Debate: Do ERISA Fiduciaries Have a Duty to Monitor Each Plan Investment Option?

Byrnes: Unanimous or not, the Supreme Court merely punted the real issue back to the lower court with their holding. What we really need are specific parameters on the fiduciary’s duty in these 401(k) investment option cases. Perhaps once the 7th Circuit addresses the issue yet again, the case could make its way back to the Supreme Court for a more decisive, concrete ruling.

Bloink: Fiduciaries shouldn’t be able to avoid fiduciary liability by simply offering a wide array of options — quantity shouldn’t be a substitute for quality, in other words. Plan participants trust investment fiduciaries to conduct their due diligence and remove any options that have excessive fees or are imprudent/poorly performing in other ways. We shouldn’t expect the plan participant to have to wade through the details when making their investment choices. 

Byrnes: The fact is, participants should be entitled to make their own investment choices when it comes to their retirement assets. It’s entirely possible that not every investment option will be suitable for every participant — but that doesn’t mean the participant should be stripped of their right to choose. This decision could scare plan sponsors into offering fewer investment choices in the long run.

Bloink: The plan sponsors in this case attempted to evade their fiduciary responsibilities by simply offering a wide range of plan investment options. By definition, the fiduciary should be responsible for helping plan participants make sound and smart investment decisions. Absent a duty to individually advise each plan participant with respect to each investment option (which would be administratively impossible in many cases), the only way to enforce that duty is to make sure fiduciaries are responsible for the prudence of each and every plan offering.

Byrnes: Every plan participant has a slightly different risk tolerance. For many 401(k) plan participants, their retirement assets constitute the bulk of their assets available for investment. We do need more specifics regarding a plan sponsor’s duty to monitor. But when it comes down to it, offering additional investment options to suit the needs of a broader range of plan participants shouldn’t expose the plan sponsor to increased liability — as long as the plan participant does, in fact, have access to strong and prudent investment options.

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