Illinois ERISA Lawyer Blog

Millions of Americans have lost a significant amount of their retirement savings due to the collapse of the subprime mortgage backed securities market. While several groups of plaintiffs (either plan participants or other plan fiduciaries) have challenged the prudence of plan fiduciaries' and money managers' decision to expose the plan to risks of those securities, those challenges have largely failed. A recent decision held that Citigroup did not breach its fiduciary duty to its retirement plan participants by leaving its own company stock in its retirement plan after it allegedly knew the stock price would tumble because of the company's heavy exposure to subprime mortgages. In re Citigroup ERISA Litigation, 662 F.3d 128 (2d Cir. 2011). But most recently, following a trial, a judge in New York determined that State Street Bank breached its fiduciary duty to its clients by ignoring stated risk guidelines and failing to diversify the assets in several of its bond funds because those bond funds were between 70% and 80% invested in mortgage backed securities. In re State Street Bank & Trust Co. Fixed Income Funds ERISA Litigation, 2012 U.S. Dist. LEXIS 13556 (S.D.N.Y. Feb. 3, 2012).

This decision is finally some consolation to the plan participants who lost so much money in their retirement savings. Prior cases have been distinguishable, though, because they largely involved claims that an employer imprudently continued to offer its own stock as a retirement investment despite knowing it would lose value. Unfortunately, where a plan explicitly states that offering employer stock is part of the plan, or so "hardwired," many courts imply a presumption of prudence on behalf of the administrator for leaving that stock in the plan, also known as the Moench presumption. While many pension practitioners have long questioned whether the typical retirement landscape today, which has transitioned from the traditional defined benefit pension plan to the individual account structure (such as a 401(k), can really provide the original stated objectives of ERISA--retirement income security. More and more baby boomers are delaying retirement to recoup investment losses because otherwise they will not have enough income to last them through retirement. Is this system really working?

If you have questions about the assets in which your retirement plan is invested and the prudence of such investments, contact an ERISA lawyer.

Employees in the Chicago area who participate in an employer-sponsored 401(k) or profit sharing plan almost never have to ask any questions about how to make contributions to the plan. Upon commencing employment, the employer provides you with paperwork including election forms that will designate how much of your salary you wish to defer into the plan. Most of these types of retirement plans, though, provide that if you leave that particular employer, you can either leave the money in that plan, or request a distribution. The plans typically provide a procedure for requesting a distribution. It is not usually as simple as telling Human Resources you want your account balance out. There will typically be at least one form you must fill out to properly make the request under the terms of the plan. But the question arises: where do you get the form? The answer is that the employer must provide it to you, and a failure to do so could result in the employer's liability for breach of fiduciary duty. Such was the case in Kujanek v. Houston Poly Bag I Ltd., 658 F.3d 483 (5th Cir. Sept. 27, 2011).

Mr. Kujanek left his employer and communicated his intent to take a distribution from the plan. The employer would not distribute the funds, because a distribution required completing a request for distribution form, but the employer would not give Kujanek the form. He contacted the plan's third party administrator to request the form. The administrator contacted the employer, but the employer still would not provide the form. In the meantime, the securities in which Mr. Kujanek's account was invested significantly dropped in value.

The United States Court of Appeals for the Fifth Circuit held that the employer breached its fiduciary duty, and was liable to Kujanek for the difference between the account balance when Kujanek tried to request a distribution, and the time when the distribution finally took place. The employer had a fiduciary duty to provide Kujanek with the forms and tools necessary to properly make his request for distribution, especially when it knew he was trying to make such a request.

If you have experienced problems obtaining a distribution from your plan, speak with an experienced ERISA lawyer today.

Executives and employees with retirement plans in Chicago, and nearly everywhere else, now change employers with greater frequency than they did 50 years ago. Long gone are the days where you would typically work for the same company your whole career. This is part of the reason for the rise in popularity of the defined contribution plan over the more traditional defined benefit plan: because you can take your account balance with you. But how exactly do you take your account balance with you when you leave your employer?

