When it comes to retirement plan litigation, the common theme I\u2019ve noticed over the years is that lawsuits rarely die in the early rounds. A fiduciary\u2019s best hope is to win on summary judgment or at trial, but a motion to dismiss? That\u2019s usually a long shot. And Sentara Healthcare just found that out the hard way.<\/p>\n
In Carter et al. v. Sentara Healthcare Fiduciary Committee et al., the Eastern District of Virginia refused to toss claims that Sentara and its fiduciary committee breached their duties by mismanaging a stable value fund, the Guaranteed Interest Balance Contract (GIBC) from Principal. While one plaintiff, Bonny Davis, initially lacked standing because she wasn\u2019t yet in the GIBC, the court granted her leave to amend, effectively keeping her in the game. That\u2019s like arguing your opponent doesn\u2019t have a ticket to the dance, only for the judge to hand them one at the door.<\/p>\n
Why This Matters<\/strong><\/p>\n Stable value funds are supposed to be the \u201csafe harbor\u201d in a defined contribution plan, the place where risk-averse participants can find steady returns. The plaintiffs here allege the GIBC fell short of that promise, claiming its returns lagged far behind what comparable products offered at the same level of risk. That\u2019s a damning accusation, because ERISA isn\u2019t about guaranteeing the highest return, it\u2019s about guaranteeing a prudent process. If the committee didn\u2019t properly monitor the investment or solicit competitive bids, the court is saying that\u2019s enough to let the case move forward.<\/p>\n And the hammer didn\u2019t just fall on the committee. Judge Walker made it clear that Sentara itself, as the plan sponsor, has independent oversight duties. Employers sometimes think they can silo off risk by delegating responsibility to a committee, but ERISA doesn\u2019t work that way. If the committee makes a mistake and the employer sits on its hands, the employer is just as liable for failing to step in. As the court put it, Sentara had the duty \u201cto monitor investments and remove imprudent ones\u201d and to rectify poor decisions.<\/p>\n The Bigger Picture<\/strong><\/p>\n This isn\u2019t a headline-grabbing case about excessive recordkeeping fees or overpriced share classes. It\u2019s about something that most sponsors overlook, monitoring supposedly \u201csafe\u201d options. With $3 billion in plan assets and over 40,000 participants, Sentara is a big target. But size doesn\u2019t matter when it comes to fiduciary responsibility; process does. A plan with $30 million in assets can just as easily get tripped up if it fails to follow a prudent process.<\/p>\n The lesson? Fiduciaries must treat every investment option, whether it\u2019s an S&P 500 index fund or a stable value contract, with the same disciplined monitoring process. That means reviewing performance relative to peers, documenting discussions, and yes, occasionally soliciting bids to make sure the product is still competitive. If you assume \u201csafe\u201d means \u201cimmune from litigation,\u201d this case should disabuse you of that notion.<\/p>\n Final Thoughts<\/strong><\/p>\n Sentara says it will show the court evidence of its prudent practices at summary judgment. Maybe it will, maybe it won\u2019t. But this case underscores the central truth of ERISA litigation: motions to dismiss rarely save you, and fiduciary oversight is never passive. You can delegate responsibilities, but you can\u2019t delegate accountability.<\/p>\n The road to fiduciary trouble isn\u2019t paved with bad intentions\u2014it\u2019s paved with complacency. And as Sentara is finding out, complacency can be very expensive.<\/p>\n <\/span><\/p>","protected":false},"excerpt":{"rendered":" When it comes to retirement plan litigation, the common theme I\u2019ve noticed over the years is that lawsuits rarely die in the early rounds. A fiduciary\u2019s best hope is to win on summary judgment or at trial, but a motion … Continue reading