I appreciate being named a Massachusetts Super Lawyer. I happen to know a lot of the lawyers on the list and have litigated against many of them. I know from their presence on the list that it’s the real deal.

But at the same time, I am never really all that comfortable broadcasting it and never really know what to say about it. I am from the generation of high school athletes, after all, who were taught when you scored, to act like you have been there before. Nowadays, if you gain two yards for a first down on second and inches, you strike a Heisman pose!

Anyway, I have in fact been named a Super Lawyer again this year and appreciate the honor. You can find more information on me being named a Super Lawyer here.

My “Five Favorites for Friday” series is quickly becoming one of my favorite undertakings. It’s a terrific opportunity for me to go back over the stories and videos that have crossed my desk during the week, and think about what they mean for my practice, my clients and the readers of my blog. Hopefully, you find it is as useful an exercise as I do.

For those of you who may be new to the series, here is the original post introducing the series. Last week, I noted that I could have covered twice as many topics as the five that I did pick out, and the same is true this week. Nonetheless, I am going to restrain myself and limit it to five items. So here we go:

  1. I am a huge fan of ESOPs. I have seen more employees retire with real wealth, more companies improve their performance, and more founders cash out happily from the use of this tool than from any other business transaction that I have observed or been involved with over the past thirty years. Now granted, as a litigator, there is a certain selection bias in play – for instance, when I see a private equity roll up, it’s usually because the deals have fallen apart and litigation has sprung to life, not because the deal went great and a lot of people who would otherwise be employees ended up with an excellent exit. This article here, by two lawyers at Foley & Lardner, on the ESOP process and structure, is an excellent place to start if you want to understand exactly what an ESOP transaction looks like.
  2. In last week’s “Five Favorites for Friday,” I discussed why insurance is a wildly underrated career field for young professionals. In the same vein, today I am including these excellent short video clips from MS Amlin that explain why underwriting complex risks is similar to being a Hollywood stunt person. I know what you are thinking – I am sure it is similar to my initial response to the premise. But watch the clips and I suspect, like me, you will end up convinced that the comparison is apt.
  3. I love this article by two lawyers at Pillsbury on what insureds should know about triggering insurance coverage for long tail exposures. They draw on the lessons of the old school classics in this genre for their guidance, namely the asbestos and environmental coverage disputes of the 80s to the early part of the 21st century. (The authors note that “as of 2024, insurers had paid $121 billion in asbestos and environmental-related losses under policies they have issued to policyholders.”) My professional and personal experience tells me the authors are absolutely right both in the lessons they draw from that time period and their belief that those lessons resonate today. I was actually the paralegal who, back in the 1980s, spent weeks sitting in the Library of Congress finding old periodicals to be used in deposing underwriters on the question of what they thought asbestosis actually was when they were excluding it from policies, and in the early 1990s I was the junior associate on some of the key Massachusetts pollution exclusion cases. In fact, almost twenty years later, I was still litigating some of the same long tail issues when I tried a reinsurance dispute concerning long tail environmental losses involving occurrence policies from decades ago.
  4. Nothing going on in the news has changed my position and views on the use of alternative investments in 401(k) plans. See here, for instance. I am a lot more sanguine about lifetime income options being added to 401(k) plans, depending on how it is done, if only because I know from my own clients that some participants want them within plans and, further, they can actually solve for participants an actual problem they are concerned about, namely the risk of outliving their money. However, the devil is in the details on this one, and this essay by The CommonSense 401(k) Project on the use of annuities in plans is worth a read in this regard.
  5. I have written many, many posts on the central role that the insurance industry has to play in addressing climate change issues, having first written about work by Lloyd’s on this issue around a decade ago. The unbreakable relationship among the industry, losses from climate change and the necessity of functioning insurance markets in the operation of modern economies makes insurance carriers central to any economic incentive to target the problem. The same, it is increasingly obvious, is true for handling cyber risks to modern economies – as is pointed out by Zurich in this whitepaper addressing the extent of uninsured and uninsurable cyber risk, and the need for public and private coordination to address it. Hat tip, as we used to say in the early days of blogging, to Mark Flippen and broker Lion Specialty, for bringing it to my desktop.

