A rising tide of lawsuits against 401(k) plan sponsors—Intel, Chevron, Anthem—are pushing fiduciaries to consider outsourcing, according to Russell’s Chief Research Strategist Bob Collie.
Cases such as Tibble vs. Edison, Tussey vs. ABB, and Sulyma vs. Intel have made defined contribution (DC) no longer the “soft fiduciary option,” Collie argued.
This rising tension between plan participants and sponsors not only raise important questions about how fiduciaries should monitor 401(k) plans, but also may cause them to lean more heavily on outside experts, Collie wrotein a blog post.
“It is basic fiduciary principle that if you’re not an expert in a particular task, you should find someone who is,” he continued. “Today’s outsourcing is more explicit in its treatment of fiduciary responsibilities.”
Pressure from both lawsuits and regulation could influence plan sponsors to hand over responsibility for the management of a service and fiduciary responsibility for that service to an outsourced-CIO.
“The series of lawsuits and regulation and the resulting changes in the fiduciary landscape are not over; some lawsuits are yet to be fully resolved (and others, presumably, are yet to appear), while the ongoing saga of the Department of Labor fiduciary rule is just one of a number of regulatory strands,” Collie wrote.
The Supreme Court issued its judgment on Tibble vs. Edison last June, confirming fiduciaries’ duty to not only select investments for 401(k) plans, but also conduct regular reviews.
This ruling is “likely to have added to fiduciaries’ uneasiness,” Collie said. “Here is one more aspect of the fiduciary’s role, which is now in a state of flux: it will take some time to lock down exactly what the required review process is expected to involve.”
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