Department of Labor Critical of Seventh Circuit Ruling

The Department of Labor spoke out against the ruling in the Seventh Circuit regarding ERISA section 404(c) regulations. Timothy Hauser of the DOL said that he was disappointed in the Seventh Circuit to failure to give deference to the DOL's definition of the word "control" in ERISA section 404(c). The Seventh Circuit held that participants had "control" over the investments and, therefore, ERISA section 404(c) shielded the fiduciaries from liability. In a nutshell, the participants alleged that the fiduciaries breached their duties by failing to informt he participants of the fees associated with the investments in their accounts. The DOL stated that it is the employer not the participant who "controls"the investment menu. It appears to be the DOL's position that since it is the employer choosing the investment line up within the plan, ERISA section 404(c) cannot shield the employer from choosing investments that have excessive fees. The Seventh Circuit did not agree.

The District Court of New Hampshire seems to be inline with the Department of Labor's view on this one. See next Blog regarding the Tyco Case.