Investment Advice to Plans and Participants and Litigation Risks

Benefits and executive compensation partners Fred Reish and Megan Hladilek and associate Emily Kile-Maxwell coauthored an article for the National Association of Plan Advisors on how retirement plan advisers can be a target of lawsuits for breach of fiduciary duties under the Employee Retirement Income Security Act (ERISA) of 1974.

The authors note the recent increase in ERISA claims filed against retirement plan advisers and outline the allegations and the courts’ conclusions in selected cases. They also describe the duties of ERISA fiduciaries and emphasize the importance of having and documenting good processes behind investment advice to limit litigation exposure.

In conclusion, the authors recommend advisers further protect themselves against these kinds of claims by understanding and following a plan’s investment policy statement, adequately communicating with participants about the nature and scope of their services and ensuring that participants understand and better appreciate the value they are receiving.