Avoiding Fiduciary Liability 2

Dangerous Road Ahead 3

Hiring the Competition 4

Take a Look at Your 5Wellness Program

Billion Dollar ‘Readable’ Plan 6

Fall2010

• A male employee does not like his female boss.Theemployeegoeshomeafterwork andposts onhispersonalblogthathisbossisa“witch”andthathewillbelookingforheronHalloween“ridingherbroom.”Maytheemployerdischargetheemployee?

Whether the employer may discipline or dischargean employee for off-duty misconduct depends on anumberoffactors.

Who Is the employer?Agovernmentalemployerfacessignificantrestrictionswhen itcomestodisciplineforoff-dutymisconduct.

Manywouldsaythatwhatanemployeedoesonhisowntimeishisownbusiness.Butthis isnotalwaystrueandtheappropriateresponsetooff-dutymisconductisnotalwaysclear-cut.Considerthesecases:

• Two hourly employees leave work and head to the local watering hole. After acoupleofbeers,anargumentbeginsandthetwoendupinafight.Botharearrestedandchargedwithdisorderlyconduct.Bothmakebailandshowupforworkthenextday,blackeyesandall.Maytheemployerdischargethetwoemployeesbecauseoftheoff-premisesfight?

• The employer operates a day care. An employee is arrested and charged withcriminalsexualconduct.Theemployeepleadsnotguiltyandisreleasedonbond.Maytheemployerdischargetheemployee?

When Can You Discipline Employees for Off-Duty Misconduct?by Louis C. Rabaut: lrabaut@wnj.com

continued on page 7

A Better Partnership®

HumanResourcesNewsletter HR Focus

page 2 :: wnj.com

the tIBBle CAse A federal court recently held that an investmentfiduciarymustknowifdifferentclassesofaparticularfundareavailable, andmustknowthedifferences inexpenses charged. Finally, the case held that unlessthereisagoodreasonforofferingaclassofamutualfundwithhigherexpenses,afiduciarywillbeliabletotheplanforthepaymentofexcessexpenses.

Tibble v. Edison Internationalwasdecidedfollowingathree-daytrial.Itwasoneofmanyexcessinvestmentfee cases that have been brought since 2007 againstlarge companies such as Boeing, Bechtel, Wal-Martand Deere. Many of the cases have been dismissedby the courts, in favor of the employers, and othershave been settled. More recently, several cases havesurvivedsummaryjudgmentandwillbetried,absentasettlement.

Notably, in the Wal-Mart case the Federal EigthCircuitreversedasummaryjudgmentinfavoroftheemployer.Itstatedthattheuseofretailfundsinthatplan representeda failureof“effort, competence andloyalty.”Tibbleisthefirsttoactuallygototrial,andtheresultswerenotgoodforplanfiduciaries.

Tibble involved several mutual funds offered forinvestment under the Edison 401(k) Savings Plan,maintainedbySouthernCaliforniaEdisonCompany.Someofthemutualfundswereshareclassescharginghigher expenses and fees (retail class), although theidentical mutual funds were available to the plan atlowerexpensesandfees(institutionalclass).

OK, you finally have the 401(k) planrunning smoothly. You allow the participants todirecttheirowninvestmentsfromamenuofmutualfunds–someofthebestfundsonthemarket.Infact,youevenhiredan investment consultant to help you pick the funds.Your

committeemeetswiththeconsultantperiodicallytobesurethemenuisstillgood,andonceinawhileyoureplacealow-performingfundwithonepromisingabetterperformance.Nothingelseforthecommitteetoworryabout,right?WRONG!

the FIDUCIAry IssUeNotonlydoyouneedtobesureyou’reofferingagoodselectionoffundsforyouremployees, but also you need to be concerned with the expenses and fees beingchargedbytheinvestmentoptions.Well,that’snotaproblem,yousay.Infact,theparticipantsdon’tevenhavetoworryaboutpayingforthe401(k)plan.Instead,youhave an arrangement with your recordkeeper and your consultant that neither oftheminvoicefortheirservicesatall.Ineffect,the401(k)planadministrationis“free.”Oh,really?Doesn’tcostathing,huh?Yourserviceprovidersareadministeringyourplanoutofthegoodnessoftheirhearts?Ofcoursenot.

