The Effect of ERISA Litigation

10 years ago, if a 401(k) plan participant tried to sue their employer for  excessive plan fees or breach of fiduciary duty, they would have been laughed out of court.

While poor stock market returns and work by the Department of Labor have been essential for final implementation of retirement plan fee disclosure, one should not discount the role of court cases like DeWolfe, Bechtel, and Tibble that have made fee disclosure possible.  I’m sure many ERISA litigators on the defense would have scoffed at the chances that plan participants had in suing employers, but the last 6 or 7 years have led to major decisive victories for plan participants.

The latest victory is Tussle v. ABB, where the court held the employer breached their duties to plan participants by failing to monitor recordkeeping costs, negotiate rebates and prudently select and retain investment options. The Court awarded the participants a damages award of $13.4 million against ABB for failure to monitor recordkeeping costs and to negotiate rebates and $21.8 million for imprudent mapping of funds; it also required Fidelity to pay $1.7 million.

While Judges don’t write laws, their work in deciding cases can have a profound effect on changes in this industry and the regulations that get promulgated. So while some may criticize plaintiff ERISA litigators as ambulance chasers, their work has spurred the need for plan sponsors to concentrate more on plan expenses because they may be the “ambulance chasers’’” next victim.

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