Employees typically depend on the employer to provide them with information about how to take the distribution or roll the funds over into an IRA, or another employer plan. So what happens when the employer does not tell you how to make the request? This happened recently, and the United States Court of Appeals for the Fifth Circuit held the sponsor breached its fiduciary duty by failing to notify the employee about how to request a distribution of his benefits following the employee's resignation. Kujanek v. Houston Poly Bag I Ltd., No. 10-20664 (5th Cir. Sept. 27, 2011). In that case, after the employee resigned, the profit sharing plan account balance dropped in value, and the decline could have been avoided if the employee knew how to request the distribution earlier. The court thus held the employer was required to make up for the "loss" to the plan (i.e., the drop in that account's balance) because of the breach of fiduciary duty under ERISA § 502(a)(2). Recall, losses to the plan remedies under that subsection can be obtained for a single participant after Larue v. Dewolff, Boberg, & Associates, Inc., 128 S. Ct. 1020 (2008).

Though this case's facts were limited to failure to notify a participant of how to request a distribution following resignation, the same principle could apply to a surviving spouse who is not notified of how to request a withdrawal following the death of the participant spouse. If your employer, or your spouse's employer, has failed to notify you of how to request a distribution, call a skilled ERISA lawyer.

Nearly every employee of any Chicago-based employer is a participant in some sort of retirement plan offered by the employer: pension plan, cash balance plan, or a 401(k) plan. Participants in 401(k) plans rarely know how much in fees the plan (and therefore, the participants) pay to the service providers. New regulations on disclosure of fees to participants will soon take effect requiring plan administrators to disclose fees charged by service providers to the participants in 401(k) plans.

There has been a wave of lawsuits alleging that certain large 401(k) plans pay excessive fees for mutual funds to service providers. The most recent of which is Renfro v. Unisys Corp., No. 10-2447 (3d Cir. Aug. 19, 2011). In that case, there was lengthy battle over whether Fidelity was a fiduciary with respect to selection of plan investments. The court held it was not, and thus a breach of fiduciary claim could not proceed against Fidelity, following the authority of Mertens v. Hewitt Associates, 508 U.S. 248 (1993). However, the Supreme Court also held non-fiduciaries can be held liable under ERISA § 502(a)(3) in order to unwind a prohibited transaction under ERISA. Harris Trust and Savings Bank v. Solomon Smith Barney, Inc., 530 U.S. 238 (2001). Under ERISA, the service provider will invariably be a "party in interest", such that the provision of services must be for a reasonable fee, otherwise it is a prohibited transaction. ERISA § 406(a).

The courts should thus stop inquiring into whether there was a breach of fiduciary duty, and just focus on whether the fees charged were reasonable for the service, and if not the service provider should be liable to the plan for the amount of the fee charged that was unreasonable under ERISA § 502(a)(3). If you have a question about fees your 401(k) plan pays, speak with a competent ERISA attorney.

Employees and Executives in Chicago that participate in an ERISA employee benefit plan often wonder whether once an employer gives a benefit, the employer can later take it away. Recently, CUNA Mutual did just that, and in an opinion with which this author disagrees (in both result and reasoning), the Court of Appeals for the Seventh Circuit ruled 2-1 that CUNA's action was not improper. Sullivan v. CUNA Mut. Ins. Society, No. 10-1558, 2011 U.S. App. LEXIS 16413 (7th Cir. Aug. 10, 2011)

Years ago, CUNA adopted a policy in order to incentivize employees not to use their sick days, whereby unused sick days could be saved for retirement and a monetary value allocated to those sick days could be used to credit premiums the retirees would have to pay for post-retirement health insurance coverage. In 2008, CUNA had accumulated a recognized liability for all these unused sick days on its books totaling over $120 million. With one swift stroke of a pen, CUNA eliminated the liability, and recorded a gain for the same amount on its books, telling all its retirees they could no longer use the sick day balance to pay for post-retirement health care.

The retirees sued, alleging CUNA engaged in a prohibited transaction by diverting plan assets to itself. Writing for the split-panel majority, Judge Easterbrook reasoned that (1) unlike pension plans, welfare benefit plans do not need to be funded under ERISA § 301, and (2) welfare plan benefits do not vest. Judge Easterbook also reasoned that the sick-leave balances were not plan assets, because they were mere bookkeeping liabilities.

The Court, however, seemed to have overlooked clear statutory and regulatory language that counters this reasoning. True, funding rules only apply to pension plans, not welfare benefit plans. But ERISA clearly requires that all plan assets, whether pension plan or welfare plan, be held in trust. ERISA §§ 401, 403. Next, ERISA provides little for a definition of plan assets, and directs the Department of Labor to define the term in regulations. ERISA § 3(42). The regulations provide that any amount that an employee pays to an employer towards an employee benefit plan becomes a plan asset shortly after the funds can reasonably be segregated from the employer's general assets. 29 C.F.R. § 2510.3-102(a)(1). It would appear that when the workers elected not to use their sick days, they paid these sick days (which under the plan had a corresponding monetary value) to the plan, and upon the end of the calendar year, the employer had an obligation to place the value of the sick days in a trust pursuant to ERISA § 403.