I talked briefly about withdrawal liability in my very first “Five Favorites for Friday” post, which you can find here. Because there is often so much money at stake, and because unions are aggressive in pursuing and claiming withdrawal liability payouts from departing employers, and because departing employers so want to not pay withdrawal liability if it can be avoided, there is a steady stream of significant and, if you are at all interested in the subject of union pension obligations, fascinating decisions on the subject of withdrawal liability.

The latest is out of the Seventh Circuit, in the case of SuperValu, Inc. v. United Food & Com. Workers Unions & Emps. Midwest Pension Fund, which is discussed in detail here. The Court focused on applying the literal terms of the statute, and rejected the employer’s arguments that policy concerns required reading the statute in a manner that would have reduced the employer’s withdrawal liability payout.

As I have discussed elsewhere, in my experience, creativity in arguing for a reduction of withdrawal liability, followed with any luck by settlement negotiations, is typically an employer’s best bet for reducing withdrawal liability. As the Seventh Circuit’s new decision reflects, taking on the statute and its requirements directly is typically not all that effective of a tactic.

My final note on this case for today is that if you are interested in reading a good, overall explanation of withdrawal liability, the Seventh Circuit provides a good one in SuperValu, which you can read in full here.

As I discussed in this earlier post just last Friday, I am now running a series of posts, each to be published on Friday, covering five articles of interest that I didn’t have time to write about – or write enough about – during the week just ending. This past week was busy and full of interesting stories to write about, and I could have easily made this post Ten Favorites for Friday, instead of five, but then the alliteration would be missing. So here goes with this week’s Five Favorites for Friday.

  1. Lawyers cannot get enough of writing about and talking about fees, for a lot of reasons. See here, for instance. But for an ERISA lawyer, the topic has particular resonance, because of all the statutes with fee shifting provisions, I suspect fee awards arise more under ERISA than under just about any other statute, because of the ubiquity of benefit disputes. But to someone like me, who also litigates insurance bad faith disputes, fee award issues are particularly salient because in many states, including in my home state of Massachusetts, fee awards can be entered against insurers in bad faith cases. Here’s a great story on whether it’s proper for a trial court to consider the size of a firm seeking an award when determining the hourly rate to apply to a fee request.
  2. It’s cyber insurance all the time, on all channels, as well it should be. Cyber risks are central to many industries, are a primary and prominent insurer exposure, and are the focus of attention with retirement plans in particular. Here’s a great article on the current state of the cyber insurance market.
  3. Speaking of cyber, I am currently litigating a data breach dispute, and the offshoots over shifting the loss among multiple potentially responsible parties. On my usual home turf of ERISA litigation, cyber is the 800 pound elephant of liability staring at plan fiduciaries. They and their lawyers should all be conversant on the subject and if they are not, I cannot think of a better place to start learning about it than this webinar, scheduled for next week.
  4. While I understand the reasons why, subjectively, insurance seems boring to young professionals and recent graduates picking a career, objectively speaking that interpretation is just plain wrong. You want international travel and work? I have mediated and litigated coverage cases in Scotland and London, and litigated in Guam. Want to make an impact on climate change? The industry has been at the heart of the issue since before most, and remains focused on it as an existential crisis. I discussed these points here and here, among other places, for instance. Anyway, that’s a long way of saying it’s a wildly underrated career field, and this article provides a nice discussion of that point.
  5. Not too long ago, a jury awarded nearly $40 million to plaintiffs in an ERISA breach of fiduciary duty case. I prefer the written word, but if you are an auditory learner, this is a pretty good YouTube explainer on the case.

When all the AI hype and AI promoters were insisting that AI would eliminate lawyers and law firms, I said no, over two years ago – I explained in this post here, in June of 2023, that instead the history of technical adoption in lawyering demonstrated the opposite. I did note as well, however, that this same history demonstrated that the adoption of AI in the legal industry would instead drive ever more complex and sophisticated transactions and lawsuits.

