I tell people all the time when I speak at seminars that compliance is key because in a downturn, participants will sue plans and their fiduciaries over things they just ignored when the markets just kept going up, up and up, with participants’ account balances doing the same. I have frequently noted this in posts as well here on this blog, reminding people that when the market goes up, participants don’t get upset that compliance problems or excessive fees or the like meant they earned “only” 12 or 14% in a given year, rather then 15 or 16% in that year, but they get plenty upset when those problems in a plan mean the difference between a loss and a bigger loss.
My support for this premise has always been anecdotal, based on what I see in litigation and learn in my discussions with fiduciaries, plan sponsors, vendors and participants. It appears there is some verifiable independent data to back this up, though: