“From stable value, to proprietary funds, to company stock, to excessive fees, to a mix of all of the above, there are also more plaintiffs law firms filing suits than ever,” warns David Levine, a principal at Groom Law Group specializing in the Employee Retirement Income Security Act (ERISA).
It’s been a busy year for litigators, Levine says, and there even seems to be a developing measure of competition among plaintiffs firms to organize and file complaints first, “to come up with new theories, and to move quickly.” Where does this leave sponsors, advisers and providers?
“In short, we are in a world where every action could be put under the microscope—before we even gauge the impact of the fiduciary regulation on these lawsuits—and where a prudent process and contemporaneous documentation is more essential than ever,” Levine predicts.
One helpful exercise for retirement plan officials is to review recent court decisions for any potentially problematic shared practices. Levine also suggests plan officials developed trusted go-to resources for sound and responsive legal advice.
NEXT: The influential lawsuits in 2015
Presented below is just a sample of the defined contribution plan litigation to emerge or progress in 2015:
Pledger, et al., v. Reliance Trust Company, et al – Despite being a professional employer organization which provides human resources and business solutions to small- and medium-sized businesses throughout the United States, the Insperity company is accused of failing to engage in a proper process for the selection and retention of a plan recordkeeper for its own 401(k).
Sulyma v. Intel Corporation – In November a participant in retirement plans sponsored by Intel Corporation filed a lawsuit claiming custom-built investment portfolios within the plan are too heavily invested in alternatives and other imprudent investments.
Dennard v. Aegon USA – Another provider-focused lawsuit claims retirement plan provider and asset manager Aegon USA caused superfluous fees to be charged to its own retirement plan.
Urakhchin and Marfice v. Allianz Asset Management of America, et al – A lawsuit filed by two participants in an Allianz retirement plan claims the company and its asset management partners, including PIMCO, misused employees’ 401(k) plan assets for their own financial benefit.
Tibble v. Edison – A decision from the Supreme Court of the United States seemed to solidify the “ongoing duty to monitor” investments as a fiduciary duty that is separate and distinct from the duty to exercise prudence in selecting investments for use on a defined contribution plan investment menu.
Windsor and Obergefell decisions – A notice from the Internal Revenue Service gives guidance to plan sponsors, applying the Supreme Court’s recent same-sex marriage cases to retirement plans, as well as other benefits.
Spano vs. Boeing – In the end it was a rather abrupt conclusion to one of the original and longest-running examples of 401(k) excessive fee litigation. Plaintiffs in this particular case alleged that Boeing violated ERISA by permitting a variety of excessive fees to be charged to 401(k) plan participants. They also claimed that Boeing engaged in self-serving conflicts of interest, and permitted imprudent funds to be included in the company retirement plan.
The full archive of 2015 compliance coverage is online here.