{"id":1385,"date":"2018-07-30T10:00:21","date_gmt":"2018-07-30T15:00:21","guid":{"rendered":"https:\/\/www.rixtrema.com\/blog\/?p=1385"},"modified":"2020-02-22T06:48:37","modified_gmt":"2020-02-22T11:48:37","slug":"plan-advisors-increasingly-pulled-into-401k-plan-litigation","status":"publish","type":"post","link":"https:\/\/rixtrema.com\/blog\/plan-advisors-increasingly-pulled-into-401k-plan-litigation\/","title":{"rendered":"Plan Advisors increasingly pulled into 401(k) plan litigation"},"content":{"rendered":"

Source<\/span><\/strong><\/a><\/p>\n

Advisors are increasingly being pulled into 401(k) plan litigation under novel theories of liability and need to pay extra attention in documenting their actions, a prominent ERISA attorney told delegates July 24 at the 2018 NAPA DC Fly-In Forum in Washington.<\/span><\/p>\n

Tom Clark, Of Counsel at The Wagner Law Group, warned that alleged fiduciary breach litigation is not slowing down and, in addition to primary fiduciary liability, claims involving co-fiduciary and party-in-interest liability are increasingly being used by the plaintiffs\u2019 bar, as part of the three potential avenues of liability.<\/span><\/p>\n

According to Clark, who was previously with the Schlichter Bogard & Denton law firm, the partial success of the Schlichter firm over the past decade has brought a lot of other new plaintiff firms into the fray, many of whom are testing new theories by going after church plan status,\u00a0university 403(b) plans<\/a>,\u00a0stable value products<\/a>\u00a0and recordkeeping firms and their affiliates.<\/span><\/p>\n

Lower Hanging Fruit<\/strong><\/span><\/p>\n

And while the \u201clowest hanging fruit,\u201d such as self-dealing suits, has been picked over, the firms are now moving onto \u201clower hanging fruit,\u201d such as prudence claims where the plaintiffs\u2019 bar makes allegations that firms engaged in a bad process.<\/span><\/p>\n

Clark noted that one prime example is the\u00a0Anthem\u00a0<\/em>case<\/a>\u00a0involving allegations that the fiduciaries failed to leverage the plan\u2019s size to take advantage of lower-fee investment options and failed to monitor and control recordkeeping fees.<\/span><\/p>\n

What these cases are coming down to is proving prudence versus perfection, where the plaintiffs\u2019 bar wants perfection or else. Clark noted that the courts seem to be increasingly providing favorable decisions for defendants and plan sponsors, because the plaintiffs have not proved that there was a bad process or that there was a substantive breach.<\/span><\/p>\n

\u201cYou\u2019ve seen a whole line of cases that say simply comparing this to the cheapest Vanguard lineup we can find is not enough to demonstrate a breach to get past a motion to dismiss,\u201d Clark stated.<\/span><\/p>\n

While this is good news overall, Clark warned that \u201cthe DOL is backfilling in where the Schlichters of the world aren\u2019t, and they remain as aggressive in the last year under this administration as they were during the last eight years of Obama.\u201d<\/span><\/p>\n

Clark advises to have clearly defined relationships with well-drafted service agreements and to make sure you\u2019re documenting your relationship. \u201cIf you\u2019re going to do services 1, 2 and 3, you better do them,\u201d he states.<\/span><\/p>\n

Co-Fiduciary Liability<\/strong><\/span><\/p>\n

Clark further emphasized that of all the points he made throughout his presentation, the most important point Fly-In Forum delegates should understand is the three prongs of co-fiduciary liability:<\/span><\/p>\n