Whether by instinct or learned behavior, retirement plan advisors and consultants commonly stir in a healthy dose of fear factor when they discuss retirement plan fee litigation with clients. The general notion is that advisors can scare plan fiduciaries into believing that without the advisors’ guidance and services, the fiduciaries will find themselves in the litigation crosshairs. This strategy may be effective in some cases, but has its limits.

Fortunately for plan fiduciaries and participants, the times they are a-changin’. A series of recent fiduciary-friendly litigation outcomes presents plan advisors with a new opportunity to discuss litigation in a different light. Strong advisors may now leave the fear factor in their back pockets and instead lead with a can-do attitude. The courts are defining a path to prudence, and plan advisors stand to gain by helping their clients to understand: “Together we can do this in a manner that protects your participants and fiduciaries.”

Getting Deeper into Litigation

As a starting point, the lessons from litigation have become much more concrete. In January 2022, the United States Supreme Court’s Hughes v. Northwestern University opinion reiterated the Court’s position (from Tibble v. Edison) that fiduciary duties are continuing and ongoing. The Court also articulated a pleading standard that has made it easier for good plaintiffs’ firms to survive a motion to dismiss. This has, in turn, resulted in more discovery, motions for summary judgment, and trials, which has led to more substantive court opinions. These opinions help us to better understand what courts expect when evaluating allegations that plan fiduciaries have breached their duties of prudence and loyalty.

Related:Plan Sponsors Driving 401(k) Industry Consolidation

When I served as a plan consultant for more than a decade, I urged plan fiduciaries to learn lessons from other companies’ litigation experiences. That message became easier to convey as the courts began to provide more substantive, concrete lessons. Now, looking at these cases from the lens of a practicing ERISA attorney and recovering plan consultant, here’s how I’d suggest advisors use some recent litigation outcomes to better support their value proposition.

These Meetings Matter

In Nunez v. B. Braun Medical, Inc., a trial addressed whether fiduciaries had breached their fiduciary responsibilities by failing to use lower-cost funds and failing to monitor or control recordkeeping expenses. In finding that the fiduciaries had engaged in “objectively prudent conduct,” the court’s opinion cited to bullet-point lists of:

Related:401(k) Real Talk Episode 141: February 26, 2025

You Need Not Race to the Bottom

In Silva v. Evonik, a trial court granted the fiduciaries’ motion for summary judgment in response to similar allegations. The fiduciaries offered significant evidence reflecting a diligent approach to benchmarking the plan’s recordkeeping fees, including their rejection of the lowest cost quote that may have required changes to the plan’s qualified default investment alternative and/or stable value fund. The court cited earlier opinions’ conclusions around fees, including “the cheapest investment option is not necessarily the one a prudent fiduciary would select” and that “fees must be evaluated relative to the services rendered.” The court concluded that fiduciaries “need not accept drastic changes to the plan simply to attain the lowest fee.”

Hiring Us Was a Good Idea

Finally, in In re Quest Diagnostics ERISA Litigation, a trial court granted the fiduciaries’ motion for summary judgment in response to allegations that the fiduciaries had breached their duties in their selection of two specific core funds and the target date fund suite. In finding that the fiduciaries’ process was “diligent,” the court celebrated specific steps taken by the committee:

Related:Great Gray Acquires RPAG

The Path to Prudence

Taken together, these three opinions provide a valuable framework for retirement plan advisors. The courts have demonstrated that they’ll give fiduciaries credit for good governance: create a committee, implement an investment policy statement, hold meetings, actually talk about the IPS and expenses at the meetings and take minutes. They have reiterated that fiduciaries need not choose the lowest-cost investment option or service provider. They have celebrated the engagement of a fiduciary advisor and the consumption of the materials and training the advisor provides.

There are plenty of reasons for fiduciaries to be scared. There are even more reasons for them to appreciate the courts paving a path to prudence. Advisors will be well-served to help their clients onto and along that path.