DC plan fiduciaries should make sure they understand their fiduciary responsibilities under ERISA and are given the necessary support to satisfy these duties.
To reduce the risk of liability for claims, fiduciaries should follow the best practices from two well-known cases that apply to all DC plans governed by ERISA.
Plan fiduciaries should consider obtaining valuable fiduciary liability insurance to protect themselves from lawsuits, which could cost more to defend than to settle.
Defined contribution (DC) plan sponsors of all sizes face the rising threat of litigation — primarily focused on alleged excessive fees and investment prudence. Between 2020 and 2022, most lawsuits were filed against sponsors with more than a billion dollars in plan assets, but 41% of cases involved plans below that threshold.1 As a result, there are steps DC plan fiduciaries should take to protect their plans and themselves from costly litigation expenses.
It’s vital that fiduciaries understand their duties under the Employee Retirement Income Security Act (ERISA) and the liability claims they could face by not performing these duties.
To decrease the risk of claims, fiduciaries should follow the expensive lessons learned from two famous lawsuits involving excessive fees — each resulting in the plan sponsor having to pay a multi-million-dollar settlement.
Also, due to costly legal expenses, fiduciaries should consider obtaining fiduciary liability insurance, which is the only liability coverage that will protect both them and plan sponsors from fiduciary-based claims.
Learn more about how fiduciaries can protect their DC plans and themselves from high defense and settlement costs.
Chubb, “Excessive litigation over plan fees in 2023,” April 2023
The impact of Loper Bright Enterprises v. Raimondo and the potential implications on DC plan litigation in a post-Chevron world.
DC plan committees can help reduce litigation risk by establishing and following proper plan governance policies and procedures.
Fred Reish covers the fiduciary process and best practices around in-plan retirement income solutions.
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Reprinted with permission from Fred Reish. While Invesco believes the information presented in this article to be reliable and current, Invesco was not involved in writing the article and cannot guarantee its accuracy. Further circulation, disclosure or dissemination of all or any part of this material is prohibited. This article is provided for educational and informational purposes only and is not an offer of investment advice or financial products. Invesco is not affiliated with Faegre Drinker Biddle & Reath LLP.
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