Continue reading "CUNA's Elimination of Accrued Account Balance for Post-Retirement Health Care Upheld by Seventh Circuit" »

Employees in Chicago and the rest of Illinois lost another potential remedy in ERISA disputes yesterday, but may have gained others. The Supreme Court issued its opinion in Cigna v. Amara yesterday, which arrested any expansion of a remedy for a claim for benefits due under ERISA § 502(a)(1)(B), but may have expanded "other appropriate equitable relief" under ERISA § 502(a)(3).

Cigna v. Amara concerned an employer's conversion from a defined benefit pension plan to a cash balance plan. The new plan contained "a phenomenon known in pension jargon as 'wear away'". Id. at 8. In a "wear away," employees could be required to work for several years, or 6-10 in this case, for benefits accruing under the new plan to catch up to those existing under the old plan, effectively resulting in employees working for 6-10 years accruing no benefits. Cigna, however, failed to tell this to its employees in the required disclosures.

The employees claimed they were entitled to the benefits due pursuant to the summary plan description, which misrepresented the terms of the plan. This theory, dubbed the "but for" theory, asserts a claim for benefits due under ERISA § 502(a)(1)(B) but for the breach of fiduciary duty. The Supreme Court reasoned that this theory is inapplicable in this case, because the SPD is not the plan or part of the plan--it is a summary of the plan. Moreover, the plan pays the benefits, but the plan administrator is responsible for issuing the plan summary accurately describing the plan.

The Court went on to state that the lower court should consider whether the case is proper for "other appropriate equitable relief," and proceeded to give guidance on that remedy. According to the Court, a court could use § 502(a)(3) to reform a plan, estoppel, or surcharge. The last remedy discussed, however, came as a surprise because courts and defense lawyers have long held the position that monetary compensation was not available under ERISA § 502(a)(3). However, the Supreme Court appeared to bless a case by a participant or beneficiary against a plan administrator seeking monetary compensation under the surcharge theory. Justices Scalia and Thomas concurred in the judgment, stating that this § 502(a)(3) guidance was not necessary to resolve the issue presented to the Court and would not necessarily be precedent in future cases.

We expect the Court's guidance here to be discussed in a currently pending case in the Seventh Circuit Court of Appeals, Kenseth v. Dean Health. If you have questions about your rights to benefits under an employee benefit plan, contact an ERISA lawyer.

Employees, executives and partners in Chicago who make elective deferrals to an employer-sponsored 401(k) retirement account are undeniably trying to save for retirement. Assuming the plan participant elects to put money into the plan, there will generally be two variables that will determine the size of the account balance upon the participant's retirement: the rate of return of the assets in which the account is invested, and the amount of fees and other deductions taken from the account. Quite naturally, the participant wants to maximize the return while minimizing the fees.

Fortunately plan fiduciaries, as defined in ERISA § 3(21), specifically are charged with exercising their duties regarding the plan in the sole interest of participants and beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable expenses. ERISA § 404(a). The employer must, therefore, try to pay only reasonable expenses, not excessive fees from plan assets. As with most issues of fiduciary responsibility in ERISA, it is less important what the ultimate result is and more important how the fiduciary arrived at it.

Many plan sponsors renegotiate their fee structures with service providers periodically. But if the sponsor is content with a service provider, the plan sponsor may renegotiate the service contract every few years, but be reluctant to change that service provider, for it does a good job. Some plan sponsors even retain a consultant to advise on the reasonableness of fees the sponsor allows the plan to pay for services. Certainly, this measure is more prudent than going it alone, though it comes at a cost to the employer. But is relying on a consultant's advice that fees are reasonable enough for the plan fiduciaries? A divided panel of judges on the United States Court of Appeals for the Seventh Circuit appear to demand more.

