Whether by instinct or learned behavior, retirement plan advisors and consultants commonly stir in a healthy dose of fear factor when they discuss retirement plan fee litigation with clients. The general notion is that advisors can scare plan fiduciaries into believing that without the advisors’ guidance and services, the fiduciaries will find themselves in the litigation crosshairs. This strategy may be effective in some cases, but has its limits.
Fortunately for plan fiduciaries and participants, the times they are a-changin’. A series of recent fiduciary-friendly litigation outcomes presents plan advisors with a new opportunity to discuss litigation in a different light. Strong advisors may now leave the fear factor in their back pockets and instead lead with a can-do attitude. The courts are defining a path to prudence, and plan advisors stand to gain by helping their clients to understand: “Together we can do this in a manner that protects your participants and fiduciaries.”
Getting Deeper into Litigation
As a starting point, the lessons from litigation have become much more concrete. In January 2022, the United States Supreme Court’s Hughes v. Northwestern University opinion reiterated the Court’s position (from Tibble v. Edison) that fiduciary duties are continuing and ongoing. The Court also articulated a pleading standard that has made it easier for good plaintiffs’ firms to survive a motion to dismiss. This has, in turn, resulted in more discovery, motions for summary judgment, and trials, which has led to more substantive court opinions. These opinions help us to better understand what courts expect when evaluating allegations that plan fiduciaries have breached their duties of prudence and loyalty.
When I served as a plan consultant for more than a decade, I urged plan fiduciaries to learn lessons from other companies’ litigation experiences. That message became easier to convey as the courts began to provide more substantive, concrete lessons. Now, looking at these cases from the lens of a practicing ERISA attorney and recovering plan consultant, here’s how I’d suggest advisors use some recent litigation outcomes to better support their value proposition.
These Meetings Matter
In Nunez v. B. Braun Medical, Inc., a trial addressed whether fiduciaries had breached their fiduciary responsibilities by failing to use lower-cost funds and failing to monitor or control recordkeeping expenses. In finding that the fiduciaries had engaged in “objectively prudent conduct,” the court’s opinion cited to bullet-point lists of:
Seven meetings with specific discussion of investment performance;
11 meetings discussing share classes and/or revenue sharing; and
Five meetings addressing recordkeeping fees.
You Need Not Race to the Bottom
In Silva v. Evonik, a trial court granted the fiduciaries’ motion for summary judgment in response to similar allegations. The fiduciaries offered significant evidence reflecting a diligent approach to benchmarking the plan’s recordkeeping fees, including their rejection of the lowest cost quote that may have required changes to the plan’s qualified default investment alternative and/or stable value fund. The court cited earlier opinions’ conclusions around fees, including “the cheapest investment option is not necessarily the one a prudent fiduciary would select” and that “fees must be evaluated relative to the services rendered.” The court concluded that fiduciaries “need not accept drastic changes to the plan simply to attain the lowest fee.”
Hiring Us Was a Good Idea
Finally, in In re Quest Diagnostics ERISA Litigation, a trial court granted the fiduciaries’ motion for summary judgment in response to allegations that the fiduciaries had breached their duties in their selection of two specific core funds and the target date fund suite. In finding that the fiduciaries’ process was “diligent,” the court celebrated specific steps taken by the committee:
Receiving written quarterly materials addressing the markets, economy, investment performance, watch list status and regulatory and legislative updates;
Receiving annual fiduciary trainings; and
Retaining meeting minutes.
The Path to Prudence
Taken together, these three opinions provide a valuable framework for retirement plan advisors. The courts have demonstrated that they’ll give fiduciaries credit for good governance: create a committee, implement an investment policy statement, hold meetings, actually talk about the IPS and expenses at the meetings and take minutes. They have reiterated that fiduciaries need not choose the lowest-cost investment option or service provider. They have celebrated the engagement of a fiduciary advisor and the consumption of the materials and training the advisor provides.
There are plenty of reasons for fiduciaries to be scared. There are even more reasons for them to appreciate the courts paving a path to prudence. Advisors will be well-served to help their clients onto and along that path.
Take a look at our comprehensive guide to the best and most popular information ebooks and products available today on Detoxing, Colon Cleansing, Weight Loss and Dating and Romance. They are all in one spot, easy to find and compere to make a quick selection for the product that best fits your needs or wants.
So browse through a category and make your preferred selection and come back here to read more choice articles and get a few more helpful tips on ways to help your enhancement.
As an Amazon Associate I earn from qualifying purchases. “saubiosaubiosuccess.com is a participant in third party affiliate and advertising programs; The Amazon Services LLC Associates Program, Awin network, and other affiliate advertising programs are designed to provide a means for sites to earn advertising fees and commissions by advertising and linking to products on other sites and on Amazon.com. Amazon and the Amazon logo are trademarks of Amazon.com, Inc, or its affiliates.”
We use anonymous cookies and various 3rd-party services to optimise and to offer you a better, more personalised, browsing experience with advanced accessibility enhancements.
Dismiss
Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