Today,401(k)serviceprovidersoftenreceivepaymentfromtheinvestmentfundsofferedtoplanparticipants.Formarketingthefunds,theadministrationandinvestmentfirmsreceive“12b-1fees”orrevenuesharing.Thesefeesareembeddedintheexpensesthefundschargeforinvestment.Thefeescomeoffthetop–beforeearningsarecalculatedandbeforeplanparticipantsreceiveareturnontheirinvestments.

Asamemberoftheinvestmentcommitteeorotherfiduciaryforthe401(k)plan,areyouawareofhowthisworks?Moreimportantly,areyouawarethatinmanycasesyoucouldoffertheidenticalinvestmentfundwithlowerexpensesandfees,therebyprovidingparticipantswithhigherreturns?

Avoid Fiduciary Liability When Choosing the Class of 401(k) Funds by Vernon Saper: vsaper@wnj.com

continued on page 8

Technology makes our lives easier byallowing us to stay connected to theworldaroundus.But,atwhatpointdoestechnologymakelifemoredangerous?Lately,newspapersandmagazineshavebeenfilledwitharticlesaboutpeoplewhowereinjuredbecausetheyweresendingtextmessagestofriendsorusingtheir cell phones to access the Internet while driving. One

recent incident involved celebrity plastic surgeon Frank Ryan. According to theCaliforniaHighwayPatrol,Dr.Ryandiedwhile“tweeting”abouthisdog.

Here Are some disturBing stAtistics: • 72%ofadultsusetextmessaging.

• 47%ofadultswhousetextmessagingsaytheyhavesentorreadmessageswhiledriving,accordingtoaPewResearchCentersurvey.

• 49%ofadultssaidtheyhavebeeninacarwhenthedriverwassendingorreadingtextmessages,accordingtothePewsurvey.

• 54%ofworkerswhohavesmartphones–including66%ofsalesworkersand59%of professional business services workers – have admitted to checking messageswhiledriving,accordingtoaCareerBuildersurvey.

• Textmessagingwhiledrivingincreasestheriskforanaccidentordriving-relatedproblemby23.2times,accordingtoaVirginiaTechTransportationInstitutestudy.

• Apersonwhosendsatextmessagewhiledrivingatthespeedof35mphwilltravel25feetbeforecomingtoacompletestop,comparedtoadistanceof4feetforadrunkdriver,alsoaccordingtotheVirginiaTechstudy.

Manystateandfederallegislatorshavedecidedtotakeactionagainstthisproblem.InMichigan,itisagainstthelawfordriverstoread,writeorsendtextmessageswhilethey drive. Specifically, House Bill 4394 states “a person shall not read, manually

type, or send a text message on a wireless 2-waycommunicationdevice that is located in theperson’shandor...lap...whileoperatingamotorvehiclethatismovingonahighwayorstreetinthisstate.”Driverswho violate the law will receive a $100 fine for thefirstoffense,a$200fineforsubsequentviolationsandpointsontheirdrivingrecords.

TheU.S.DepartmentofTransportation(DOT)whilepartneringwiththeOccupationalSafetyandHealthAdministration (OSHA) announced a rule thatcommercial bus and truck drivers will be prohibitedfrom sending text messages while driving, and trainoperators will be barred from using cell phones andotherelectronicdeviceswhileonthejob.

WithintheDOT,theFederalMotorCarrierSafetyAdministration (FMCSA) has prepared a finalrule that will allow the FMCSA to fine drivers upto $2,750 and motor carriers up to $11,000 forviolations.Additionally, stateswouldbe required todisqualifycommerciallicensesfor60daysfordriverswho violate the rule twice within three years and120daysfordriverswhoviolatetherulethreetimeswithinthreeyears.

Secretary ofLaborHildaSolis stated the reasoning:“OSHAisclear,employersmustprovideaworkplacefree of serious recognized hazards. It is imperativethat employers eliminate financial incentives thatencourageworkerstotextwhiledriving.”

Human Resources Newsletter Fall 2010::page3

by Tara Kennedy: tkennedy@wnj.com

Dangerous

AheadRoad

continued on page 10

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Itisnotasecretthatyouneedlooknofurther than your competition whenyou’reseekingtohireaperfectlyqualifiedemployee. Your competitors’ employees already knowthebusiness.Theirlearningcurveisshort.

Butwhathappensifyouactuallydecidetohiresomeonefromacompetingbusiness?Althoughaddingahighlyqualifiednewmembertoyourteamcanboostthebottomline, italsocanbecomea legalnightmare ifyouarecareless in thehiringprocess.Whiletheremayalwaysbesomerisk,therearestepsyoucantaketominimizeorevenavoidlitigation.