In my own field of ERISA litigation, for instance, the superpowers that AI will grant to law firms that prosecute class action cases is going to lead to more, not less, suits, pressing more types of theories against more types of plans and transactions than has ever been the case. With that, will also come more and more class action defense work for firms. If I had to bet, I would say that this is why, if you are paying close attention to the media coverage of law firm investment in mass tort and other class action defense teams, large firms are investing in this space.

I have pointed out over the past year at least three different themes about change for law firms and lawyers that will be driven by AI, none of which align with the prior, early narrative that AI was the end of law and law firms. They are:

  1. Commodification of routine legal work previously done on a bespoke basis. I discussed this point here, for instance.
  2. Impact on fees. I discussed this point here, among other places. Note that this does not mean universal reduction in fees, but rather wider adoption of fee models other than hourly and, perhaps more importantly, a closer alignment between price and value.
  3. Increased demand for experienced lawyers who can do good work better and faster by making use of AI tools. I discussed this point here and here.

I mention this now not because, as business strategist Jamaal Glenn has noted on LinkedIn, when you make predictions, you should show the receipts later when time has proven you right, but instead because leading general counsels who are charged with adapting to and profiting from the new legal world order being ushered in by AI legal tools are reaching similar conclusions. They are finding that AI is a surgeon’s scalpel they can wield to their benefit, not a bazooka destroying everything it hits.

Most recently and most visibly, Eric Dodson Greenberg, the executive vice president, general counsel, and corporate secretary of Cox Media Group, made essentially these exact same points last week as part of his series on AI on Bloomberg Law, in his column “AI Will Scramble GCs’ Calculus for Hiring Outside Counsel.” He points out the benefits to in-house counsel of the impact of AI on the relationship, including pricing, between companies and their outside lawyers.

For lawyers who sell judgment and expertise, and GC offices that are looking to hire for it and not just for legal bodies to throw en masse and indiscriminately at problems, these are all good things.

I am launching a new series of posts on the blog, starting today, listing five topics from the week just ended that are worth paying attention to, but which any busy person might have missed during the preceding week. For each, I will include a link or two if you want to read more deeply on that particular subject.

It is, if I am being honest, a way to clear off the backlog on my desk of things that caught my attention over the week but that I never had time to write about (or write enough about) here or on LinkedIn.

1. The first is a little (maybe more than a little?) self-referential, but what the heck. I enjoyed it and I think you might enjoy the conversation too. I was a guest on the Real Lawyers podcast, discussing twenty years of writing this blog. If you are interested, you can read more about it in this post on the Real Lawyers Have Blogs blog, which provides links to the podcast and a list of highlights (and where to find them in the podcast). If by now you still haven’t read enough about, well, me, I talked about the podcast on this blog, here.

2. Pension risk transfers are back in the news. The Southern District of New York allowed one lawsuit claiming that terminating a plan and instead providing the participants with annuities was a breach of fiduciary duty to proceed into litigation. Me personally, I am fascinated to see how the case progresses, what evidence the plaintiffs can uncover to show there was allegedly something wrong with the transaction, and what legal standards the court ends up testing the decision against.

What’s even more interesting about this case to me is that I have been counsel to a plan sponsor and plan fiduciaries in a pretty substantial pension risk transfer, and I think we did a good job and the participants will make out just as well as they would have without the transaction. That said, though, I think this is another of many areas of ERISA where the transaction at issue is exactly as good as the good faith of the plan sponsor and/or fiduciaries. ESOPs are one area in particular where I think you get a good result when plan sponsors, fiduciaries and selling employers are acting in good faith, but a lot of litigation when they are not. I am starting to wonder whether the same may be the deciding factor in pension risk transfers, and the dividing line between ones that do no harm and those that just might be a fiduciary breach.

3. No one, including me, can get enough of the discussion of whether, and if so how, to add alternative investments to 401(k) plans. Here’s the story of a major financial institution looking to fold private credit instruments into an electronically traded fund. Somehow, I don’t think it will be long before someone is trying to get that same fund into a 401(k) plan.

