In Leimkuehler v. American United Life Insurance Co., Nos. 12-1081, 12-1213 & 12-2536 (7th Cir. 2013), the plaintiffs brought suit against American United Life Insurance Company (“AUL”). AUL is an Indiana-based insurance company, which offers investment, record-keeping, and other administrative services to the Leimkuehler, Inc.Profit Sharing Plan (the “Plan”), in which the plaintiffs participate. The plaintiffs alleged that AUL had benefited, at the expense of the Plan, by participating in “revenue sharing”, a practice by which mutual funds in which the Plan had invested were sharing a portion of the fees they collect from investors with AUL for the recordkeeping services AUL was performing. The plaintiffs claimed that this benefit violates ERISA. However, the district court ruled that AUL was not a fiduciary of the Plan, with respect to AUL’s revenue-sharing participation, so that no ERISA violation had occurred. The plaintiffs appeal.
The Seventh Circuit Court of Appeals (the “Court”) agreed with the district court that AUL was not an ERISA fiduciary of the Plan when it made decisions about, or engaged in, revenue sharing. Therefore, it affirmed the district court’s ruling. In analyzing the case, the Court said that AUL is a fiduciary with respect to the Plan to the extent it: (i) exercises any discretionary authority or discretionary control respecting management of the Plan or exercises any authority or control respecting management or disposition of its assets, (ii) renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of the Plan, or has any authority or responsibility to do so, or (iii) has any discretionary authority or discretionary responsibility in the administration of the Plan (see section 3(21)(A) of ERSA).
In this case, only clause (i) is potentially applicable. The Court concluded that AUL is not a fiduciary under clause (i), at least with respect to the revenue sharing. AUL had selected the funds to be included in the Plan’s investment menu. However, such selection, without more, does not give rise to a fiduciary responsibility, both because limiting the funds in the investment menu does not automatically create discretionary control sufficient for fiduciary status, and-here-another person had final say on fund selection. Other than limiting the funds, all AUL did was provide recordkeeping services for Plan accounts. Those services did not involve any exercise of authority or control over the revenue sharing.