First,findoutwhetherthepotentialemployeeissubjecttoanyrestrictivecovenants,including non-compete, non-solicit or confidentiality agreements. Ask thecandidateaboutthelikelihoodofyourcompetitorsuingtoenforcetherestrictions.Iftheagreementsareinwriting,askforacopyandgiveyourlawyeracalltoseeiftheyareenforceable.

Hiring the Competitionby Gregory Kilby: gkilby@wnj.com

Iftheagreementsareenforceable,considerhow,andif,thenewemployeecanperformthedutiesofthenewpositionwhileabidingbythetermsoftheagreement,totheextent they are reasonable. If compliance is not feasible, consider modifying jobresponsibilitiesduringthetermoftherestrictions.Waystodothisincludescreeningthe candidate from a particular line of business or placing the candidate outsidetheareaofgeographicrestriction.Withthecandidate’spermission,youalsomightconsidercallingthecompetitorandaskingforanexemption.

Even if thecandidate isnot subject tonon-compete,non-solicitorconfidentialityagreementsthatwouldaffecthisorherdutieswithyourcompany,youstillneedtoprotectyourcompanyfromclaimsthatyouareattemptingtostealyourcompetitor’stradesecrets.Ofallpost-employmentobligations,courtsaremostlikelytoenforcethose that prohibit disclosure of a previous employer’s confidential information

and trade secrets. You should take reasonable stepsto prevent an overlap of responsibility between anemployee’soldandnewpositionsthatmightresultinthe disclosure of such information. And you shoulddocumentyourefforts.

Herearesomeadditionalstepsyoucantaketoreducetheriskofalawsuit:

• Do not pay above market rates: a high signingbonusorsalaryincreasemaylooklikepaymentforconfidential information rather than payment forskills;

• Require an agreement not to use or discloseconfidentialinformationfromformeremployers;

• Warnemployees–inwriting–nottobring,discloseoruseaformeremployer’sconfidentialinformation.Be clear that failure to adhere to this requirementmayresultintermination;

• Requiredisclosureofinventionsordiscoveriesmadepriortoanewemployee’semployment(inawaythatdoesnotdisclosetradesecretsofaformeremployer);

• Minimizethenewemployee’s role inrecruitingorhiringothersfromhisorherformeremployer;

• Screenallemployeesassignedtodesignanddevelopnewproducts,processesorservicesforpastaccesstocompetitors’secrets;

• Monitorcomputeruseande-mailtraffictoensurethere are no uploads or transmissions of outsideinformationinthefirstmonthsofemployment;and

• Createandmaintainavirtual“wall”betweenthoseassigned to analyze competitive services, processesand products and those formerly employed bycompetitors.

In short, following these typesofprocedureswillgoa long way toward reducing your company’s risk offacinglitigationwhenhiringfromacompetitor.

Of all post-employment

obligations, courts are most likely to

enforce those that prohibit disclosure of a previous employer’s

confidential information and trade secrets.

mustbeprovidedtoparticipantswithoutco-paymentsordeductibles.Thisoverlapswiththebenefitsofferedby many traditional wellness programs. PPACAalso increases the maximum incentives employersmayofferthosewhomeetcertaintargets inwellnessprogramsfrom20%upto30%in2014.PPACAalsosets aside $200 million in grants over five years forsmallcompaniestostartwellnessprograms.

If you intend for your group health plan to begrandfathered under health care reform, we cautionthat you carefully review whether changes to yourwellness incentives may jeopardize that status.Changes that cause an increase in employee cost orsignificantly reduce benefits may cause your plan tolose grandfathered status. For example, if your planpreviously imposed a 10% tobacco-use surcharge onparticipants,andyouincreasethatpenaltyto20%,thechange would cause your plan to lose grandfatheredstatus.Also,ifyourwellnessprogrambasesarewardonthesatisfactionofastandardrelatedtoahealthfactor,yourprogrammustmeetadditionalrequirements.ginAThe Genetic Information Nondiscrimination Actof 2008 (GINA) prohibits plans and insurers fromrequestingor requiring that an individual undergo a“genetictest”priortoorinconnectionwithenrollmentinagrouphealthplan.Mostbiometricscreeningusedinconjunctionwithawellnessprogramdoesnotfallwithintheterm,asdefined.