I am still standing by my advice to plan sponsors about how best to handle the push to add alternative investments into 401(k) plans.

4. There has long been an overlap between my tech litigation work over the years and my insurance coverage practice. My first IP work involved copyright infringement cases covered by insurers, who retained me to defend those cases, which in turn led to one of those insureds retaining me to try a patent infringement case. Those relationships likewise led to my infringement litigation defense of a knowledge management start up, including in preliminary injunction proceedings, which from there led to my current work litigating a data breach dispute. Some of this drives my interest in, and writing on LinkedIn and here, about AI adoption in the legal field. See here and here for instance.

AI, however, has now reached the point – as all new industry developments in any field eventually do – where it is raising complications in insurance underwriting and provoking more complex and careful claims resolution. Unsurprisingly, this is leading to more work for lawyers (this provides a certain ironic spin on the claim that AI will actually replace lawyers, when I argue it will actually just increase demand for at least the experienced and better lawyers). I like this article on the subject, and hat tip, as we used to say in the early days of blogging, to Geoffrey Fehling for pointing it out on LinkedIn.

5. Withdrawal liability is just great fun, partly because many employers and companies don’t even realize they are triggering it when they stop using union labor. It’s basically the trailing pension liability that employers owe to union pension plans in that circumstance, and there aren’t a whole heck of a lot of ways for employers to avoid paying it – although there are some. I have litigated the issue before, with some success, and my view is it takes some real substantive and tactical creativity to get a good result for an employer in this type of a dispute. Here’s a great article on an attempt to do just that which was rejected by the Third Circuit.

I was a guest last week on the Real Lawyers Podcast hosted by Kevin O’Keefe, one of if not the founding fathers of legal blogging. As we discuss in the podcast, I had come across a reference to blogging and Kevin (as well as his then new company, LexBlog) in an article and thought blogging sounded like fun, so I reached out to him. Kevin got me set up pretty quickly, and within a few weeks I was a blogger. It’s now twenty years later and I am still posting regularly.

I talk about what I have learned along the way in the podcast. In a blog post, Kevin points out some of the key takeaways from our discussion, including that:

• Blogging remains one of the most effective ways for lawyers to establish credibility and generate work
• Publishing allowed me to break into ERISA litigation despite being an outsider in a closed market
• Referrals often hinge on credibility, and consistent writing makes both referrers and clients confident
• Blogs contribute to secondary law by providing analysis, commentary and frameworks where published case law is limited
• Young lawyers should use publishing to build expertise in niches, especially as AI changes traditional entry-level work

You can watch the podcast on YouTube here, and you can find other links to it here.

Fred Reish has an excellent article out on the technical and substantive aspects of the executive – and soon to be regulatory – efforts to open 401(k) plans to alternative investments, with a particular focus on the targeting (pun intended) of target date funds as the channel for bringing them into the investment holdings of millions of American workers. I have written extensively about various concerns I have about doing so, including with regard to burying them within the range of assets held within a target date fund. I am skeptical, as I have written elsewhere, that this is in the best interest of plan participants; that all plan participants will even know they are holding such assets in their accounts; or that it won’t put plan sponsors and fiduciaries at significant liability risk. I am also skeptical, however, as I have also written elsewhere, that alternative investments won’t end up in target date funds, despite these issues.

One of the central substantive issues with adding alternative investments into 401(k) plans concerns the disjunct between sloganeering and the substantive purpose of 401(k) plans. Plans, and the accompanying costs to the taxpayer from deferral of taxes, do not exist – and ERISA was not enacted – to democratize investing, which seems to be the alleged rationale for the idea of opening plans to such investments. In the article, Fred goes to the question at the heart of whether the regulatory and financial industry push to add such investments to plans aligns with the purpose of such plans and the real justification for the cost to the Treasury of them – which is the goal of protecting and improving retirement outcomes for workers. Fred points out that the real question in the long run for fiduciaries, in deciding whether to grant entrance to plans to such assets, is whether doing so improves, or instead harms, the retirement readiness and outcomes for plan participants. He also points out that it involves far more than just consideration of the returns on the investment, but also numerous issues related to the propriety of the investment for the employee pool. All of this will go into any analysis of the question of whether it was a fiduciary breach for plan sponsors to allow, rather than seek to preclude, their addition into target date funds used in a given plan.

