This is a great story in Plan Adviser on the past and future of ERISA litigation over 401(k) plans. It’s a fun and short read, neither of which is normally true of articles on this subject. That’s a little tongue in cheek, but that phenomenon is nobody’s fault: when I have written on the subject, I have an awful lot of trouble reining in the word count. At its core, the article presents the question of whether the long and highly contentious history of this area of litigation has actually benefited participants.

There are three points from it that I wanted to touch on. First, a defense lawyer argues in the article that while there have been many large settlements, they were simply made for business reasons and not because of potential liability. She argues that the underlying fiduciary actions have, and continue to be, proper and that, as a result, defense lawyers would have liked to try more of these cases to conclusion, but business concerns argued against that approach. I don’t know about that, myself. While I have long argued that plan sponsors and their insurers should be aggressive about taking these types of cases to trial, I have long felt like a voice in the wilderness on this point and have only noted others agreeing with my take since the recent high profile defense win in the trial involving the Yale retirement plans. I hope the tide, and appetite for trial of defendants in this area, is turning, but we will see.

Second, Paul Secunda, who once served as my expert in an ERISA dispute back when he was still in academia, makes what I think is the reasonable point, which is that fees have declined during the history of this type of litigation and attributes it to the potential and actual litigation exposures faced by plan sponsors and fiduciaries. I haven’t looked at the numbers on this, or looked critically at the data on it, in a long time, but that matches my sense of the matter. Even if Paul is right, though, as I think he is, there should be no shame in that for plan sponsors. The threat of litigation has always been a powerful force in getting people to look closely at established business practices that, through no fault of anyone and for no nefarious reason, have simply operated on autopilot but should be improved upon.

Third, the article ends with some excellent advice to sponsors in the “mid-to-small retirement plan market” that they worry less about the legal exposures and more about their processes and the outcomes for their participants. The problem with the advice is that, for many smaller plans, getting a strong outside TPA or other vendors who can help execute this advice can be very difficult. Larger service providers often aren’t a good fit for smaller plans, and many third party administrators who focus on that market are, in fact, only interested in making the sale, not in bulking up staffing and expertise to the level needed to fully serve that type of sponsor. I mention this only as a sort of supplement to the speaker’s advice to sponsors of smaller plans. It is good advice, but it can be hard for plans that size to obtain the outside expertise needed to execute it.