Human Resources Newsletter Fall 2010::page5

About70%of employers offerwellnessprograms, according to The Wall Street Journal.Ofthose,64%offerincentivesforparticipation,including cash, gift cards or group health plan premiumdiscounts.Openenrollmentseasonmaybetheprimetimetotakeacloselookatwhatyourcompanyisdoingwithrespecttowellnessprograms.Inadditiontoincreasingthehealthof

employees(andtherebylimitingmedicalcosts),thereareotherpositive,thoughlesstangible,returns,whichincludebetterworkforcemoraleandlowerabsenteeism.

Mostwellnessprogramsoffersomemixofthefollowingoptions:

• Risk identification tools such as detailed health risk assessments and biometricscreeningsforbodymassindex,bloodpressureandcholesterollevels

• Behaviormodificationprogramsincludinggrouporpersonalizedhealthcoaching,tobacco cessation, weight loss/management, nutrition and diet, exercise andworkplacecompetitions/contests

• Educationalprogramssuchasemployer-sponsoredhealthfairsandseminarsandonlinehealthanddietaryresources

• Changesattheworkplacethatencouragehealthierlivingsuchasprovidingdifferentfoodoptionsinthecafeteriaandvendingmachinesandreconfiguringworkspacestoencourageemployeestowalkmoreortakethestairs

Wellnessprogramsmayberunin-houseorthroughthird-partyvendors.Regardlessof thestructure, theprogramsareunlikely toprovidea returnonyour investmentunless theyareeffectively communicated toemployeesandbecomeapartofyourcompany’sculture.Therearemanystatutoryschemesthatoverlapwhenitcomestowellnessprograms,andweencourageyoutoconsultwithcounselonthisissue.

A Boost from HeAltH cAre reform ThePatientProtectionandAffordableCareAct(PPACA),commonlyreferredtoashealthcarereform,encouragesemployerstodevelopwellnessprograms.Oneofitsmostnotableprovisionsismandatedcoverageofcertainpreventiveservicesfornon-grandfathered group health plans. Under these rules, required preventive services

by April Goff: agoff@wnj.com

TakeaCloseLookatYour

continued on page 10

wellnessprogram

page6::wnj.com

What’s significant about this case, aside from theshockingamountofmoneyatstake,ishowtheerroroccurredinthefirstplace.Itwastheresultoftheplanadministrator’sin-housecounselrevisingadraftoftheplandocumentinanattempttomakeiteasiertoread.Thedraftingerrorinvolvedjustafewwordsandwasn’treviewedbyoutsidecounsel.Itwasonlynoticedwhentheparticipantfiledaclaimforbenefitsbasedontheerroneouslanguage.

The participant argued that it was “profoundnegligence”toentrustasinglein-houseattorneywithrevising a critical provision in a multibillion dollarretirementplanwithoutreviewbyanotherexpert.Thecourtresponded,“Itisbafflingthatamajorcorporationwouldnotinvestgreaterresourcestoensureaccuracyinthedraftingofsuchanimportantdocument.”

Thecourtfurtherobservedthatifanyparticipantshadreliedon thedraftingerroror the companyhadnotbeenabletoprovidesuchoverwhelmingdocumentaryevidence of its intent, Verizon could have lost thecase.Evenwiththesefacts,theresultcouldhavebeendifferent in another court because the case law onreformingaplandocumenttocorrectanerrorvariesinotherjurisdictions.

WhileVerizonwasfortunatetoescapeacatastrophicoutcome in this case, it only did so after years oflitigation(whichwaslikelyverycostly)andrisktothetaxqualificationofitsplan.Regardlessofwhatoccursinlitigationlikethis,theIRScanpenalizeaplanforfailingtofollowitswrittenterms.TheIRShasrefusedtoapprovethedefensethataplandocumentshouldn’t

Why can’t the plan document be more“readable”? This is the question clients and serviceproviders often ask us when expressing their distaste forthe technical jargon and formattingweuse in benefitplandocuments.

Contrary to what it may seem, there is no conspiracy byERISAattorneystopreventanyoneelsefrominterpretingwhatbenefitplanssay.Weactuallydowantclientstounderstandtheirplans.

And,we’lloftenrespondthatweputthislanguageinplandocumentsbecausetheIRS requires it or because it provides important protections to clients. However,a recent participant lawsuit against Verizon offers an example of another, and anarguablymorecompelling,answer:accuracy.

