Fiduciary Litigation for Defined Contribution Plan Administrators: Risks and Challenges

Description

Fiduciary responsibilities of sponsors and administrators for defined contribution plans, such as 401(k) or 403(b) plans, require a duty of prudence under ERISA. Failure to follow best practices for defined contribution plans can result in litigation and cost millions in legal fees and settlements.

The methods of plan investment selection and excessive fee arrangements are often the basis of litigation alleging breach of fiduciary duty against plan sponsors and administrators of defined contribution plans. For example, several court decisions have found that fiduciaries breached their duties to participants by selecting investment options with high fees when lower fee options were available.

In addition to prudently selecting investments and entering into reasonable fee arrangements, fiduciary responsibilities under ERISA require plan sponsors and administrators to monitor investments, monitor fee structures, avoid conflicts of interest, and act in the best interest of plan participants and beneficiaries at all times. Fiduciaries must understand the full scope of their fiduciary responsibilities under ERISA to avoid breach of fiduciary duty claims by participants. In addition, the new DOL fiduciary rule subjects investment advisers and others to ERISA fiduciary standards. The issue was recently a source of controversy when the Fifth Circuit vacated the DOL fiduciary rule days after the Tenth Circuit issued a decision upholding it.

Our panel will provide plan sponsors, administrators and ERISA counsel with a comprehensive understanding of fiduciary litigation and the risks and challenges it presents. The panel will discuss the necessary methods of selecting plan investments, monitoring fee structures, defending and avoiding breach of fiduciary duty claims and the implications of recent court decisions involving the new DOL fiduciary rule.