According to David M. Weiner, shareholder, Littler Mendelson, PC, plan sponsors want to avoid lawsuits altogether, but at the least they should create circumstances where they can get out of a suit early, either by dismissal or summary judgment.
Lucas Barton, partner and vice president at Lockton Investment Advisors LLC, recommended having an investment review process in place and making sure quarterly meetings address processes in the investment policy statement (IPS). In addition, plan committees should keep meeting minutes and document all processes for selection or rejection, not just of investments, but of plan providers. He notes that more detail helps as time passes and committee members change.
James Fleckner, partner at Goodwin Procter LLP, adds that there are two benefits to documentation; it shows you have processes in place and helps committee members recall decisions made years earlier.
Weiner says plan sponsors need to know what their plan documents and IPSs say, so the processes will follow it. “This is an area of risk you have control over,” he told conference attendees.
Fleckner advised that unless sponsors get a lawsuit dismissed on technical or legal grounds, the legal process moves to discovery, which includes a request for all documentation, including e-mails. He warned that some of the most damaging evidence comes from e-mails, so plan sponsors should be careful about this conduit of plan communication and treat it as formal documentation. He also noted there is a fiduciary exception to attorney-client privilege.
Weiner said a good rule of thumb is if the conversation is about plan administration, assume it is not privileged and stop e-mail communications as much as possible.