WhentheretirementplandocumentforacompanythatVerizonwouldlateracquirewasamendedandrestated,adraftingerrorincreasedtheamountofbenefitsbeingpromisedunderthetermsoftheplandocumentbyabout$1.67billion.Theerrorwasnotrepeatedinanyothercommunicationorbenefitstatementandtheaffectedplanparticipantsdidnotrelyontheerroneouslanguageindeterminingtheirbenefits.

But, aplanparticipantnoticed thedrafting error andfiled a claim requesting thecalculation of her benefits under the erroneous terms of the plan document. Herclaimandappealweredenied,citingthedraftingerror,andshesuedVerizon(theplan administrator) on behalf of all affected plan participants to enforce the plandocument’swrittenterms.

Thelowercourtthatheardthecaseheldthattheplanabuseditsdiscretioninignoringthedraftingerrorbecausefederallawrequiresplanstobeenforcedexactlyaswritten.However,italsonotedVerizoncouldrequestpermissiontoreformtheplandocumenttoeliminatetheerroneouslanguageifVerizoncouldprovetherehadbeenanerrorandthatreformationwouldproduceafairandequitableresult.Verizonfiledaclaimforreformationandthecourtfoundinitsfavor,soitwillnotbeforcedtopayanextra$1.67billioninunintendedbenefits.Thisdecisionwasrecentlyaffirmedonappeal.

by Heidi A. Lyon: hlyon@wnj.com

TheBillionDollar‘Readable’Plan

continued on page 11

Human Resources Newsletter Fall 2010::page7

Apublicsectoremployeeenjoysanumberofconstitutionalrightswithrespecttohisgovernmentalemployer.Theseincludetherightofassociationandfreespeech.Theseconstitutionalrightsgenerallydonotapplytoprivatesectoremployees.

Agovernmentalemployeestandsupatapublicforumandsayshisemployer,thelocalcounty,iswastingtaxdollarsandthevotersshoulddosomethingaboutit.Aprivatesectoremployeeworkingforagunmanufacturerstandsupatapublicrallyandsaysthatallgunmanufacturersshouldbeputoutofbusiness.Thelocalcountywillfaceaseriouslegalchallengeifitdischargesitsemployee.Butthegunmanufacturermayfacenolegitimatelegalchallenge.

Is the employee At WIll?Anat-willemployeemaybedischargedatanytime,withorwithoutcause.Ingeneral,if an employer does not like an employee’s off-duty activities, the employer mayproceedwithanat-willtermination.

Who isn’t at will? Unionized employees aren’t at-will employees and may onlybedischarged for cause.Most arbitratorswill not uphold adischargeof a union-represented employee for off-duty misconduct unless the employer can show asignificantconnectiontotheemployment.

InBaker Hughes, Inc.,arbitratorBarryJ.Baronifacedsuchanissue.Anhourly,union-representedemployeewasupsetbyinformationhisGerman-nationalplantmanagerpresented at an employee meeting. The hourly employee then wrote derogatorycommentsaboutthemanageronhis“MySpace”page,evenmakingaspecificreferencetoHitler.

Theemployeewasfired for violating its antiharassmentpolicy.Theuniongrieved,arguing that “harassment violations only apply on company premises.” ArbitratorBaroni upheld the termination and ruled that the employee’s conduct constitutedinsubordination.Henoted:

“[A]rbitrators have consistently upheld management’s right to discharge anemployee for verbal abuse, or threatening behavior toward a co-worker or asupervisor,awayfromtheplant,whenthereisa‘sufficient[n]exus’orconnectiontotheworkplace.”

He also noted that “arbitrators have long recognized that insubordinate off-dutylanguagedirectedat a supervisor canhave long-lastingandharmful effects in theworkplace.”

Discipline Employees for Off-Duty Misconduct continued

other ConsIDerAtIonsThe law protects certain off-duty activities byemployees. These include advocating unionization,filing a workers’ compensation claim and whistle-blowing (e.g., reporting the employer to OSHA oranothergovernmentalagency).

Existing policies also may play a role. A policystatementthatanemployee’sactivitiesonhisowntimeare his own business seriously limits the employer’sright to take action. Alternatively, a statement onexpected professionalism – both on and off duty –may significantly increase an employer’s position.Other important policy statements may prohibitfraternization with subordinates, use of unlawfulsubstancesandoff-dutyillegalconduct.