In George v. Kraft Foods Global Inc., No. 10-1469, at 26 (7th Cir. Apr. 11, 2011) (Slip Opinion), the court reversed a district court's entry of summary judgment in favor of the defendants. The class of plaintiffs in that case advanced a claim, among others, that the plan fiduciaries caused the plan to pay excessive fees to its recordkeeper, Hewitt. Hewitt had been the plan recordkeeper for 11 years before the lawsuit had been filed. While the evidence showed the defendants had renegotiated the plan's service agreement with Hewitt upon the conclusion of the term of each contract, there was no evidence that the plan fiduciaries ever solicited competitive bids for the recordkeeping service contract with the plan. The defendants stressed that they hired independent consultants who advised the fiduciaries that the fees they allowed the plan to pay Hewitt were reasonable.

Continue reading "Is Your Employer Shopping Service Providers to Ensure the 401(k) Plan Pays Competitive Rates?" »

Employees, executives, retirees and soon-to-be retirees in Chicago participating in a single-employer defined benefit pension plan may encounter unpleasant benefit restrictions because of plan underfunding. According to a study by Mercer, in 2007 large employers' pension plans were over 100% funded. Just three years later, in 2010, the same test group of plans were only 73% funded. Following the passage of the Pension Protection Act of 2006, which took effect in 2008, certain benefit restrictions would begin to apply to some underfunded plans, with the various restrictions depending on the funding level.

For purposes of benefit restrictions, the funding level is derived from the Adjusted Funding Target Attainment Percentage ("AFTAP"), defined in I.R.C. § 436(j)(2). The Internal Revenue Code proscribes a complex scheme of applying presumed AFTAPs, until the plan provides an actual AFTAP certified by an enrolled actuary. An employer may not amend the plan in a way that would increase benefit liabilities if the AFTAP is below 80%, or the amendment would cause it to dip below 80%. Id. § 436(c). Also, plans less than 80% funded will become subject to partial payment restrictions, limiting accelerated payments (e.g., lump sum distributions) to half the value of the benefits. Id. § 436(d).

Plans funded less than 60% can pay no accelerated benefits. Id. In these cases, the participant will be forced to leave the money in the plan, except for a monthly annuity distribution based on a single life expectancy. Plans under 60% funded also must freeze the annual benefit accruals of participants still working. Id. § 436(e). These under 60% funded plans also may not pay any "unpredictable contingent event" benefits, commonly dubbed plant shutdown benefits. Id. § 436(b).

Continue reading "Pension Plans Subject to Benefit Restrictions Following the Pension Protection Act of 2006" »

Yet another case in the Midwest (Wisconsin to be exact) went up on appeal to the Seventh Circuit Court of Appeals in Chicago where an employee sought the necessary pre-authorization for a surgery, received it from the health insurance administrator, and later the plan administrator denied coverage for the surgery. Strikingly similar to a case we previously covered, Kenseth v. Dean Health Plan, Inc., 610 F.3d 452 (7th Cir. 2010), the court was faced with a clear breach of fiduciary duty, but a difficult to ascertain remedy.

In Smith v. Medical Benefit Administrators Group, Inc., No. 09-3865 (7th Cir. Mar. 15, 2011), Mr. Smith alleged that the plan required him to notify the administrator and obtain pre-authorization before having any non-emergency surgery. Mr. Smith and his physician notified the administrator that Smith had been advised to undergo gastric bypass surgery to alleviate his congestive heart failure. Medical Benefit Administrators Group, d/b/a Auxient took 4 months, but nevertheless pre-authorized the surgery. Smith had the surgery, and 6 weeks later Auxient refused to pay for it, causing the hospital and doctors to bill Smith.

The Court wrestled with the lower court's dismissal of Smith's case. While a breach of fiduciary duty to Smith by Auxient was clear, the lower court dismissed because it held there was no remedy. The lower court held "Even if Smith was harmed by his reliance on Auxient's pre-authorization, he still received the proper amount due under the plan." 665 F. Supp. 2d 989, 994 (E.D. Wis. 2009). Unlike the plaintiff in Kenseth, Smith did not allege that money was wrongfully in the administrator's possession that belonged to Smith, so the lower court saw no available remedy. Also, Smith conceded that the plan did not cover the surgery he had. Why Smith did not pursue these theories is unknown to this author. Nevertheless, it was error for the lower court to dismiss the complaint.

