Page 161 - NovDefComp

Understanding Fiduciary Responsibilities

Recently Announced Settlements

Fees: $57 million, including $19 million in legal fees

• Failure to monitor recordkeeping costs and revenue sharing.
• Inclusion of imprudent investments, including retail share classes of mutual funds, and undiversified technology
fund, and a small-cap stock fund that failed prudence standards and paid the recordkeeper revenue sharing.

Fees and Investments: Hughes v. Northwestern

• The Supreme Court revived this excessive fee lawsuit filed in 2016 by vacating lower court dismissals.
• Northwestern retirement plan participants alleged that plan fiduciaries breached their duties by failing to monitor
recordkeeping fees, offering higher-cost, retail share classes, and having a menu with over 400 options that
confused participants.
• District court and Seventh Circuit previously dismissed the case because the plan fiduciaries provided a broad menu
that included low-cost funds and participants had the ultimate choice over their investments.
• The Supreme Court ruled that offering a diverse menu does not excuse allegedly imprudent decisions and
fiduciaries must conduct their own independent evaluation to determine which investments are prudent for the
plan’s menu.
• This decision reinforces that fiduciaries have an ongoing duty to monitor plan investments and failure to remove an
imprudent investment within a reasonable time is a fiduciary breach.

Conflict of Interest: Lowes settled for $12.5 million, consultant
claims dismissed

• Plan fiduciaries allowed the consultant (Aon) to offer its untested and underperforming proprietary investments
(CITs).

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