Employersshouldtreadcarefullyinregardtotheissueofdiscipline foroff-dutymisconduct.Ananalysisofallofthefactorsiswise.Intheend,perhapsthemostimportantquestion is:Howdoes this conduct affecttheemployer?

A public sector employee enjoys the right of association

and free speech. This does not apply

to private sector employees.

page8::wnj.com

For example, aparticularmutual fundmayofferClassA,ClassBor institutionalshares. The investments in all classes will be identical, but each class will haveadifferent expense structure.ClassAmightbea retail class andchargea loadorcommissionwhenthefundispurchased,butnofeewhenitissold.ClassBmaybeanotherretailclasswithnoloadwhenitispurchased,butwitha12b-1feepayabletotheplanrecordkeeper.Finally,aninstitutionalclassmightbeofferedwithnoloadandno12b-1fee,butitmayrequireaminimumdollaramountforinvestment.

In Tibble, several of the mutual funds were retail classes. A part of the feeschargedbythosefundswasusedtocompensatetheplanadministrator.Theplan’sinvestmentcommitteedidnotreviewotherclassesavailableforthesamemutualfund.Instead,theytooktherecommendationoftheirconsultantandneverinquiredaboutthefees.Themutualfundsinquestionalsoofferedinstitutionalclasseswithlowerexpenses.Thecommitteecouldnotshowanycrediblereasonwhythehigherexpenseretailclasseswereselected.Accordingly,theCourtfoundthefiduciariesliabletotheplanfortheexcessexpensespaidfortheretailclasses.Inaddition,thefiduciarieswere liable for the lossof“investmentopportunity”ontheexcess feestheparticipantspaid.

Interestingly, there was a minimum amount necessary to utilize the institutionalclasses,whichtheplanwouldnothavemetwhenthefundswerefirstaddedtotheinvestmentmenu.However,evidenceproducedattrialindicatedtheminimumwouldhavebeenwaivedifonlysomeonehadasked.Butnooneaskedforthewaiver.

The Court found the fiduciaries breached their ERISA duty of prudence. It wasimprudent for thecommittee tooffer the retail classofmutual fundswithhigherexpenses,whentheidenticalfundscouldhavebeenmadeavailabletoplanparticipantsatalowerexpense,andwhennogoodreasonwaspresentedforusingthemorecostlyretailclass.

hoW Does thIs AFFeCt yoU?Sowhatdoesthismeanforyourplan?First,TibbledoesnotholdthatofferingaretailclassofamutualfundisalwaysaviolationofERISA.Instead,theCourtheldthatplanfiduciariesneedtoshowalegitimatereasonforusingaretailclasswithahigherexpense.InTibble,thefiduciarieswereunabletodoso.

Second,alowercourtcaseisnormallynotconsideredas precedent for future cases. On the other hand,it does give an idea of what one judge thought ofthis set of facts. A representative of a large nationaladministrationfirm recently said tome,“This rulingwill turn the entire 401(k) industry upside down.”Perhaps that is correct. There is no question thatthe trend (and the law) is toward more and betterdisclosureoffeesandexpensestotheplanparticipants.TheTibblecasefitsrightintothattrend.

Third,inTibblethecommitteearguedthattheyreliedontheirconsultant’srecommendationsonwhatclassofthefundstooffer.However,theCourtruledthatthecommitteestillhadthedutytoaskaboutthevariousclassesofaparticular fundandtheexpensesofeachclass, regardless of whether the consultant discussedtheissue.

ItremainstobeseeniftheTibblecasewillindeedturnthe 401(k) industry “upside down.” At present, the

401(k) Funds continued

Human Resources Newsletter Fall 2010::page9

casehasnotbeenappealed.Ifitisappealedandthedecisionisupheld,theprecedentwillbeestablished,atleastintheFederalNinthCircuit,whichcoversCalifornia.

NomatterwhatfuturecourtsdowiththeTibblecase,itiscleartheU.S.DepartmentofLabor(DOL)agreeswiththedecision.TheDOLhasbeenfilingFriendoftheCourtbriefsinseveralinvestmentfeecases.

Forexample, inanexcess feeclassactionbroughtagainst theUnisysCorporationSavingsPlan,theDOLfavorablycitestheTibblecase:“Inlightofthefactthattheinstitutionalshareclassesofferedtheexactsameinvestmentatalowerfee,aprudentfiduciary acting in a like capacity would have invested in the institutional shareclasses.”