Smith did request declaratory and injunctive relief under ERISA § 502(a)(3). Smith requested Auxient be enjoined from invoking coverage exclusions after pre-authorization where Auxient did not note the coverage exclusions and did not obey regulations on timing of determinations on pre-service claims for benefits. See, e.g., 29 C.F.R. 2560.503-1(f)(2)(iii)(A) (requiring pre-service claim determinations to be made in not more than 15 days). Even if Smith could not obtain payment for the surgery in this case, the relief would benefit all other participants, and Smith the next time he seeks pre-authorization for a procedure. The Seventh Circuit therefore took the common sense approach that even if a breach of fiduciary duty cannot compensate a claimant for the cost of the procedure, the health insurer should not be permitted to eternally breach its fiduciary duty to participants. The lower court would have apparently permitted Auxient to lie to each and every participant over, and over, and over again.

If you have been billed for any health care services that your insurer or plan administrator pre-approved or pre-authorized, contact an ERISA lawyer.

Participants and beneficiaries of retirement plans in Chicago and the rest of Illinois will soon have opportunity to review the testimony presented to the Department of Labor ("DOL") regarding the DOL's proposed new definition of a plan "fiduciary" and submit comments on that testimony. The DOL announced the extension on March 8, 2011 in a press release. Once the DOL uploads the testimony to the site of its agency, the Employee Benefit Security Administration ("EBSA"), the testimony will be available for review for 15 days.

Prior to holding the hearings on March 1-2, 2011, the DOL received an abnormally high number of public comments regarding its proposed regulation, 199 to be exact. It further received 39 written requests to testify at the hearing.

Times have changed. The DOL's proposed new definition of fiduciary would modernize the 35 year-old definition that may have been appropriate in the 1970s, but has proven to be outdated today. The retirement plan industry has experienced a mass exodus from traditional defined benefit pension plans and gravitated towards defined contribution plans, such as a § 401(k) plan (where the account balance defines the amount of benefits the participant will receive). In addition, there are far more outsourced service providers to plans today than there were 35 years ago. These service providers' fees are often paid from the account balances of the very participants to whom the providers wish to owe no fiduciary duty.

In the 1970s landscape of defined benefit pension plans, the service providers' loyalty understandably may have been to the plan sponsors and employers, because a misfeasance by the service provider likely resulted in the employer paying more to fund the promised benefits. But today, the participants often directly pay for these services, thus lowering the participants' and beneficiaries' benefits. Should there not then be a higher duty of cared owed by service providers to participants and beneficiaries today than there was 35 years ago?

For more information regarding the proposed new definition, see DOL Issues Agenda for Hearing on Proposed Regulation Changing the Definition of "Fiduciary".

This is an issue that has surely plagued every employee, executive or partner in Chicago and the metropolitan area before. You have health insurance coverage through a group plan at work. The plan is administrated by an insurance company, or your employer purchases insurance coverage. All written materials you receive tell you to either get pre-authorization for coverage or to call customer support to determine if a particular procedure or treatment is covered. You do just that, and are told the surgery you need is covered, only to be stuck with an outrageous hospital and surgeon bill afterwards when the insurer tells you the plan does not include coverage for that procedure.

This exact thing happened to Deborah Kenseth. Ms. Kenseth sued Dean Health Plan, Inc. after the HMO refused to pay for her surgery that left her with $77,000 in medical bills. All materials Dean Health provided to Kenseth advised her to call customer service to determine if a procedure would be covered. Never did any written materials provided to Kenseth suggest that the customer service representatives' statements are non-binding. After the District Court for the Western District of Wisconsin granted summary judgment for Dean Health, Kenseth appealed. The Court of Appeals for the Seventh Circuit remanded the case to the district court to determine whether the relief Kenseth sought, payment of her medical bills, was proper equitable relief under ERISA § 502(a)(3).

Just recently, the District Court granted summary judgment again to Dean Health, stating "Defendant has refused to provide her any relief after lulling her into believing that she had coverage for an expensive operation, only to reverse course after the procedure was performed, leaving her with a stack of medical bills. Many might be surprised to learn that defendant has no legal duty to make things right under those circumstances." Kenseth v. Dean Health Plan, Inc., No. 08-1, Slip Op. at 4 (W.D. Wis. Feb. 14, 2011). The court held that the remedy Kenseth sought, to "hold her harmless for the cost of her surgery and treatment", id. at 3, was a claim for compensatory damages not allowed under ERISA § 502(a)(3).

The Department of Labor has involved itself in this case as Amicus Curiae, or friend of the court, to argue on behalf of Ms. Kenseth alongside her own counsel. We hope to see this case taken up on appeal again to the Seventh Circuit. While many would agree with the district court that money is not an available remedy for a breach of fiduciary duty action under 502(a)(3), the line of caselaw used to support that proposition did not apply the rationale to a fiduciary making a misrepresentation to a single plan participant or beneficiary. If her argument is presented properly, Ms. Kenseth appears to have a good chance of success on appeal. If something similar has happened to you, seek the advice of an ERISA lawyer who can navigate you through the maze of ERISA.

