United States: Tenth Circuit Upholds Great-West Stable Value Win In ERISA Case

William J Delany is a partner in Holland & Knight's Philadelphia office, Chelsea Ashbrook McCarthy and Tammy Tabush are an attorneys in Holland & Knight's Chicago office


  • The U.S. Court of Appeals for the Tenth Circuit affirms a District Court's holding that Great-West Life & Annuity Insurance Co. was not a fiduciary with respect to its stable value fund, even though it announced the fund's credited rate quarterly.
  • Because participants could leave the fund after learning the credited rate, without penalty, Great-West did not have the power to force its rate decision upon any unwilling participants and was therefore not a functional fiduciary under the Employee Retirement Income Security Act of 1974, as amended (ERISA).
  • The Court of Appeals found that Great-West was not liable as a non-fiduciary party-in-interest to a prohibited transaction because the plaintiff failed to demonstrate that the relief he sought was equitable, the only relief available against a non-fiduciary under ERISA Section 502(a)(3).

The U.S. Court of Appeals for the Tenth Circuit issued its decision in Teets v. Great-West Life & Annuity Insurance Company on March 27, 2019, finding that Great-West, an investment fund manager, was not liable to a class of plan participants as either a functional ERISA fiduciary or a non-fiduciary party-in-interest to prohibited transactions.


Great-West offers a stable value fund to participants called the Key Guaranteed Portfolio Fund (KGPF). Great-West deposits the money that participants invest in the KGPF into its general account, which is invested in fixed-income instruments such as treasury and corporate bonds. Money invested in the KGPF earns interest at the Credited Interest Rate (Credited Rate), which is set quarterly by Great-West. Great-West retains as revenue the difference between the total yield on the KGPF's monetary instruments and the Credited Rate it sets. Plans may terminate their relationship with Great-West based on changes to the Credited Rate, and participants who have placed their money in the KGPF may withdraw their principal and accrued interest at any time without paying a fee.

In 2016, the plaintiff filed suit against Great-West in the U.S. District Court for the District of Colorado on behalf of all employee benefit plan participants who invested in the KGPF since 2008, as well as their beneficiaries, alleging that Great-West violated ERISA's fiduciary duty provisions. As a prerequisite to bringing its claims, the plaintiff argued that Great-West was a functional ERISA fiduciary because it exercises authority or control over the quarterly Credited Rate and, by extension, controls its compensation. In the alternative, plaintiff argued that Great-West was a non-fiduciary party in interest to a prohibited transaction insofar as it uses plan assets for its own benefit. After discovery, the parties filed cross-motions for summary judgment. The District Court addressed only whether the plaintiff had sufficiently established Great-West's fiduciary status. After certifying a class of 270,000 plan participants, it granted summary judgment for Great-West, holding that Great-West was not a functional fiduciary. The District Court also found insufficient evidence to impose liability on Great-West as a non-fiduciary party in interest. The plaintiff appealed.

Court of Appeals Opinion

The Tenth Circuit affirmed the District Court's decision, finding that Great-West was not a functional fiduciary under ERISA based on how it distributes investment profits to the KGPF participants. The Court of Appeals explained that the KGPF participants are free to leave the fund after learning the Credited Rate (although they may have to undergo a 12-month waiting period before their savings are transferred out of the fund). Accordingly, Great-West does not have the power to force its rate decision upon any unwilling participants; its contractual power to choose the Credited Rate does not render it a fiduciary under ERISA because participants can "veto" the chosen rate by withdrawing their money from the KGPF without paying a fee or penalty. The Court noted that the plaintiff did not provide an example of any participants that were deterred from withdrawing from the KGPF based on the waiting period or any other restriction on competing investment options. Because the ultimate amount that Great-West earns depends on whether participants elect to keep their money in the KGPF each quarter, the Court also found that Great-West does not have any control over its compensation.

In addition, the Court of Appeals found that Great-West was not liable as a non-fiduciary party-in-interest to a prohibited transaction. The Court reaffirmed the requirement that to recover against a non-fiduciary party-in-interest under ERISA Section 502(a)(3), the plaintiff must establish that the remedy it seeks constitutes "appropriate equitable relief." Because the plaintiff failed to show the relief that he sought was equitable, the plaintiff could not demonstrate liability against Great-West as a party-in-interest to a prohibited transaction. The Court's analysis discussed the distinction between legal and equitable restitution, and emphasized that only those categories of relief typically available in equity are available under ERISA against non-fiduciary parties-in-interest. Because the plaintiff failed to identify the particular property in Great-West's possession over which he could assert title or right to possession, as required to seek equitable restitution, the Court found that the plaintiff failed to establish a required element of his claim.

Key Takeaways

The Tenth Circuit's decision is a positive outcome for insurance stable value products in which plans and participants have a meaningful opportunity to reject a service provider's announced Credited Rate.

The decision also highlights the limitation in remedies available against a non-fiduciary and the requirement of demonstrating an available equitable remedy to proceed with a claim against a non-fiduciary under ERISA Section 502(a)(3).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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