To me, there is one central and absolute starting point – where is the evidence, and what is the data, showing the potential improvement to investment outcomes, and at the cost of what extent of additional volatility, for plan participants? Without that, plan sponsors are just guessing and fiduciaries will never, if and when sued, be able to show that they fully investigated and properly understood the investment option when they approved it for plan participants. Even if and when that data is made available to plan sponsors and fiduciaries, as I have written elsewhere, most are not going to have the sophistication themselves or, within their companies, the internal expertise to interpret the data and information. As a result, plan sponsors are going to have to bring in outside experts with the ability to actually pierce any fog, deliberate or otherwise, created by the data and to project out the likely financial and risk ramifications of the change to the asset mix and the investments.

Anything less will make it impossible for plan fiduciaries to defend, other than on legal and technical grounds rather than on the merits of the decisions, future breach of fiduciary duty claims alleging losses to plan participants from the addition of alternative assets into plans, whether through inclusion in target date funds or otherwise.

Insurance coverage lawyer Geoffrey Fehling had a great LinkedIn post concerning a Massachusetts court dismissing class action claims against Liberty Mutual because of the failure of plaintiffs’ counsel to identify and then name the correct Liberty Mutual affiliated insurance companies as defendants. I wanted to add three points to it which, in their absence, could make the decision seem either picayune or as unnecessarily elevating form over function. That is not the case here and instead the ruling is consistent with both the history of the insurance industry and the approach of Massachusetts law and courts to interrelated, but legally distinct, defendants.

  1. It Isn’t Easy to Pierce the Corporate Veil or Otherwise Intermingle Corporate Defendants under Massachusetts law or in Massachusetts Courtrooms.

Massachusetts courts and Massachusetts law, in a variety of legal areas, tend to strictly maintain the legal separation between companies, even when they are part of the same corporate umbrella or otherwise interrelated, and can be very tough on efforts to pierce the corporate veil or otherwise hold individuals or other corporate entities financially liable for the responsibilities of a particular corporate entity. That is partly why it can be such a relative shock when, such as happened in the context of withdrawal liability for union employers under ERISA, a Massachusetts court breaks new ground in this area. I have litigated, including trying and handling on appeal, pierce the corporate veil cases in other jurisdictions, and they are often not as opposed to allowing it as are Massachusetts courts. That tendency to strictly enforce corporate niceties in Massachusetts and under Massachusetts law hung up the lawyers in this case.

  1. These Types of Corporate Distinctions Among Different Insurers and Claims Administration Companies Operating Under the Same Overall Corporate Umbrellas Aren’t Just Niceties.

As an insurance coverage and bad faith lawyer for decades, I have litigated plenty of cases where the proper defendant is one, but not other, insurers in a corporate family. Moreover, many of these corporate families actually have their own separate, free-standing claim administration companies within those families. This has been commonplace for many years and there are often regulatory, capital, and other corporate reasons for this type of segregation – it is not, as decisions like this one can sometimes suggest to readers, something that is random and shouldn’t be respected by courts.

I defended at trial the separate and free standing TPA operation of Liberty Mutual that administered claims covered by the captive insurer of a particular conglomerate when both entities were sued for bad faith in their handling of a multi-million dollar claim. There were a number of reasons that it was important for the two entities to be recognized and understood solely as separate corporations, even though their actions were interlinked. Otherwise, responsibility and legal liability of the two companies, if any (there was none, as the defendants prevailed at trial), could not have been properly assessed and allocated under Massachusetts law. The issue of allocating liability and responsibility in these types of situations in a fair and understandable manner tends to require respecting the corporate form and the legal separation of the various implicated companies.