Workers and retirees all over Chicago and the rest of Illinois may soon receive more protections from the Department of Labor. The Department of Labor has issued an agenda for the upcoming hearings on the proposed new definition of "fiduciary" for purposes of ERISA. In October 2010, the DOL issued a proposed regulation modifying the definition of "fiduciary" for purposes of ERISA. 75 Fed. Reg. 65,263 (Oct. 22, 2010).

Among other things, the regulation would expand the definition of fiduciary to include investment advisors and valuation experts it previously did not define as fiduciaries. Under ERISA, a person is a fiduciary with respect to a plan to the extent that "he renders investment advice for a fee or other compensation, direct or indirect, with respect to moneys or other property of such plan, or has any authority or responsibility to do so . . . ." ERISA § 3(21)(A)(ii). This is by no means the only way one can become a fiduciary of a plan, though.

The DOL promulgated regulations in 1978 refining what it meant to "render investment advice for a fee." 29 C.F.R. § 2510.3-21. The DOL noted that currently, in order to render "investment advice for a fee", an adviser who does not have discretionary authority or control with respect to buying and selling plan assets must satisfy a 5-part test, in that he must: (1) render advice as to the value of securities or other property, or make recommendations as to the advisability of investing in, purchasing or selling securities or other property (2) on a regular basis (3) pursuant to a mutual agreement, arrangement or understanding, with the plan or a plan fiduciary, that (4) the advice will serve as a primary basis for investment decisions with respect to plan assets, and that (5) the advice will be individualized based on the particular needs of the plan. 29 C.F.R. § 2510.3-21(c).

Under the proposed regulation, many investment advisers currently evading fiduciary status would fall under the fiduciary umbrella. The proposed regulation requires only that a registered investment adviser who does not have discretionary authority or control with respect to buying and selling plan assets: (1) Provides advice or recommendations regarding the value, buying, selling, holding, or management of securities or other property (2) to a plan, plan fiduciary, participant, or beneficiary. Should this proposed regulation become enacted, we can expect to see more investment advisers named as defendants in breach of fiduciary duty ERISA lawsuits. If you would like questions answered regarding who is a fiduciary of the plan in which you are a participant or beneficiary, speak to somebody knowledgeable about ERISA.

Workers in Chicago and the Midwest now have even more compelling of a reason to consult an ERISA lawyer before signing a severance agreement. In late January, the United States Court of Appeals for the Seventh Circuit rendered an opinion in Howell v. Motorola, Inc., No. 07-3877, 2011 U.S. App. LEXIS 1193 (7th Cir. Jan. 21, 2011) holding that any member who signed a release as part of a severance agreement after being terminated from employment could not pursue a claim against the former employer or the plan for a breach of fiduciary duty--even if that breach of fiduciary duty resulted in a denial of benefits due.

The case stemmed from Motorola's offering of employer stock as part of its participant-directed 401(k) plan. In 1999, Motorola involved itself, though an affiliate, in a lending deal with a Turkish telecom company, Telsim, whereby Motorola loaned Telsim $1.8 billion. Telsim pledged a number of shares of its own stock as security. Prior to July 1, 2000, Motorola only had 4 options in its 401(k) plan, employer stock being one of them, and the plan limited participants to investing no more than 25% of their account balances in employer stock. Thereafter, Motorola began offering 9 different options, including employer stock, but lifted the restriction so that employees could invest 100% of their retirement savings in Motorola stock.

In April 2001, Telsim missed the first repayment deadline and had diluted the stock that served as collateral for the Motorola loan, and as Motorola released more information about the Telsim deal, the stock price declined. The plaintiffs alleged that Motorola did not adequately disclose the terms of the Telsim deal or the risk to which Motorola was exposed, and that as more information was released regarding the deal, the stock price declined.

The Seventh Circuit held Howell's claims against Motorola were dismissed because he signed a release as part of a severance agreement that would release Motorola from any past breaches of fiduciary duties under ERISA. Even though Howell tried to argue that his claim was really one for benefits due under ERISA 502(a)(1)(B), the court nevertheless dismissed. This case demonstrates precisely why it is so important to consult an attorney versed in ERISA prior to signing any severance agreement.