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Posted By Stephen D. Rosenberg In ERISA Statutory Provisions

Dismayed at the attention her father was receiving from her teenage friends over dinner in a Chinese restaurant, Sally Draper remarked to the table that her father s joke about stray cats and slow restaurant service was one he had been making for years. I thought of this when I saw Mike Reilly s interesting post last week on the test for determining whether a plan is a governmental plan or not, because I have been leading off stories about governmental plan and other exemptions from ERISA for many years with the story of a client who, in 1975, was assigned this new law to oversee for his employer, with the new law, of course, being ERISA. My client liked to say how, back then, with no case law to guide them, they would handle the exemption by means of an if it looks like a duck and quacks like a duck, then it s a duck analysis. In other words, if they thought a plan looked like a governmental plan, and it was related to a governmental enterprise, then they would treat it as a governmental plan.

Of course, over the years, legal rulings have given some framework to the analysis of governmental plans, and my client accordingly moved on from the if it looks like a duck school of analysis for handling plans related to government or quasi-government enterprises. The problem, though, is that determining whether to treat or not treat a particular plan as a governmental plan is not always cut and dried, because of the variety of circumstances in which a plan related to governmental functions can come into existence, in this era of quasi-governmental agencies, private contracting out of government functions, and the overlapping role of private, public and union entities in some areas of government services. Mike Reilly s post was on governmental plan exemptions in just this type of a context, where the role of collective bargaining, a teacher s union, and a school district overlap in a manner that impacts determining whether the plan in question is a governmental plan.

As you can see both from Mike s post and, even more, from the District Court decision itself that he discusses, there can be a lot of moving parts or more accurately perhaps, hands in the pot with regard to the provision of plans in such circumstances, and all of those moving parts have to be accounted for and analyzed in deciding whether or not there is a governmental plan.

The somewhat amorphous nature of the analysis reminds me, to some extent, of the church plan exemption and the current litigation over it. That exemption likewise was subject to a somewhat rickety legal structure, based to some extent on the intersection of private letter rulings with assumptions made by courts and plan administrators as to what it takes to qualify as a church plan. Church plan status, of course, is currently under attack by the plaintiffs bar. and the eventual outcome is up in the air. However, it is worth noting that panelists on the church plan litigation at the recent ACI ERISA Litigation Conference in Chicago raised the question of whether governmental plans will be the next target if the plaintiffs bar succeeds in overturning various plans claims to the church plan exemption. One thing I can tell you is that if that happens, we are going to see an awful lot of briefs and court opinions that explain the difference between the two exemptions by making a pun about the separation of church and state.

April 30, 2015

This is great I loved the idea of this Bloomberg BNA webinar the minute it popped up in my in-box, just from the title: Just Say No: Why Directors Should Avoid Duties That Will Subject Them to ERISA . I have written extensively on the idea of accidental fiduciaries, and the manner in which corporate officers find themselves dragged, unwittingly, into ERISA class actions because they played some role in the administration of a benefit plan, rendering them, at least arguably, deemed or functional fiduciaries for purposes of ERISA. Sometimes, they actually have played enough of an operational role to truly be proper defendants in an action; in others, they have only enough connection such as having appointed the members of a committee that runs the plan to be forced to litigate the question of whether they actually qualify as fiduciaries; and in other cases, their roles lie somewhere in between.

But there is also the question of the extent to which directors should deliberately place themselves in harms way by being the overlord of the company s benefit plans, rather than leaving that in the hand of a lower level employee. I have represented officers who have taken on that role, and I have also sued officers who have taken on that role, and I have to say that, consistently, having a director actually be a plan fiduciary, intentionally, seldom appears, in the hindsight of litigation, to have been the best idea. Moreover, it has often appeared to be the case that a company officer or director took on the role because of its seeming importance but without any real analysis as to whether or not it made sense to take on that role. In many instances, there was almost a default, knee jerk reflex that something that important should be on a senior officer s radar screen, but at the same time, that same officer did not really have the time or expertise to focus on it, leaving the officer exposed to potential liability if a problem arose with the plan and, further, leaving the plan open to more suits based on poor oversight than would have been the case if the oversight had been assigned to a lower level executive for whom the assignment was more of a central focus and possibly even one that could raise his or her profile.

In the end, litigation teaches that it isn t so much the question of whether directors should ever be a plan fiduciary accidentally or deliberately that is important, but rather the act of thinking logically in advance about who best in a company should have what roles with regard to a plan. Doing the latter not only protects against unanticipated litigation exposures, but also decreases the likelihood of litigation by increasing the probability that the plan will be in the hands of the executives best placed to run it well.