Supreme Court ruling: 401(k) participants can sue employer for fiduciary breach
A heads up from Wyatt, Tarrant & Combs Partner Gayle McGrath that LLP employers who sponsor some 401(k) plans should pay attention to a recent U.S. Supreme Court case increasing their exposure to participant claims in some cases.
Contrasting retirement benefits offered today to those offered when ERISA was enacted, the U.S. Supreme Court allowed an award to an individual 401(k) plan participant to be specifically credited to his individual account. In LaRue v. DeWolff, Boberg & Associates, Inc., the plan participant sought to be "made whole" for losses he suffered in his 401(k) account when his employer, DeWolff, delayed carrying out his investment instructions. LaRue claimed this delay was a breach of his employer's fiduciary duty and that his employer should make up his loses.
According to McGrath, "the Supreme Court has always provided that plans - not participants - are entitled to sue for a fiduciary breach that harms a plan. The Court observed, however, that the ERISA enforcement provisions have always sought to impose duties on fiduciaries that concern 'proper management, administration, and investment of fund assets,' to guarantee that benefits promised by the plan are ultimately paid."
In a statement, McGrath explained that the Court contrasted a prior case where it did not award fiduciary breach damages to a disability claimant who received all the plan benefits to which she was entitled. The Court was influenced in LaRue, rather, by the current shift in the workplace to account for retirement benefits where fiduciary breaches usually do not affect the entire plan financially, but are more likely to affect an individual's plan account. The Court believed that ERISA drafters did not intend to leave account holders with no protection.
The Court noted that protection for fiduciaries in an ERISA provision that governs the relationship between fiduciaries and participants with self-directed accounts would be meaningless if the fiduciary could not otherwise be liable for individual losses. Thus, the Court held a participant could recover individually for a fiduciary breach that impairs a participant's individual account, making those who deal with plan assets more vulnerable to a new host of lawsuits.
Employers who act as fiduciaries for their 401(k) plans can lessen the likelihood of a lawsuit like LaRue. Employers can hire outside firms, such as financial institutions, to serve as the plan's fiduciary and allocate fiduciary responsibility in the trust agreement or other governing document. Also, migrating to any system where investment instructions bypass the employer and go straight to the custodian of the plan assets and, again, allocate responsibilities in an administrative agreement will help to take the employer out of harm's way.
Public invited to Central Sector Small Area Plan workshop
In addition to proposed East End neighborhood revitalization detailed in an article on page 16, the city is also focusing on enhancements for the Central Sector neighborhood located northeast of downtown Lexington.
The Lexington Fayette Urban County Government (LFUCG) will host a public workshop focusing on the Central Sector Small Area Plan (CSSAP) on Tues., June 10, from 6:30 p.m. to 8:30 p.m. at the Dunbar Community Center, 545 North Upper St., Lexington. Urban design team members RATIO Architects, Development Concepts Inc. and ECSI will provide a project overview, lead interactive activities, provide surveys and facilitate discussion.
The CSSAP results from a recommendation made by the 2007 Lexington/ Fayette County Comprehensive Plan, which addressed communitywide concerns about density, land use, public safety, traffic, transit, schools, community facilities, infill, infrastructure and commercial/residential compatibility. The final plan for the Central Sector neighborhood will include a vision and goals along with suggested recommendations and methods to achieve the goals.
Interested parties who are unable to attend the public workshop can access workshop materials, summaries and surveys, and review and comment on plan drafts by visiting the LFUCG Web site (www.lfucg.com/planning/centralsectorplan.asp) or by visiting RATIO's community-based Web site (www.CommunityCollaborate.com).
Horse Park hotel partners sue state
In a complaint filed in Franklin Circuit Court, the Bluegrass Equine & Tourism Foundation, Inc. and KHPWESLUX - LLC, the partnership formed to develop a hotel and conference center at the Kentucky Horse Park, asserted that the project failed because of the commonwealth's unilateral decision to terminate the ground lease agreement signed last year.
The partnership said that it had met all requirements of the contract and the project would have been completed well in advance of the 2010 World Equestrian Games had the state not terminated the contract without grounds, causing lenders to drop support for the project.
In the complaint, the partnership charges that the commonwealth's attempt to terminate the lease in the absence of default caused financial institutions and lenders who were poised to provide the required financing to conclude that they should not get involved.
The complaint further states that public announcements made by state officials that the project was not essential and might not be completed before the World Equestrian Games, despite assurances from the partnership that the project would be operational no later than five months prior to the Games, also contributed to decisions by financial institutions, lenders and others to steer away from the project.
