There\u2019s never a shortage of new retirement plan fee and investment performance cases. The problem for plan sponsors is that even if you\u2019re doing everything right, you can\u2019t ever be completely sure you won\u2019t be sued. That\u2019s just the reality of today\u2019s litigation environment.<\/p>\n
A recent case, Macias v. Sisters of Charity of Leavenworth Health System, drives home one of the most basic lessons that retirement plan attorneys (myself included) harp on all the time: if you put something in writing, you need to follow it, and document that you followed it.<\/p>\n
The Case at Hand<\/strong><\/p>\n In Macias, the plan sponsor, its board, and the retirement investment committee were sued over alleged failures in monitoring investments. The defendants tried to get the case dismissed early, arguing that the plaintiffs hadn\u2019t even stated a valid claim. The court didn\u2019t agree.<\/p>\n Why? Because the plaintiffs alleged that the defendants had an Investment Policy Statement (IPS) that required them to evaluate plan investment performance annually against certain benchmarks, and that they failed to do so. The court found that was enough to plausibly allege a breach of fiduciary duty.<\/p>\n Now, maybe the defendants did the evaluations. Maybe they didn\u2019t. Maybe they\u2019ll eventually win at trial. But the point is that because there\u2019s an allegation they didn\u2019t follow their own IPS, they couldn\u2019t knock the case out early. That means discovery, legal fees, and possibly a settlement just to avoid bleeding money in litigation.<\/p>\n Process Over Results<\/strong><\/p>\n This case highlights a theme that comes up time and again in ERISA litigation: process matters more than results. Courts know markets are unpredictable and investment performance will fluctuate. What they focus on is whether fiduciaries had a prudent process for monitoring investments, following their own rules, and documenting their actions.<\/p>\n An imprudent process, or even the appearance of one, is a much bigger legal risk than a bad quarter in a mutual fund.<\/p>\n The Role of the IPS<\/strong><\/p>\n Here\u2019s the irony: a retirement plan isn\u2019t legally required to have an IPS. But having one is considered best practice. It sets the framework for how investment decisions will be made and how advisors\u2019 performance will be measured. It provides structure and consistency.<\/p>\n The catch is that once you have an IPS, it\u2019s not just a nice piece of paper. It\u2019s a commitment. If the IPS says you\u2019ll review performance annually, you need to do it annually. If it says you\u2019ll benchmark against certain indices, you need to use those indices. And you need to write down that you did it.<\/p>\n Otherwise, the IPS becomes Exhibit A in the plaintiffs\u2019 complaint.<\/p>\n Practical Takeaways for Plan Sponsors<\/strong><\/p>\n 1. Review the IPS regularly \u2013 Dust it off at least once a year to make sure it still matches your practices and expectations.<\/p>\n 2. Follow the IPS to the letter \u2013 If it says you\u2019ll do something, do it. Don\u2019t improvise.<\/p>\n 3. Document everything \u2013 Meeting minutes, memos, consultant reports\u2014if it\u2019s not documented, it might as well not have happened in the eyes of a court.<\/p>\n 4. Align with your advisors \u2013 Make sure your investment advisors are on the same page. They\u2019ll want clarity on how their performance will be judged, and you\u2019ll want their help keeping the IPS current.<\/p>\n The Bottom Line<\/strong><\/p>\n Even perfect process and airtight documentation won\u2019t guarantee you won\u2019t get sued. Plaintiffs\u2019 firms are filing these cases in bulk, especially when fees are involved. But if you\u2019ve got your IPS, you\u2019re following it, and you\u2019re documenting it, you\u2019re putting yourself in the best possible position to defend the plan.<\/p>\n Skipping those steps? That\u2019s like putting a \u201cSue Me\u201d sign on your retirement plan.<\/p>\n <\/span><\/p>","protected":false},"excerpt":{"rendered":" There\u2019s never a shortage of new retirement plan fee and investment performance cases. The problem for plan sponsors is that even if you\u2019re doing everything right, you can\u2019t ever be completely sure you won\u2019t be sued. That\u2019s just the reality … Continue reading