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How to Minimize Judicial Review of ERISA Fiduciary Decisions

"A recent decision from the Court of Appeals for the Seventh Circuit offers help to ERISA benefit professionals who prefer to maximize judicial deference in favor of the fiduciaries.... ERISA's core focus is the governing plan documents.... [If] they provide the fiduciary with broad discretion to interpret their terms, and provide that the fiduciary decision shall be final and binding, the court should give the fiduciary the benefit of the doubt." [Bator v. District Council 4, Graphics Communications Conference, No. 19-2626 (7th Cir. Aug. 27, 2020)]

Sixth Circuit Confirms That ERISA Is a Law of Process, and Does Not Allow Hindsight Second-Guessing of Fiduciary Decisions

"[A recent Sixth Circuit decision] refutes the entire genre of lawsuits claiming that active fund management is per se proof of fiduciary malpractice. It effectively disposes of the persistent and repetitive claims of fiduciary imprudence asserted in most excessive fee lawsuits in which plaintiffs are asking the court to infer fiduciary malpractice based on circumstantial evidence of what participants consider an undesirable outcome." [Smith v. CommonSpirit Health, No. 22-5964 (6th Cir. Jun. 21, 2022)]

Supreme Court Could Defend Fiduciary Decisions in Taking Up Putnam Case

"The Investment Company Institute (ICI) is urging the U.S. Supreme Court to take on a case against Putnam Investments ... ICI argues that shifting the burden of proving causation, or the lack thereof, from the plaintiff to the fiduciary ignores the ordinary default rule and the plain language of ERISA specifying that fiduciaries are liable for 'losses to the plan resulting from' a fiduciary breach." [Putnam Investments, LLC v. Brotherston, No. 17-1711(1st Cir. Oct. 15, 2018; cert. pet. filed Jan. 11, 2019, Docket No. 18-926)]

ERISA Fiduciary Decisions: Making Changes to Your Qualified Plan's Investment Lineup (PDF)

"Poor performance, eliminating duplicate and overlapping funds, expanding investments alternatives, organizational changes at the fund manager level, significant changes in amount of assets under management, evaluation of fees, etc., are all potential reasons for considering investment alternative changes.... Regardless of the reason for considering a change, this advisory summarizes the technical requirements and recommended procedures in making changes to your plan's investment lineup."

Heuristics, Cognitive Biases and 401(k)/403(b) Fiduciary Decision-Making

"[H]euristics can often result in errors due to the influence of cognitive biases that may influence a decision-maker's judgment. Common cognitive biases that influence decisions include Confirmation bias ... Anchoring bias ... 'Halo effect' ... [T]hese three cognitive biases often come into play in the fiduciary decision-making process. The most notable example of this is the refusal of plan sponsors to listen to anyone other than their existing plan advisers and their refusal to consider alternative options."

The Process of a Fiduciary's Decision Is Often a Determinant of Prudence

"Often times, whether a fiduciary has breached his or her duty is not determined by the outcome of a decision but the process that went into the decision, and whether the process demonstrated prudence. Many cases hinge on the following three simple questions: [1] Did the fiduciary take reasonable measures to stay informed? [2] Did the fiduciary give due consideration to the issue? [3] Did the fiduciary consult an expert when appropriate to do so? Whether a fiduciary should or should not have acted can always be debated but a lack of process leading up to an act or omission is often fatal to the defense in a breach of fiduciary duty case."

Recent Case Emphasizes Importance of the Retirement Plan Fiduciary Decision-Making Process

"[T]he recent district court decision in Tussey v. ABB, Inc., which levied a $35.2 million judgment against the employer-fiduciary (ABB), emphasizes the importance of a prudent decision-making process. Here are some of the major missteps made by ABB and the key takeaways for other plan fiduciaries[.]"

Changing Plan Recordkeepers Is a Fiduciary Decision: Considerations for Plan Sponsors

"[A] change in recordkeepers -- regardless of the motivating forces behind the move -- is one of those 'choices' that plan fiduciaries are expected under ERISA to evaluate as a prudent expert.... [P}lan fiduciaries can be expected to know: [1] How much your plan pays in fees. And to whom. And for what.... [2] What revenue-sharing is (and where it goes).... [3] How your investment menu might change."

Selecting a QDIA Is a Fiduciary Decision

Of the three choices for options, 1) age-based (target date funds - TDFs), 2) risk-based (balanced funds), and 3) managed accounts, TDFs are the most popular to date by far; but they remain a work-in-progress.

A Fiduciary's Guide to GLP-1 Coverage Decisions

"Coverage decisions should align with fiduciary obligations to balance cost with access to care. Keep in mind that the questions (and potential options) may change depending on how your plan is funded (fully insured, self-funded, etc.), the goals and objectives of your benefit offerings, and the current/projected utilization of these prescription drugs for your plan. Here are some key questions to ask your plan advisors, insurers, and PBMs (pharmacy benefit managers)."