Does It reAlly mAtter?Severalclientshavecommented:“Wejustusethehigherfeesoftheretailclasstopay theadministrationfirm, so ifwe start touse the institutional class,we’llhavetochargetheplandirectlyfortheadministrationexpenses.What’sthedifference?Eitherwaytheplanpaysthefees.”Onedifferencecouldbewhatparticipantshavebeentold.Dotheythinktheemployerispayingtheexpensesordotheyunderstandtheyarepayingtheexpensesbyreceivingalowerreturn?Here’sanotherdifference:

Assumetwoparticipantshave$25,000accountsina401(k)plan.ParticipantAisinvestedinseveralretailclassmutualfundsthatpayrevenue-sharingfeestotheplanadministrator.ParticipantBistotallyinvestedinamoneymarketfund,whichpaysnorevenuesharingfees.SoParticipantAispayingplanadministrationexpenses,butParticipantBisnot.Ontheotherhand,ifadministrationexpenseswerechargedtotheplanasawhole,andallocatedbasedonaccountbalances,bothParticipantsAandBwouldbepayingthesameportionofplanexpenses.Whichof these alternatives ismore fair and reasonable?Eachplanwillneedtoanswerthatquestion.Asaplanfiduciary,youshouldclearlyunderstandtheresults of how the expenses are being paid and be sure plan participants alsounderstandtheprocess.

steps to ConsIDerWhatshouldyourinvestmentcommitteedonow?

• Investigate tofindoutwhetheryour investmentmenuhas retailor institutionalclassesofmutualfunds.

• Ifyourplanisusinghigherfeeretailclasses,askyouradvisertojustifythedecision.Ifthejustificationseemsreasonable,besureyouandtheplanparticipantsunderstand

howfeesarepaidandbywhom.Ifthejustificationdoes not seem reasonable, consider using a lowerexpenseclass.

• Ifyouaretoldyoucannotuseaninstitutionalclassofaparticularmutualfundbecauseofaminimuminvestmentrequirement,besureyouoryouradviserasksforawaiveroftheminimum.Eveniftheansweris‘no,’youwillhaveevidencethatyouasked.

• Documenteverythingyoudo.Tibbleisanotherinalonglineofcasesthatmakesitclearitistheprocessbywhichfiduciariesmakedecisionsthatdetermineswhether they were prudent, not necessarily theresults of those decisions. Be sure to follow areasonable process, and be sure to document eachstepalongtheway.

In conclusion, 401(k) plan fiduciaries should alwaystakeappropriatestepstokeepplanexpensesaslowasreasonablypossible.Iftheydeterminethathigherfeesare reasonable in a particular situation, they shoulddocumenttheprocessusedtoreachthatdecision.

A federal court recently held that an investment fiduciary must

know if different classes of a particular fund are available, and

must know the differences in expenses charged.

AsWarnerNorcross&Juddenhancesitssustainablebusinessinitiativein2010,weinviteyoutoparticipateinyourownlittle

way.IfyouwouldprefertoreceiveournewslettersinanelectronicPDFformatinsteadofapaperversion,pleasecontact

GenaRinckeyatgrinckey@wnj.comandwewillbehappytomakethatchange.Thanksinadvanceforjoiningus

inthisimportantmission.

EnvironmentalConsciousness

(Or Help Save a Tree)

page10::wnj.com

Dangerous Road continued

GINA also prohibits a group health plan sponsor from requesting an individual’s“geneticinformation”inconnectionwithorpriortoenrollmentintheplan.“Geneticinformation” includes the resultsofgenetic tests,butalsomaybeany informationregarding the “manifestation of a disease or disorder in an individual’s familymembers.”Inplainterms,thatmeanstheplancan’taskanyquestionsaboutafamily’shealthhistory,suchaswhetheranyonehasdiabetes,heartdiseaseorcertaincancers.

