One of the most dangerous phrases in the 401(k) world isn\u2019t \u201clawsuit\u201d or \u201cDOL audit.\u201d It\u2019s: \u201cEveryone does it this way.\u201d<\/p>\n
I hear it all the time from plan sponsors. Everyone uses revenue sharing. Everyone uses forfeitures to offset employer contributions. Everyone has the same default investment lineup. And yes\u2014many of those practices may be permitted. But ERISA doesn\u2019t ask whether something is common. It asks whether it\u2019s prudent.<\/p>\n
Fiduciary duty is not a popularity contest. Courts don\u2019t care how many other plans do the same thing you do. They care whether your fiduciaries engaged in a thoughtful process, understood the impact on participants, and made a reasoned decision based on facts\u2014not habit.<\/p>\n
That\u2019s why \u201ceveryone does it\u201d has become such a weak defense in recent litigation. Plaintiffs\u2019 lawyers love industry norms, because norms often hide complacency. And complacency is kryptonite under ERISA.<\/p>\n
If your plan uses a common practice, ask the uncomfortable questions:<\/p>\n
\u00b7 Why does this plan do it this way?<\/p>\n
\u00b7 Who benefits?<\/p>\n
\u00b7 What alternatives were considered?<\/p>\n
\u00b7 When was the decision last reviewed?<\/p>\n
The goal isn\u2019t to be different for the sake of being different. It\u2019s to be deliberate. Fiduciary best practices come from process, not tradition.<\/p>\n
In the retirement plan world, comfort is often the enemy of compliance. If you\u2019re relying on the idea that \u201cno one ever gets sued for this,\u201d you\u2019re already thinking about fiduciary duty the wrong way.<\/p>\n
<\/span><\/p>","protected":false},"excerpt":{"rendered":" One of the most dangerous phrases in the 401(k) world isn\u2019t \u201clawsuit\u201d or \u201cDOL audit.\u201d It\u2019s: \u201cEveryone does it this way.\u201d I hear it all the time from plan sponsors. Everyone uses revenue sharing. Everyone uses forfeitures to offset employer … Continue reading