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Washington D.C. Benefits Law Blog

TIAA accused of profiting illegally from retirement plan loans

Workers in Washington, D.C., whose retirement plans are managed by TIAA might have a stake in the lawsuit filed against the company by one investor. The attorneys for the plaintiff are pursuing a class-action suit on the grounds that TIAA allegedly made over $50 million a year by keeping interest from payments made by retirement plan participants who took loans. According to the lawsuit, the company should have credited interest paid by borrowers to their retirement accounts instead of keeping some of the money.

A federal judge has ruled that a portion of the lawsuit may proceed after deciding that some accusations against TIAA appeared credible. The judge applied the legal theory of disgorgement to the case. If found to be valid, the retirement plan service company might have to return money taken while processing loans by plan participants. The profits generated by the practices of TIAA might have violated federal laws that concern retirement plan administration.

Ocwen sued by pension fund for ERISA breaches

Washington, D.C., members of the Employers Midwest Pension Fund and the United Food & Commercial Workers Union might be interested in learning that the trustees have filed a lawsuit against Ocwen. Ocwen, which is a mortgage lender, allegedly forced people into foreclosure in an effort to drive up profits.

According to the lawsuit, the trustees allege that Ocwen acted in violation of its fiduciary duties under ERISA. ERISA governs pensions and requires that fiduciaries act with due diligence and loyalty to investors. Since the pension fund invested in mortgage-backed securities that are held by Ocwen, the plaintiffs allege that Ocwen's actions toward the homeowners also harmed the pension fund.

University faces ERISA-related lawsuit

Some employees in the District of Columbia may have had their retirement funds mismanaged. A lawsuit filed against Georgetown University and several officials alleges that the university's defined contribution retirement plans were not adequately overseen and that this resulted in fees that were excessive and unreasonable. According to the lawsuit, the university in fact had a significant amount of bargaining power and could have used that for the benefit of plan participants and their beneficiaries.

One of those breaches of duty, the complaint says, was using three different service providers instead of selecting one. This significantly drove up fees for several reasons. One was that it resulted in an enormous number of investment choices that officials could not adequately monitor for performance. The lawsuit said that it was unreasonable to expect plan participants to screen these out and that they should have been excluded by the officials responsible for managing the plans. Furthermore, the lawsuit also states that a TIAA loan program was flawed in several ways. It required too much collateral, involved illegally transferring plan assets and was in violation of Department of Labor rules for these types of loan programs.

Have you been denied employee benefits covered by ERISA?

Your employer offered health, disability, retirement, life or COBRA insurance or other benefits and now the insurance company is trying to deny them. These benefits are supposed to be provided based on the plan's terms -- not the plan's financial situation or other factors. If the benefits were offered and you qualify for them, they should be paid out, right?

When an insurance company refuses a valid employee benefits claim, it may be in violation of the Employee Retirement Income Security Act, or ERISA. The law protects the interests of participants and beneficiaries of employee benefit plans. It requires plans to operate at high standards and in the interest of plan participants.

Department of Labor pursues ERISA compliance

Located in Washington, D.C., the Employee Benefits Security Administration of the Department of Labor returned over $1.1 billion to employee benefits plans in 2017. The funds were restored to health plans, retirement plans and life and disability insurance benefit plans covered by the Employee Retirement Income Security Act of 1974.

Under ERISA, employee benefits like pension plans are protected from misuse or wastage by the fiduciaries responsible for administering them. The law establishes a number of minimum standards regarding disclosures, reporting, safeguards, and the conduct of plan administrators. In 2017, there were 1,707 civil investigations performed, and of those, 1,114 led to the recovery of $682.3 million. From that amount, $326.7 million was due to terminated participants in defined benefit plans. This means that 63.5 percent of the investigations opened resulted in recoveries.


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