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Litigation Lessons for 2019

Some things are inexorable. Seasons. Tides. And, argues a recent blog entry, plan litigation. But as with natural phenomena whose effects can be mitigated, the analysis suggests that lessons from the litigation that has taken place can benefit 401(k) and 403(b) plan fiduciaries in 2019.

Litigation concerning 401(k) and 403(b) plans “is not going away,” argues Carol Buckman in “10 Litigation Lessons for 401(k) and 403(b) Fiduciaries — Apply Them in 2019,” an analysis appearing in Cohen & Buckmann, P.C.’s “Insights” blog. She suggests that there are 10 lessons based on the litigation that already has taken place that will help a plan fiduciary to protect itself from litigation in the new year.

Process Matters. Demonstrating that a prudent process has been followed in selecting investments can help secure a dismissal of a lawsuit.

Written Records Matter. Policies that are clearly written can help prove that prudent policies have been followed and make it clear what is considered when decisions are made about investments.

Be Aware of Options and Review Them. Investigating different options and being aware of them, even if they are not selected, can demonstrate that a fund has considered a variety of alternatives. Recording the reasons decisions were made can be helpful as well.

Understand TDFs. While it may be easier to automatically choose a vendor’s target date funds, it can be worth considering other TDFs as well, Buckmann suggests.

Benchmark Plan Fees. It can be helpful to be able to show that fees are reasonable, and worthwhile to compare them with “an appropriate peer group,” says Buckmann.

Retain Expert Assistance. Seeking the help of a fiduciary from outside one’s organization if the internal resources do not provide such expertise. In addition, written reports and attendance at committee meetings may be a good idea as well.

Seek Outside Counsel Advice. If one’s organization lacks legal expertise, one should be willing to seek the advice of counsel from outside. But that’s not enough, says Buckmann. “Don’t try to guess what the law requires, and listen to counsel’s recommendations about best practices,” she adds.

Hold Regular Committee Meetings. Formal committee meetings should be held regularly and recorded, Buckmann says. In addition, she suggests, having ERISA counsel present may be appropriate.

Review Vendors. Buckmann suggests that vendors be reviewed at least annually to determine if their performance meets the proposals they submitted and and the service agreements into which they entered. She adds that it can be helpful to survey committee members to gauge their satisfaction with providers.

Hold Regular RFPs. Regularly requesting proposals can facilitate renegotiation and altering fees, as well as bring to light other services that may be available.