Fiduciaries manage assets on behalf of other individuals, like participants in retirement and health care plans. As such, fiduciaries have an ethical duty to act in the best interests of the beneficiaries they represent. In fact, they can be held liable for their actions. But what happens when beneficiaries lose confidence in fiduciaries? Lately, the answer seems to lie in the increasing number of fiduciary liability cases.
The Rising Level of ERISA Retirement Assets
The Employee Retirement Income Security Act of 1974 (ERISA) became law about 45 years ago. Between its inception and now, levels of ERISA retirement assets have continued to rise. In fact, United States retirement plans currently hold approximately $28 trillion dollars in assets.
Where there’s money, there’s the possibility of a lawsuit.
A Corresponding Increase in Fiduciary Liability Cases
As plan assets have soared, so, too, have the number of fiduciary liability lawsuits. That’s not the only trend, either. Courts seem to be showing a preference for plaintiffs in ERISA lawsuits, which may not bode well for plan fiduciaries.
ERISA fiduciary liability cases tend to focus on:
- Duties and actions of plan fiduciaries,
- Excessive plan fees,
- Excessive plan expenses,
- Failure to shop around for the best plans,
- Making imprudent decisions about plan investments, and
- Failure to manage documentation and people.
Plan participants upset over high costs of employee retirement plans seem eager to find someone to blame. The pool of potentially liable fiduciaries often includes the CEO and CFO, vice president of human resources, the individual members of the board of directors, and any other employee who made decisions regarding the management of any employee retirement plan.
Hoping to Avoid the Wave of Fiduciary Liability Cases?
It’s critical to clearly define the ERISA fiduciary role, as well as hiring the right fiduciaries. Recent fiduciary liability cases under ERISA are attempting to hold fiduciaries, co-fiduciaries, executives, board members, and committee members personally liable for actions taken on behalf of a plan.