Can Duties of Prudence and Loyalty Diverge?

National Association of Plan Advisors [NAPA]

Could plan fiduciaries violate their duty of loyalty to plan participants despite a prudent process? A recent federal judge says yes — Nevin (Adams) & Fred (Reish) discuss.

Participant-plaintiff (and pilot) Bryan P. Spence filed suit in the U.S. District Court for the Northern District of Texas in June 2023 against defendants American Airlines, Inc., American Airlines Employee Benefits Committee, Fidelity Investments Institutional, and Financial Engines Advisors, LLC (he subsequently dropped the latter two). 

The suit alleged that they “breached their fiduciary duties in violation of ERISA by investing millions of dollars of American Airlines employees’ retirement savings with investment managers and investment funds that pursue leftist political agendas through environmental, social and governance (‘ESG’) strategies, proxy voting, and shareholder activism — activities which fail to satisfy these fiduciaries’ statutory duties to maximize financial benefits in the sole interest of the Plan participants.”

And now — following a four-day bench trial — during which there was “testimony from multiple witnesses and examined numerous exhibits,” a review of the record in its entirety and where the Court “has observed the witnesses to assess their credibility and weigh their testimony” — that same Judge O’Connor has now determined what appears to be an unusual divergence. 

So, what’s going on with this case — and what does/should it mean for retirement plan fiduciaries? Nevin (Adams) and Fred (Reish) discuss.

More Information, How to Register