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  • Brian Schroeder

ERISA Plans are now being Sued for Performance!

Have you read the class action suit surrounding the New York State Teamsters Conference Pension and Retirement Fund? If not, it should be required reading for trustees serving on pension plans subject to ERISA. Here is the link.


In the complaint, there are different alleged breaches and conflicts by both professionals and trustees. What I highlighted below, a performance-based charge, is the easiest to prove or defend against as it can be objectively quantified. Should the trustees claim they were just "following the advice of an expert and fiduciary," that raises another question which is addressed below.



Most, if not all, investment consultants do not report if their manager selection advice yields a net financial benefit. Therefore, if plan sponsors have not recently performed due diligence, they are de facto following manager selection advice not knowing if it is beneficial. They are flying blind risking a legitimate performance-based lawsuit.


Following the Tibble v. Edison ruling, plan sponsors must ensure that their reliance on their investment expert's advice is "reasonably justified." Let me say again, investment consultants do not self-report their manager selection value-add and therefore trustees cannot defend their reliance by simply saying, "Your honor, on a quarterly basis we review reports prepared by the expert that also gave us the advice."

Remember, all it takes is just one participant and a lawyer to start a class action lawsuit.

The best time to buy insurance is before you need it. Evaluating your active manager selection history may be the best investment you can make when it comes to improving future performance and protecting your pension plan (and trustees) from costly lawsuits.

OCIO Monitor should be considered for protecting your defined benefit plan from performance-based lawsuits; not just for manager selection, but asset allocation too.

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