If the Supreme Court does wade into the amount of authority an administrative agency has, then this case could impact how agencies involved in regulating investing and employee benefits operate, such as the DOL and the IRS.
In May of 2023, we mentioned a few cases we thought might catch the attention of the Supreme Court that could impact the retirement planning industry. One was a case brought based on the funding of the Consumer Finance Protection Board (CFPB). You can read more about that in our article.The case is now slated to be heard on the November calendar, with a decision to be handed down in June of 2024. Many groups have chimed in on the topic, but notably 27 States have asked to participate in the oral argument on the matter. The heart of CFPB v. Community Financial Services Ass’n of Am., Ltd. involves appropriations and funding for a specific agency, yet underlying the case may be the extent and amount of administrative agency authority. If the Supreme Court does wade into the amount of authority an administrative agency has, then this case could impact how agencies involved in regulating investing and employee benefits operate, such as the DOL and the IRS.
The other case we mentioned was Department of Ag. Rural Development Rural Housing Service v. Kirtz which is also now slated for the November argument. To the extent other federal cases involve similar arguments, which may mean a delay in those courts’ rulings until the Supreme Court makes clear what their position will be. At issue in Kirtz is whether the civil-liability provisions of the Fair Credit Reporting Act unequivocally and unambiguously waive the sovereign immunity of the United States. Sovereign immunity is a doctrine that protects federal agencies and officers from lawsuits unless an exception has been written into the law or can be implied. The Plaintiff in Kirtz had a credit record reporting issue with an agency of the federal government. That agency moved to dismiss any claims against it based on sovereign immunity. This case challenges that application of the doctrine. On its own, that doesn’t seem to involve plan sponsors very much. However, if the Supreme Court ruled that sovereign immunity did not apply in this case, it may provide more space for plan sponsors harmed by administrative errors on the part of the DOL, EBSA, or other quasi-governmental agencies.
Other cases we were watching included Greebel v. U.S. Unlike CFPB and Kirtz which were granted cert and placed on the Court’s calendar, Greebel was denied review. As stated by the Petitioner, at issue in Grebel was “whether lump-sum compensatory payments to an individual, such as those made pursuant to a retirement plan, qualify as ‘earnings’ subject to the Consumer Credit Protection Act’s garnishment limitations.” The issue was not so much whether “earnings” would remain with the same definition, but whether the laxity in the structure of the definition of that provided by the Department of Labor would continue to be given deference by federal courts. By denying the petition for review, the USSC may have shown an unwillingness to curtail administrative flexibility towards governing their own regulations.
Similarly, the petition for review in CoreCivic v. Owino was also denied, meaning investment policies will not be able to create a class for the purposes of suing a retirement advisor or plan sponsor. As we discussed, post-Hughes, the courts seemed to be loosening the grip on one factor in the test for when a group of investors could sue as a class, that of commonality. Here, by denying the petition for review of the 9th Circuit’s decision allowing for a broad class, it seems that the US Supreme Court may be signaling more flexibility in how classes are constructed. That would make it easier for cases like Hughes to be brought against plan sponsors.
Lastly, we note that whistleblowing and retaliation may also be on the Court’s agenda in November, with Murray v. USB Securities, LLC slated to be heard at those arguments. This case involves who bears the burden of proof concerning retaliatory intent when it comes to whistleblowers. Recordkeeping and compliance measures concerning Sarbanes Oxley and all other reporting requirements should assist any sponsor concerned with allegations of retaliatory firing or poor reviews, but plan sponsors may want to ensure this case is on their counsel and compliance’s radar should it call for a change in recordkeeping and forms regarding whistleblowing and investment concerns.
These articles are prepared for general purposes and are not intended to provide advice or encourage specific behavior. Before taking any action, Advisors and Plan Sponsors should consult with their compliance, finance and legal teams.
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