If yourwellnessprogramusesbiometric screeningor ahealth risk assessment,weshoulddiscusswhetheradditionalstepsarenecessarytoensurecompliancewiththelaw.Additionally,ifyouadministeryourownwellnessprogram,weshoulddiscusstheadditionalsafeguardsnecessaryunderGINA.Employerswhoofferfinancialincentivestoencouragehigheremployeeparticipationmay inadvertently run afoul of the Americans with Disabilities Act (ADA) ifparticipation is not deemed to be “voluntary.” Proposed regulations state that a

Wellness Program continued

So, what does this mean for you? It means that you may be liable if one of youremployeessendsawork-relatedtextmessageore-mailwhiledriving.InMichigan,an employer may be held liable for the negligence of its employees, agents andcontractors–evenwhentheemployerdidnotactnegligently.Generally, itapplieswhenanemployeeisactingwithinthescopeofemploymentorforthebenefitoftheemployer.

So,whatcanyoudo?Youcanupdateyourpolicytospecificallyaddresstextingande-mailingwhiledrivingandwarnemployeesofitsdangers.Whileitmaybeeasierormoreconvenienttoallowemployeestocontinuetotextanddriveatthesametime,itisabetterpracticetoputanendtoit–beforeanaccidentoccurs.

In addition to increasing the health of employees

(and thereby limiting medical costs), there are other positive, though less

tangible, returns, which include better workforce morale and lower absenteeism.

wellnessprogramisvoluntaryaslongasanemployerdoesnot requireparticipation anddoesnotpenalizenonparticipating employees.TheEqualEmploymentOpportunity Commission (EEOC) has requestedcommentsregardingthisissue,buthasnotyetissuedfinal regulations.We caution that theEEOC issuedtwo informaldiscussion letterson the topic lastyearthatdiscouragetheuseofmonetaryincentives.Withcreative structuring, however, you can still provideparticipantswithincentivestoparticipate.conclusion To ensure that your wellness program is legallycompliant and is reaching your specific goals, pleaseconsult with legal counsel. Any of the EmployeeBenefits attorneys at Warner Norcross & Juddwill be happy to assist you in developing a strategicplan, including structuring or revamping programs,developingeffectivecommunicationsandmonitoringprogress.

Human Resources Newsletter Fall 2010::page11

LABOR AND EMPLOYMENT ATTORNEYSEdward Bardelli (616) 752.2165Andrea Bernard (616) 752.2199Scott Carvo (616) 752.2759Robert Chovanec (616) 752.2120Robert Cleary (248) 784.5181Gerardyne Drozdowski (616) 752.2110Robert Dubault (231) 727.2638Daniel Ettinger (616) 752.2168Amanda Fielder (616) 752.2404Kathleen Hanenburg (616) 752.2151Angela Jenkins (616) 752.2480Tara Kennedy (616) 752.2717Gregory Kilby (616) 752.2181Jane Kogan (248) 784.5193Jonathan Kok (616) 752.2487Toni Kujawa (248) 784.5172Matthew Nelson (616) 752.2539Dean Pacific (616) 752.2424Steven Palazzolo (616) 752.2191Louis Rabaut (616) 752.2147Janet Ramsey (616) 752.2736Paul Sorensen (616) 752.2135Mary Tell (616) 752.2793Karen VanderWerff (616) 752.2183Donald Veldman (231) 727.2603Elisabeth Von Eitzen (616) 752.2418

EMPLOYEE BENEFITS ATTORNEYSSue Conway (616) 752.2153April Goff (616) 752.2154Scott Hancock (616) 752.2713Anthony Kolenic, Jr. (616) 752.2412Norbert Kugele (616) 752.2186Mary Jo Larson (248) 784.5183Heidi Lyon (616) 752.2496John McKendry, Jr. (231) 727.2637Vernon Saper (616) 752.2116Justin Stemple (616) 752.2375Jennifer Watkins (248) 784.5192George Whitfield (616) 752.2102Lisa Zimmer (248) 784.5191

human resources Attorneys

beinterpretedaswrittenwherethewrittentermsaretheresultofadraftingerror,andithasshownitwillpenalizeplansevenifaminordraftingerroristhecauseofsuchafailure.

Althoughweareconstantlyevaluatinghowtoimproveourplandocumentsand make them easier to understand, the Verizon case offers a billionexampleswhyweprioritize accuracy over readability whenwedraft plandocuments. And, in the end, an easy-to-read description of the benefitsaplanprovides is thepurposeof anotherdocument– the summaryplandescription.

PleasefeelfreetocontactaWarnerNorcross&JuddLLPEmployeeBenefitsattorneywithanyquestionsyoumayhaveaboutyourplandocumentsorformoreinformationonwhatyoucandotoensuretheyareinorder.

Billion Dollar Plan continued

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