Tibble v Edison – Five Lessons Learned

Tibble v Edison – Five Lessons Learned

By: David I Gensler, MSPA, MAAA, EA

Tibble v Edison broke new ground in terms of clarifying that plan stewards have “an ongoing duty to monitor plan investments.” In the Tibble case, the Supreme Court rejected the argument that an initial fund review was sufficient when facts and circumstances may have changed to preclude the need for an ongoing assessment of a retirement plan’s fund lineup.

However, the defendants in Tibble actually did a lot of things right that many retirement plans fail to do. Here are the top five:

1. They had a formal investment committee 

Two heads are better than one, three heads are better than two, etc. ERISA does not require that the plan’s fiduciary form an investment committee. However, it does require that if you lack the requisite expertise to make the sorts of investment decisions unique to 401(k) plans (establishing the metrics that funds will be benchmarked against, evaluating the fund lineup, etc.), you should reach out to someone or an organization that has that expertise. Forming an investment committee to review the plan’s investment performance is just a wise thing to do.

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What Could Cause Your Plan To Be A Candidate For Excessive Fee Litigation?

By: David I Gensler, MSPA, MAAA, EA

There has been enough excessive fee litigation through the years that certain patterns have emerged. So what common traits do most of the excessive 401(k) fee litigation cases share?

The Plan Assets Are In The Multi-Billion Dollar Range – Nearly every lawsuit filed since 2006 has been against plans with assets in excess of $1 billion. That is not surprising.  These cases rarely go to trial.  They almost always get settled.  As Woodward and Bernstein were advised, just “follow the money.”  But given the enormous resources that these plans and the companies that sponsor them have, what has caused them to be so open to litigation and why did the plan sponsors almost universally choose to settle?  And what can smaller plans learn from their experiences?

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401(k) Lawsuits move…Down Market?

By: David I Gensler, MSPA, MAAA, EA

Businesses rarely adopt a strategy of moving down market. They either stay or move up market. That certainly has been true in the world of 401(k) litigation. Almost universally, the plans being sued have had participants in the tens of thousands and assets in the billions of dollars. And why wouldn’t they? The attorneys that pursue these actions take them on a contingency basis. Years pass as they wind their way through the courts. So the only way that the potential result justifies the investment of time, energy and money by the litigating law firm is to “follow the money.”

Now, for the first time, in two separate actions, 401(k) lawsuits seem to be moving down market.

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