Key Takeaways
- • The U.S. Court of Appeals for the Second Circuit affirmed the dismissal of Carlisle v. Board of Trustees of the American Federation of the New York State Teamsters Conference Pension and Retirement Fund, finding no breach of fiduciary duty under ERISA in the plan's allocation to private market investments.
- • The ruling cleared the plan's financial adviser, Meketa Investment Group Inc., and actuary, Horizon Actuarial Services LLP, of wrongdoing.
- • The appellate court found the plaintiffs had standing and acknowledged private assets carry more risk, but held that trustees were exercising ordinary judgment in weighing tradeoffs among reasonable options.
- • The original 2020 complaint alleged the fund allocated 19.9% of assets to private equity versus a 13% average for large multiemployer plans, per a 2016 peer analysis cited in the filing.
- • As of January 2024, the plan reported total assets above $2.9 billion against $3.7 billion in liabilities, a 79.4% funded ratio, after receiving about $1.4 billion in PBGC special financial assistance.
Summary
The U.S. Court of Appeals for the Second Circuit has confirmed a district court's dismissal of a lawsuit challenging the New York State Teamsters Conference Pension and Retirement Fund, according to planadviser. In Carlisle v. The Board of Trustees of the American Federation of the New York State Teamsters Conference Pension and Retirement Fund, the court affirmed that the plan did not violate its fiduciary duty under the Employee Retirement Income Security Act (ERISA) by investing in high-risk private market assets. The ruling also cleared the plan's financial adviser, Meketa Investment Group Inc., and its actuary, Horizon Actuarial Services LLP, of any wrongdoing.
The Second Circuit found that the plaintiffs had standing to sue and acknowledged that private assets carry greater risk. Nonetheless, it held that the complaint's allegations, including that fiduciaries were aware of the risk, volatility and illiquidity of such asset classes and that other similarly situated ERISA plans favored more stable investments, did not show that trustees did more than engage in the normal practice of weighing tradeoffs and selecting from a range of reasonable judgments. The court's reasoning turned on that standard of prudent process rather than on the outcome of the investments.
The case dates to 2020, when plaintiffs filed a complaint in the U.S. District Court for the Northern District of New York. The plaintiffs alleged the pension board, with Meketa and Horizon, had imprudently adopted a riskier strategy in 2014 in response to the fund's declining funding status. According to the complaint, the fund, which managed $1.5 billion in 2018, raised its actuarial return target to 8.5% from 8% and significantly increased exposure to riskier assets such as private equity and emerging market equities. The filing cited a 2016 peer analysis showing an average alternative investment allocation of 13% among large multiemployer plans, compared with 19.9% allocated to private equity by the New York State Teamsters fund. Plaintiff Robert Carlisle argued the strategy produced significant losses and subsequent benefit reductions for participants and sought a permanent injunction against continued risky allocations.
Counsel included Chimicles Schwartz Kriner & Donaldson-Smith LLP, Bayard P.A. and Blau & Malmfeldt for the plaintiffs; Morgan, Lewis & Bockius LLP and Blitman & King Law Firm for the Teamsters fund; Snell & Wilmer LLP, Steptoe LLP and Choate, Hall & Stewart LLP for Meketa; and Groom Law Group for Horizon.
According to the board of trustees, the fund received approximately $1.4 billion in special financial assistance from the Pension Benefit Guaranty Corporation under the American Rescue Plan Act in 2022 and 2023. As of January 2024, total plan assets, including that assistance, exceeded $2.9 billion, against $3.7 billion in liabilities, or a 79.4% funded ratio.
The Second Circuit found that the plaintiffs had standing to sue and acknowledged that private assets carry greater risk. Nonetheless, it held that the complaint's allegations, including that fiduciaries were aware of the risk, volatility and illiquidity of such asset classes and that other similarly situated ERISA plans favored more stable investments, did not show that trustees did more than engage in the normal practice of weighing tradeoffs and selecting from a range of reasonable judgments. The court's reasoning turned on that standard of prudent process rather than on the outcome of the investments.
The case dates to 2020, when plaintiffs filed a complaint in the U.S. District Court for the Northern District of New York. The plaintiffs alleged the pension board, with Meketa and Horizon, had imprudently adopted a riskier strategy in 2014 in response to the fund's declining funding status. According to the complaint, the fund, which managed $1.5 billion in 2018, raised its actuarial return target to 8.5% from 8% and significantly increased exposure to riskier assets such as private equity and emerging market equities. The filing cited a 2016 peer analysis showing an average alternative investment allocation of 13% among large multiemployer plans, compared with 19.9% allocated to private equity by the New York State Teamsters fund. Plaintiff Robert Carlisle argued the strategy produced significant losses and subsequent benefit reductions for participants and sought a permanent injunction against continued risky allocations.
Counsel included Chimicles Schwartz Kriner & Donaldson-Smith LLP, Bayard P.A. and Blau & Malmfeldt for the plaintiffs; Morgan, Lewis & Bockius LLP and Blitman & King Law Firm for the Teamsters fund; Snell & Wilmer LLP, Steptoe LLP and Choate, Hall & Stewart LLP for Meketa; and Groom Law Group for Horizon.
According to the board of trustees, the fund received approximately $1.4 billion in special financial assistance from the Pension Benefit Guaranty Corporation under the American Rescue Plan Act in 2022 and 2023. As of January 2024, total plan assets, including that assistance, exceeded $2.9 billion, against $3.7 billion in liabilities, or a 79.4% funded ratio.
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