Your participants want to sue you! Yep, that's right. Apparently there is a whole cottage industry springing up relating to participants suing for hidden fees. I read 4 articles this morning by people postulating about how much fiduciary litigation there will be in the future over fees and costs passed on to plan participants.
What it caused me to question is how far will it go? What about health plan administration fees and costs associated with maintaining your benefit plan? Does the cost of plan administration weigh on the value of overall benefits provided to participants? Should profit sharing plan sponsors eliminate loads on participants' accounts and bear the full weight of the plan themselves to maximize participant account balances? What will the "reasonable person" standard under ERISA Section 404 look like in 5 years based on the answers to these questions?
I happened to be looking at a multiemployer health fund for a client where 60% of employer contributions were being used to pay plan administrative costs. How do you think the participants will feel when that plan starts cutting benefits because it does not have sufficient income to cover claims? They will want to know what the fiduciaries did to control administrative costs. Or how about a single employer plan where participants want to know why the employer did not pay administrative fees out of company assets instead of the plan? Why should my 401(k) balance be lower just because my employer was stingy?
Well, before we try to divine the ultimate decisions of the court, let's try something more practical. I believe that a "reasonable person" starts by looking for potential problems, so let's check ourselves out first. I think a good starting point is to make a little chart and list all of your employee benefit plans, list all the fees and costs associated with maintaining that plan annually and then list how they are paid. Once you know how much and who pays, you can then start evaluating whether the fees are too high and whether you can take steps to minimize the impact on participants.
Of course you don't have to do it alone. Your benefits professionals and your attorneys at Fox Rothschild are available to help evaluate whether or not your plan practices with respect to fees and costs make you a likely target for participant litigation.