The pace of litigation seems to have picked up this year – but the impact on plan sponsor decisions seems to be somewhat muted, according to NAPA Net readers.
Only about 1 in 10 said that in their discussions plan sponsors seemed “more aware than ever” about the litigation. Just over 41% indicated that they were aware, but “not excessively so.” Roughly a third indicated they were “not really” aware, another 12% said they weren’t aware, and the rest were in a “some yes, others not so much” category.
More significantly, perhaps was the finding that mostly it’s not the plan sponsor bringing up the topic. A full two-thirds of this week’s respondents said they were the one bringing it up, another one out of eight said that “mostly” it was them, and the remainder said “it depends.” Although, as one reader explained, “It has not been brought up yet. Sponsors are unaware and because all my plans follow proper governance, I do not bring this up.”
For all the awareness gaps, half of this week’s respondents said that the topic did seem to be influencing plan sponsor decisions, and just under a third said it was doing so “sometimes.” About 22% said it was not having any impact.
We also asked readers to describe the areas in which the litigation topic was having. “Pushing for lower fees” was the most commonly cited response (41%), with “pressing on the subject of share class” a distant second (29%). The rest were split between “focusing on investment committee membership” and a greater focus on “fiduciary liability/insurance.” Several indicated that it was impacting consideration on how they (the plan sponsor) was paying fees.
As you might expect, readers had some interesting thoughts on the topic. Here’s a sampling:
- You would not be able to print what I would like to say about this subject; the lawyers are dancing on our graves.
- We continue to have discussions regarding the documentation of plan sponsor decisions and opportunities to enlist the services of independent 3(21), 3(38), and 3(16) fiduciaries as tools to defend potential litigation.
- Someone needs to end revenue sharing altogether. As an experienced advisor determining who gets what is challenging. There is no way that a plan sponsor, even one with the best intentions, can navigate this mess and understand their fees.
- The current litigation environment seems like spaghetti thrown at a wall – the accusations are getting broader and from case to case seem to be at odds, the parties who are being sued are getting broader and the in the end the lawyers are going to make all the money, not the participants.
Thanks to everyone who participated in our weekly NAPA Net Reader Poll!
Got a question that’s been bugging you? Want to run something by your NAPA Net reader peers? Post it in the comments section below, or email me at [email protected].
