Years ago, I represented a financial advisor in a dispute with a particular, well-known financial product provider after the advisor concluded that the fees in the annuities offered by that company were both too high and too hidden for him to continue to recommend the product to his clients, and instead recommended that his clients purchase other annuities offered by other companies. I have to say that, even to an ERISA lawyer and financial litigator like me, it was eye opening to closely study the contrast among the fee structures, their complexity, and the lack of transparency about costs and fees among the competing products.

At the same time, particularly after the tariff driven market gyrations over the past few months, I have spoken to more than one individual looking into annuity and lifetime income options for their 401(k) plans. Is it an idea whose time has come? Well, almost certainly. But is it an idea that can be well and easily executed at this point? That’s more debatable.

ERISA lawyer Carol Buckmann has an excellent article on all of the logistical barriers and worries (reasonable and not exaggerated) of liabilities for fiduciaries that stand between current levels of participant interest in lifetime income options and their access to those options. Broadly speaking, she identifies the lack of vendor support for offering annuities, the lack of transparency on fees and costs, and the liability risks to fiduciaries who may be challenged on their selection of vendors or products. She points out that, in many ways, the practical responses to these barriers are the same ones that have always existed with regard to complexity and liability risk in defined contribution plans – namely, that fiduciaries have to do their homework, hire outside expertise, follow a prudent process and make an educated, informed decision. In theory, anyway, this should result in both the best possible annuity options for a plan and protection for fiduciaries from liability for the selection and offering of annuities to plan participants.

The one caution I would offer, though, is that we know from decades of excessive fee litigation involving investment products in 401(k) plans that there is no possible fee level or extent of investigation into fees that can entirely rule out the possibility for a fiduciary of getting sued for breach of fiduciary duty, and I can confidently predict that the same will be true with regard to annuity options added to plans – no matter how well a plan fiduciary handles the process of adding such an option to a plan, the litigation risk will always be present.

The real solution to this for plan fiduciaries is to focus less on the litigation risk and instead on the liability risk. Litigation risk for fiduciaries in running 401(k) plans is real and cannot be avoided – and the only real solution to that is to make sure that this risk is properly and thoughtfully transferred by plans to their insurers, which effectively turns the litigation risk of providing a 401(k) plan into a shared and pooled risk among all plan sponsors.

On the other hand, actual liability exposure – or in other words paying a judgment or a settlement for having added annuity options to a plan– is something a plan fiduciary can control, to a substantial although not complete extent. And the way to do that is to fully follow the best possible practices in selecting and adding such options to plans. Do your homework, hire experts, and make sure you understand the fees and costs of the products you are considering. After all, for a plan fiduciary seeking to avoid incurring fiduciary liability, the best offense in court has always been a good defense built out during the time that the decisions in question were being made.