Snapshot of the Status of 403(b) Plan Fiduciary Litigation

A recent uptick in litigation over retirement plans and, specifically, the fees those plans are being charged for administration and management, has many businesses working to renegotiate plan fees. Plan fiduciaries are closely watching the status of 403(b) plan litigation both to see what further steps they need to take to protect the plans they manage. In particular, this type of litigation has shown that there are a variety of specific themes that litigators are looking at when they identify plans to prosecute.

Identifying Plans at Risk of Litigation

While not all plans are at risk for any particular element, plan fiduciaries need to be aware of the common themes being raised and how those may impact their particular situations. For example, plans that use an asset-based allocation method rather than a dollar fee allocation are subject to scrutiny, as are plans that do not regularly review and benchmark recordkeepers, and review and compare plan expenses to verify that they are not above-market.

Many of the different risks plans face come from plan fiduciaries not spending plan assets in the wisest fashion. From using proprietary investment options to investing in expensive share classes or offering too many different investment options, plans often run afoul by simply not paying attention to cheaper selections or taking the easiest investment without exploring better options. Most of the plans subject to fiduciary breach litigation did not engage ERISA legal counsel to assist with building out a fiduciary legal compliance paradigm to avoid fiduciary liability exposure.

Current Status of Major 403(b) Plan Litigation

One recent case to reach settlement is a lawsuit filed against Vanderbilt University. The defendants will not only pay over $14 million to class members for recoveries, attorneys fees, and expenses, they will also provide the plaintiff’s counsel with a list of investment opportunities and associated fees and the plan’s investment policy statement. The University will communicate more openly with plan participants regarding investment options. Further, the plan administrator is required to solicit quotes for recordkeepers and administrative services.

A second university, Duke, recently settled against plaintiffs for $10.65 million. In the Duke case, plaintiffs argued that fiduciaries paid certain HR staff out of plan assets. While Duke continues to deny any wrongdoing, they also agreed to take bids for independent recordkeeping and administrative services, make it easier for plan participants to transfer their investments from frozen annuity accounts, and avoid using the plan’s assets to pay salaries of Duke employees working on the plan. Like the Vanderbilt case, this settlement highlights the importance of plan fiduciaries paying attention to costs associated with recordkeeping and administration.

Having a team like the experienced benefits counsel at Hall Benefits Law on your side means having someone who understands the importance of fiduciary legal compliance. Hall Benefits Law provides a comprehensive, ongoing fiduciary legal compliance program to mitigate costly fiduciary liability for plan sponsors across the country.  Call our Georgia-based team today at 678-439-6236 or visit the Hall Benefits Law website to learn more about the different areas of benefits law we can help you handle.

The following two tabs change content below.

Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

Latest posts by Hall Benefits Law, LLC (see all)

%d bloggers like this: