Last year brought us new class action lawsuits on a number of fronts: proprietary funds, stable value funds and more. What does 2016 hold?
The answer: Probably more of the same, with creative new theories of damages and liability continuing to appear on a regular basis.
Most recently, a lawsuit was filed on Dec. 29 by the plaintiff’s law firm Schlichter, Bogard and Denton that involves the 401(k) plan of another big plan sponsor (Anthem). As always, lawyers will dissect the complaint for its nuances. Summarized briefly, this latest complaint targets a plan that: (1) had already moved to mainly lower cost investments; (2) had already reduced its fees; and (3) has a money market fund (and, of note, is being criticized for not having a stable value fund).
While these lawsuits are often headline grabbers, as a practical matter sponsors, advisors and other service providers will continue to have their approaches and practices nitpicked as plaintiffs’ lawyers look for new opportunities. Interestingly, Schlichter, Bogard and Denton has advocated for lower cost investments in numerous other lawsuits and has previously filed claims alleging mismanagement of stable value funds. In other words, advisors, sponsors and service providers will need to watch their backs because what may have seemed “safe” from the threat of litigation a year ago may no longer be so in 2016.
Going forward, complacency will not be anyone's friend — reviewing your processes and continually working to improve plan governance and oversight will remain of paramount importance as the litigation landscape evolves.
David N. Levine is a Principal at Groom Law Group, Chartered, in Washington, DC. He writes the “Inside the Law” column for NAPA Net the Magazine.
