I wanted to pass along this advisory from Davis Wright Tremaine which argues for legislative action to, in essence, raise the bar that plaintiffs have to hurdle to prosecute an ERISA excessive fee class action. What I like most about it is the authors do not simply complain and ask for legislative intervention, but instead detail a specific legislated presumption of prudence that could be enacted for this purpose. There is a lot I could and would like to say on this matter, but for today I want to limit myself to one point, although I may come back and discuss this topic more in future posts.

Davis Wright Tremaine’s advisory picks up on a common complaint at this point with regard to excessive fee cases against ERISA governed plans, particularly after the trustees of Boston College demonstrated, at summary judgment, an arguably prudent process in Sellers but nonetheless either will have to settle or try the action because questions of fact existed precluding summary judgment: that in cases where the plan sponsor demonstrably acted reasonably well but not necessarily perfectly, the cases risk being nothing more than a tax on insurers and plan sponsors. I talked about this here and here, and in particular, the Fid Guru Blog addressed this point from the perspective of insurers and plan sponsors here. The problem with this point of view, though, is that it leaves out the fact that there are cases with substantive merit – in my mind, not as many today as there used to be now that plan sponsors, vendors and their advisors have dramatically upped their games in response to the lessons from the earliest suits, settlements and rulings, but there certainly were and remain meritorious cases. To simply universally declare that such cases should not be allowed is to ignore this reality. Davis Wright Tremaine’s advisory strikes at the sweet spot for reducing such cases while still leaving room for the meritorious ones to proceed, by proposing a reasonable presumption or safe harbor that would – depending on how, once enacted, it is applied by the courts – make it harder to prosecute the types of cases that, in essence, serve as nothing more than taxes on plans and their sponsors.