In the complex world of corporate law, the concept of control frequently plays an instrumental role in the outcomes of various legal proceedings and negotiations. Recently, our attention was drawn to this topic with an interesting article by Ary Rosenbaum, from The Rosenbaum Law Firm P.C. — an exploration into the challenges and advantages that ensue when pooled employer plans (PEPs) are offered to corporations that already have existing pension plans.
Rosenbaum suggests that even though cost savings might not be particularly substantial when switching to a PEP, corporations might not fully understand the advantages, particularly in terms of the reduction of liability. Essentially, when corporations adopt PEPs, they are no longer considered fiduciaries.
This notion is significant because in legal parlance, fiduciaries are expected to act in the best interests of the individuals whom they represent. In other words, corporations that are considered fiduciaries can be held legally responsible for a wide range of decisions and actions.
However, by changing to a PEP, corporations can relinquish this fiduciary status, hence reducing their overall liability. Therefore, control, in this case, has a two-fold impact. On the one hand, corporations lose some control over their pension plans when they switch to a PEP. On the other hand, they gain control by reducing their liability and exposure to legal issues and lawsuits. It’s a kind of give-and-take scenario and hence, control, as Rosenbaum rightly puts it, can be everything in this context.
When dealing with legal matters related to corporations and pension plans, understanding and navigating control can indeed make all the difference.