How Retirement Plan Sponsors Can Reduce Litigation Risk Through Structure, Discipline, and Documentation Fear of litigation is something almost every retirement plan sponsor experiences. Lawsuits are ...
How Retirement Plan Sponsors Can Reduce Litigation Risk Through Structure, Discipline, and Documentation
Fear of litigation is something almost every retirement plan sponsor experiences. Lawsuits are disruptive and costly, but fear should not stop you from offering a strong retirement plan to your employees. As Brad Ferguson often says, “Don’t let the fear of lawsuits and litigation keep you from giving your employees the retirement plan they deserve.” Your employees benefit when you lead with clarity and discipline.
Why Litigation Has Increased and Why It Matters
Retirement plan litigation has remained elevated in recent years. Plaintiffs often file complaints that touch multiple fiduciary areas. Even if one part of your process is strong, weaknesses elsewhere can leave you exposed.
Most claims focus on predictable topics: recordkeeping fees, weak or unused Investment Policy Statements, and committee minutes that do not explain how decisions were made. Courts look closely at process and documentation. Good intentions matter less than your ability to show consistent oversight.
Smaller Plans Are At Risk Too
Many sponsors assume litigation mostly affects billion-dollar plans. Consider Damberg v. LaMettry’s Collision: a plan with about $9 million in assets and roughly 100 participants. It still faced accusations tied to recordkeeping fees and fiduciary monitoring.
The challenge was not only the claim but the time, legal cost, and disruption required to address it. Strong governance is essential for every plan, regardless of size.
Turn Headlines Into a Fiduciary Checklist
Use litigation headlines as practical guides. Identify the issue that was challenged and confirm whether it is addressed in your program.
If a headline focuses on excessive fees, review your recent discussions on recordkeeping costs. Make sure fees were benchmarked, compared, and discussed during retirement committee meetings. Then check that these details appear in the minutes.
If you do not have time to review everything yourself, ask your advisor. Simple questions like “Are we doing this?” or “Should we look at this again?” help close gaps before they become risks.
Improve Oversight Without Converting Recordkeepers
You do not need to change recordkeepers to improve governance. Choose an advisor who is independent, free from conflicts, and willing to accept a full fiduciary role. Sponsors should expect that level of support, no matter which firm they select.
ERISA Requires Expertise and Ongoing Monitoring
ERISA expects plan sponsors to obtain the expertise they need and to perform due diligence on every fiduciary involved in the plan. To make this easier, we provide clients with an annual fiduciary package that incorporates services, insurance information, and a due diligence checklist. This creates a clear record of oversight and strengthens the committee’s compliance file.
No Single Fix, Only a Complete Process
When sponsors ask for the one step that will reduce litigation risk, the honest answer is that there is no single fix. A reliable program is built on structure, discipline, and documentation.
We often use the example of building a house. Even if you follow every safety step, forgetting something small can still lead to a problem. Fiduciary oversight works the same way. You need a repeatable process that covers every meeting, every review, and every decision.
Quick Fiduciary Checklist
- Investment Policy Statement reviewed regularly and used in decision-making
- Quarterly investment reviews with benchmarking
- Recordkeeping fees evaluated and renegotiated or rebid as needed
- Minutes that reflect discussions, decisions, and the reasoning behind them
- Fiduciary training that covers recent cases and regulatory changes
- Ongoing oversight of vendors and fiduciaries
- Annual compliance package that collects essential documents
Stay Current With Industry and Regulatory Changes
Regulations continue to change quickly. Sponsors have seen updates from 408(b)(2), the SECURE Act, and SECURE 2.0.
The best way to stay informed is to rely on your advisor and recordkeeper. They should bring regulatory updates to your committee, prepare agendas, lead fiduciary training, benchmark fees, and document meeting outcomes. When these responsibilities are clearly assigned, your committee can stay compliant without becoming overwhelmed.
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