ERISA Fee Litigation: What Plan Sponsors Need to Know

Since the landmark cases of the mid-2000s (most notably Tibble v. Edison and Tussey v. ABB), ERISA fee litigation has become a significant legal risk for plan sponsors of all sizes. What once affected only mega-plans has increasingly targeted mid-size and even smaller plans.

The Wave of Fee Litigation

ERISA fee lawsuits typically allege that plan fiduciaries:

• Paid excessive recordkeeping fees without conducting competitive bidding
• Failed to benchmark fees against the market
• Used retail-class mutual funds when institutional classes were available
• Allowed revenue sharing to inflate costs without analysis
• Failed to monitor and respond to changing market conditions

Settlements in major cases have ranged from a few million dollars to over $140 million (Boeing, Lockheed Martin). Even small plans are not immune — plaintiff attorneys have increasingly targeted plans in the $20M–$100M range.

What Courts Look For

In evaluating fiduciary conduct, courts consistently look at the same factors:

1. Was there a documented process? Did the plan have an Investment Policy Statement? Were meetings held and minutes kept? Were fee benchmarks conducted and documented?
2. Was the process followed? Even good policies don't help if they weren't followed.
3. Was an RFP conducted? Plans that have never put recordkeeping out to bid have consistently struggled in court.
4. Were fees actually compared to the market? Fiduciaries who relied solely on their provider's assurances have fared poorly.

The Tibble v. Edison Ruling

In 2015, the U.S. Supreme Court ruled unanimously in Tibble v. Edison that ERISA imposes a continuing duty to monitor plan investments — not just to make a prudent initial selection. This ruling has been applied broadly to fees as well as investments. You cannot rely on a fee analysis from five years ago. Monitoring must be ongoing.

Protecting Yourself

The most effective protection against ERISA fee litigation is a documented, repeatable fiduciary process:

• Conduct and document fee benchmarks annually
• Run a formal RFP every 3–5 years
• Meet regularly (at minimum annually) to review fees and investments
• Document every meeting with written minutes
• Maintain a fiduciary file with all supporting documents
• Engage ERISA counsel if you're uncertain about any decision

Courts have not required perfection — they've required a good-faith, documented process. A benchmark report showing your fees are within market range, stored in your fiduciary file alongside annual meeting minutes, is meaningful legal protection.