  1. The Separate Corporate Forms Aren’t Nefarious – They Are Often Just Accidents of History.

In some pierce the veil type cases – such as with certain private equity transactions – there are tactical reasons for multiple corporate entities to exist and the distinctions among the entities were deliberately crafted right from the get go. But sometimes they can just be charming artifacts of a bygone era. Many of the different corporate names and forms contained within the overall umbrella of a larger insurance entity are remnants from the combining of different insurers into a larger entity. For instance, years ago, I tried a reinsurance case involving missing reinsurance certificates from the 1960s (I won’t explain here how we ended up in a state court trying the dispute when it is something that would have typically been arbitrated; it is real inside baseball stuff but if you are interested, message or email me and I will explain it). One of my key witnesses was the first General Manager of Lexington Insurance Company, who was put in charge after AIG formed the company – although much has changed since then, Lexington remains a separate insurer within the AIG umbrella many decades later.

This history can be part of the charm of working in the insurance industry or litigating insurance cases, particularly when you get old timers talking, as was the case in my reinsurance trial.

In earlier posts in my Plan Sponsor and Fiduciary 2.0 series I promised to provide a cheat sheet for fiduciaries confronting the push to add private equity and other alternative assets to 401(k) plans.  Here it is, with a focus on private equity assets, because that is where most of the initial action currently is and will be – although the same approach will provide protection with regard to other types of alternative assets as well.

I am not going to say in this cheat sheet whether plan sponsors and fiduciaries should or should not add such assets into their plans, nor am I going to tell them here what decisions to make. As the recent Intel case makes clear, there are circumstances in which a valid argument for adding private equity investments to a plan can be made – but that does not mean it is the right decision in all or even most cases.  And it continues to be my view that, first, the onus remains on the proponents of this idea to demonstrate that adding private equity investments to plans will decrease volatility and/or increase returns for participants, and, second, that in the absence of such proof, it is hard to see a valid reason for adding such assets to plans.

From a 30,000 foot level, there are two primary risks for plan sponsors, plan fiduciaries and plan participants from adding private equity or other alternative investment options into plans.  For the first two – sponsors and fiduciaries – it is the substantial risk of getting sued by the class action bar on the theory that it was imprudent to include such assets in plans.  For the remaining group – the plan participants – it is the risk of incurring losses that, absent such investments, they would not have incurred.  These risks obviously overlap, in that the greater any losses to plan participants, the greater the likelihood of class action litigation and, moreover, fiduciary liability.  Plan sponsors and fiduciaries who add private equity or other alternative investments into their plans will not be able to completely avoid these risks, but they can reduce the risks they face in this regard by following certain approaches in adding those assets into their plans.  

Here is my six step cheat sheet for plan sponsors and fiduciaries looking to reduce their future litigation risk and potential fiduciary exposure as private equity and other alternative assets are moved into plans.

1. Be Skeptical About Their Inclusion in Target Date Funds, Consider Pushing Back on It,  and Document Doing So

    First, plan fiduciaries should think about how private equity or other alternative investments would gain access to their plans.  The push to include private equity as part of asset allocation funds, such as target date funds, is not to the benefit of plan fiduciaries. It means that far more plan participants will end up holding the assets than would otherwise be the case if, for instance, plan participants were required to affirmatively elect a fund in the lineup that is solely offering such assets. It also increases the likelihood that a large number of plan participants will end up exposed to private equity risks without knowing it.  For these and other reasons, burying the private equity assets in target date funds is likely to increase the amount of potential losses and of potential fiduciary exposure, than would be the case if private equity assets were added to a plan only in their own capacity, rather than as a potential co-morbidity with other investments.

    I can see many reasons why including private equity assets in a target date fund would be in the best interest of sellers of financial products, but that doesn’t mean it is the best way for plan participants to access, or sponsors to add, that exposure in plans.  A plan sponsor or fiduciary should leave a documented trail of seeking to have them instead added only as a separate free standing investment option and excluded from any asset allocation funds in the plan – I am skeptical that any plan fiduciaries will succeed in such an effort, but the very nature of seeking that solution and documenting that it could not be done will go far towards demonstrating prudent and reasonable conduct if forced to defend against a breach of fiduciary duty class action.

