Tenth Circuit Upholds Great-West Stable Value Win In ERISA Case

Author:Ms Chelsea Ashbrook McCarthy, William J Delany and Tammy Tabush
Profession:Holland & Knight
 
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William J Delany is a partner in Holland & Knight's Philadelphia office, Chelsea Ashbrook McCarthy and Tammy Tabush are an attorneys in Holland & Knight's Chicago office

HIGHLIGHTS:

The U.S. Court of Appeals for the Tenth Circuit affirms a District Court's holding that Great-West Life & Annuity Insurance Co. was not a fiduciary with respect to its stable value fund, even though it announced the fund's credited rate quarterly. Because participants could leave the fund after learning the credited rate, without penalty, Great-West did not have the power to force its rate decision upon any unwilling participants and was therefore not a functional fiduciary under the Employee Retirement Income Security Act of 1974, as amended (ERISA). The Court of Appeals found that Great-West was not liable as a non-fiduciary party-in-interest to a prohibited transaction because the plaintiff failed to demonstrate that the relief he sought was equitable, the only relief available against a non-fiduciary under ERISA Section 502(a)(3). The U.S. Court of Appeals for the Tenth Circuit issued its decision in Teets v. Great-West Life & Annuity Insurance Company on March 27, 2019, finding that Great-West, an investment fund manager, was not liable to a class of plan participants as either a functional ERISA fiduciary or a non-fiduciary party-in-interest to prohibited transactions.

Background

Great-West offers a stable value fund to participants called the Key Guaranteed Portfolio Fund (KGPF). Great-West deposits the money that participants invest in the KGPF into its general account, which is invested in fixed-income instruments such as treasury and corporate bonds. Money invested in the KGPF earns interest at the Credited Interest Rate (Credited Rate), which is set quarterly by Great-West. Great-West retains as revenue the difference between the total yield on the KGPF's monetary instruments and the Credited Rate it sets. Plans may terminate their relationship with Great-West based on changes to the Credited Rate, and participants who have placed their money in the KGPF may withdraw their principal and accrued interest at any time without paying a fee.

In 2016, the plaintiff filed suit against Great-West in the U.S. District Court for the District of Colorado on behalf of all employee benefit plan participants who invested in the KGPF since 2008, as well as their beneficiaries, alleging that Great-West violated ERISA's fiduciary duty provisions. As a...

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