There are three practical lessons from the March 2012 decision in the case, Tussey v. ABB, as outlined by NAPA Net ERISA Conductor Bob Rafter:
1. make Investment Policy Statements as broad as possible so that there can be little room to second-guess the plan sponsor’s actions;
2. while selecting a higher costs fund is not inherently problematic, not selecting lower share class is; and
3. employers cannot use their position as a fiduciary and trustee of a plan to co-opt the service provider to subsidize other services that would have been otherwise paid by the employer.
Many employers get complacent about benchmarking fees, understanding the law and documenting their activities. The Tussey case illustrates how one sponsor that was asleep at the wheel paid for those lapses. Advisors can use this to wake up clients and prospects who think it will never happen to them – why take that risk? In ERISA, prudent process rules over results.