    2. Watch Out for Private Equity Assets Being Back Doored Into Existing Fund Options

    Second, along the same lines, a big question to me continues to be whether private equity investments will simply be added into the mix of holdings in target date funds that are already in plans, thus entering plan holdings by sort of the back door and under the radar, instead of through the front door for all to see, with their arrival heralded to the fiduciaries and plan participants right at the outset. Personally, I am skeptical if, by the time regulatory rewrites on this issue have occurred, fund vendors are not free to unilaterally add private equity assets into the mix of investments in target date funds that are already in plan investment options and already held in vast amounts by plan participants. If those participants take losses because of the addition of these assets, which were added to their holdings without them affirmatively deciding to take on that risk, plan fiduciaries will be sued for allowing it to happen.

    Plan fiduciaries should keep a close eye on this issue and avoid allowing private equity investments to creep into their plans in this way without demonstrating an effort to avoid it.  Plan fiduciaries should document that they either affirmatively came to the conclusion that this occurring was a good thing for participants and thus affirmatively decided to allow it, or else should document that they engaged in industry appropriate efforts to avoid it.  A future defense against class action lawsuits related to this type of backdoor “asset creep” is going to require proof of one or the other.

    3. Focus on Exploiting the Upcoming Safe Harbor

    Third, there is absolutely no question that regulatory developments in this regard will add some form of a safe harbor for plan fiduciaries who add private equity assets into plans.  However, we have more than enough experience with safe harbors, including with litigating their scope, to know that they are not a perfect “get out of jail free” card in this context. Nonetheless, they are better than nothing and, depending on various factors, could be a lot more help than that in this circumstance.  As a result, plan sponsors and fiduciaries considering adding private equity assets to plans should look very closely at the nature of any regulatory safe harbor in this context and make sure that they approach adding private equity assets to plans in a manner that will maximize any protection that may be provided by such a safe harbor.  Equally importantly, they should document anything necessary to invoke that protection.

    4. Overcommunicate with Participants

    Fourth,  fiduciaries must demand broad disclosure of relevant financial information concerning private equity investments, including costs, volatility, fees, past performance, etc., and thoroughly vet that information, including using outside experts to do so if necessary.  They must then provide that information in an understandable format to plan participants.  Nothing will look worse for plan fiduciaries in class action litigation than the argument that not only did plan participants suffer losses from adding private equity investments into plans, but they also weren’t even told enough information to make educated decisions about whether or not to hold the asset in their accounts.

    5. Fully Investigate the New Investment Assets

    Fifth, and this is related to the one above but distinct from it, fiduciaries should conduct a thorough and detailed investigation of the finances of the investment option and the case for inclusion in the plan.  This really does need to be a searching inquiry, and not simply a review of vendor representations of past performance and predictions of future performance (particularly given the caveats with regard to each that will almost certainly be provided to plan sponsors and fiduciaries). In my experience, few but the most sophisticated plan sponsors will have the internal expertise to sufficiently conduct this examination, so most plan fiduciaries should retain excellent outside experts to review and report to them on these issues.  Plan fiduciaries should be careful about who they hire for this purpose, as well – just hiring anyone to do it won’t be enough, as it will open plan fiduciaries up to the charge in class action litigation that they may have sought outside expertise but they failed to properly select and utilize experts, which is almost as bad as being charged with having brought no expertise to bear on the issue at all.

    6. Make it a Settlor, Not Fiduciary, Decision

    Sixth and finally, whatever a fiduciary decides to do about this – including excluding private equity from plan assets – they should put it in the plan document.  One of the more interesting defense theories – and proactive tactics for preparing for possible future class action suits – that is currently in vogue is the idea of protecting plan fiduciaries by transforming decisions into plan settlor, rather than fiduciary, decisions, through the tool of making them part of the design of the plan, outside of the discretionary decision making of the plan’s fiduciaries.  This is a perfect place for that tactic.  Sponsors and fiduciaries should fully examine the question of whether to allow private equity investments into plans, but then should have the plan amended one way or the other on this question.  They need to remember, though, not to deviate from the treatment of this option as written into the plan itself – doing so will bring its own host of litigation problems.