISA Confusion
Current Litigation May Spawn More of the Same

SEVERAL ERISA LAWSUITS recently have been decided or will be ruled upon in the coming months, but these decisions likely will do little to clear up many compliance questions.

In fact, any rulings on the current litigation simply will determine how many more suits involving 401(k) plans and the Employee Retirement Income Security Act will spring up next, according to a report by the law firm Spencer Fane Britt & Browne.

Many of the current lawsuits revolve around “pay to play” arrangements in which service providers allegedly agree to include investment companies on ther list of fund options for 401(k) plans if the companies agree to funnel undisclosed fees (often called revenue sharing payments) to the service providers, the report said.

A federal judge in Iowa recently refused to classify one of these lawsuits involving the Principal Financial Group as a class-action suit. The suit, filed by a plan sponsor, would have represented as many as 57,000 401(k) plans.

The plaintiff had claimed Principal, which had made revenue sharing deals with investment companies, violated ERISA laws by compensating itself with plan assets through its arrangements with the investment companies and failing to disclose details of those arrangements.

Nearly 30 other ERISA cases are alive in federal and appellate courts. Most of these are claims filed by plan participants against employers and plan fiduciaries, although many service providers, including ING, AG Edwards and Fidelity, also are involved in pending ERISA action.

As these lawsuits linger, the Government Accouting Office (GAO) has renewed its push to amend ERISA laws to require service providers to better disclose compensation arrangements. The GAO cites a recent analysis that found that plan sponsors face big challenges in fulfilling their fiduciary duties when they lack information about their service provider’s arrangements.

The study by PLANSPONSOR also found several instances in which sponsors assumed they had delegated fiduciary responsibilty regarding investment advice to the service provider, but the service provider did not assume that fiduciary role.

The GAO noted that some plans likely suffered financial harm because of this lack of communication and inadequate disclosure of revenue-sharing deals made by the service providers.

More Americans Covered
U.S. Uninsured Rate Dips; Effect on Costs Unknown

A RECENT GOVERNMENT REPORT found that the number of uninsured in the U.S. dropped in 2007, but such a decline likely won’t have much affect on health care premiums, according to new research.

The Census Bureau announced that the number of uninsured Americans last year dipped to 45.7 million, down slightly from 47 million in 2006.

The drop occurred despite the fact that employer-based coverage continued its decline. The report said growth in government health plans such as Medicaid accounted for the overall dip.

Although this reduction in the uninsured might seem to be good news for the nation’s overall health care picture, new research says the rate of uninsured Americans doesn’t significantly affect the health care premiums of insured people.

Just $14.1 billion, or 1.7 percent, of the $829.9 billion in annual private health insurance costs in the U.S. can be attributed to cost shifting to cover uninsured workers, according to a report published in the August edition of Health Affairs. The report says total medical spending would rise 5 percent, or about $122.6 billion, if all insured people were fully covered.

Those who were uninsured for any part of this year will spend about $30 billion out-of-pocket on medical costs and will receive $56 billion in uncompensated care while uninsured, the report says.

. . . . . . . . . . . . Bulletin Briefs . . . . . . . . . . . .

• A report issued this month opposes the commonly held belief that older workers are more vulnerable during the current economic downturn. An analysis of employment numbers by Challenger, Gray & Christmas found that employment among U.S. workers age 55 and older grew by 3.7 percent as of July 2008 compared with July 2007.