Leimkuehler v. Am. United Life Ins. Co., No. 12-2536 (7th Cir. 2013)Annotate this Case
The 401(k) services industry engages in “revenue sharing,” an arrangement allowing mutual funds to share a portion of the fees that they collect from investors with entities that provide services to the mutual funds, the investors, or both. Until recently the practice was opaque to individual investors and many 401(k) plan sponsors. As the existence and extent of revenue sharing has become more widely known, lawsuits were filed, alleging that the practice violates the Employee Retirement Income Security Act of 1974 (ERISA). The district court awarded summary judgment to AUL, an Indiana-based insurance company that offers investment, record-keeping, and other administrative services to 401(k) plans. The court ruled that AUL was not a fiduciary of the Leimkuehler Profit Sharing Plan with respect to AUL’s revenue-sharing practices. The Seventh Circuit affirmed. Although “very little about the mutual fund industry or the management of 401(k) plans can plausibly be described as transparent,” AUL is not acting as a fiduciary for purposes of 29 U.S.C. 1002(21)(A) when it makes decisions about, or engages in, revenue sharing.