Organizers of the 2010 FEI World Equestrian Games promised that a hotel and conference center would be constructed for the Games. In December 2004, former governor Ernie Fletcher said, "Without these improvements and the hotel, Kentucky would not have been selected as the home of the 2010 Games."
Is community leadership for you? Try new Web site
Fifteen Central Kentucky organizations have partnered to offer a new Web site for youth and adults who want to develop their community leadership potential.
The site, called "Let's Lead," is hosted by the University of Kentucky College of Agriculture's Center for Leadership Development. The site focuses on community-based leadership development opportunities in Lexington and the Bluegrass region.
Tricia Dyk, director of the center, said the site is unique. "We looked nationally for a model of this approach and found none, so we designed the site based upon a leadership development framework."
The site offers opportunities for fostering individual, organizational and collective leadership abilities. The site takes visitors through a virtual mountain-climbing experience, beginning with a base camp of community leadership opportunities and then leading visitors through specific skills needed to make a full ascent. It culminates in a summit of training opportunities where visitors are provided direct links to partner Web sites for more extensive information on each program.
"The idea of a one-stop leadership development resource is appealing," said Stephanie Hong, executive director of Partners for Youth, one of the participating organizations. "Previously, if a person wanted to locate training programs to build their leadership skills, they were on their own to search for these kinds of opportunities."
The concept began a year ago as a conversation between Wanda Bertram, executive director of LexLinc, and Laura Williams, Lexington program director of the Knight Foundation. The two recruited other participants and began meeting monthly. Within months, the UK College of Agriculture's Center for Leadership Development offered to develop and host the Web site.
Partners in the Let's Lead portal include: Commerce Lexington, Hugh O'Brian Youth Leadership Seminar (HOBY), LexLinc, Partners for Youth, Prichard Committee for Academic Excellence, Fayette County Cooperative Extension office and 4-H, Non-Profit Leadership Initiative, Center for Leadership Development, The Kentucky Chapter of the United States Green Building Council, United Way of the Bluegrass, Urban League of Lexington, Girl Scouts, Lexington Fayette Urban County Government, and the YMCA of Central Kentucky.
Lissa Pohl, program and outreach associate for UK's Center for Leadership Development, said the partnership can expand. "Let's Lead partners invite other community organizations that provide leadership development opportunities to also have a presence on the site," she said.
Interested organizations can apply by checking out the "partners" page on the site, which provides criteria and an application. Visit the site at www.letsleadlex.com.
UK economics department scores high rankings
A recent study looking at rankings of doctoral programs in economics in the United States finds the Department of Economics at the University of Kentucky's Gatton College of Business and Economics ranks 19th among all public universities in the nation. The ranking places the department ahead of 10 benchmark institutions including Michigan State, North Carolina State, Purdue, Texas A&M, Arizona, Florida, Georgia, Iowa, North Carolina and Washington.
The study, published in the April 2008 issue of the Southern Economic Journal, is based on citations to publications authored by UK economics faculty members. The study focused on published research in all major peer-reviewed economics journals over the period 1985 to 2004 and citations to these publications in professional journals. The findings indicate professional acknowledgment of the importance of UK economists' contributions to the field.
Other highlights of the findings include:
• In the field of public economics, the department is ranked eighth overall and fourth among all public universities. The department is the third highest ranked in this field among UK's benchmarks, and first among SEC schools.
• In the area of urban, rural and regional economics, the department ranks 17th overall and 12th among public universities in the nation. UK is ranked second in this field among its benchmarks and first in the SEC.
• The department ranks 10th among all public universities in the area of health, education and welfare, and 26th nationally with private universities included. This corresponds to an eight-place ranking among the benchmarks.
City government updates on BizLex.com
Editor's note: Business Lexington will begin providing regular coverage of important developments at city hall on its Web site. Stay abreast of local government actions impacting business and the economy by visiting www.bizlex.com. Readers interested in receiving e-mail alerts should provide an e-mail address to info@bizlex.com. Subject: Email alert.
DLC launches street musician program
"Street Scenes" will appear soon around downtown Lexington. The Downtown Lexington Corporation is encouraging acoustic musicians to enliven the downtown area. Plans call for the program to begin appearing in June during the lunch hour and on Saturday nights. According to the DLC street musicians do not need a vendor's license if they confine performances to no more than two hours. Amplification is prohibited, she added. For more information, contact Jessica Gies at jessica@downtownlex.com or 425-2595.