Don’t be the target of a 401(k) plan suit

Posted on June 15th, 2016 at 9:28 AM
Don’t be the target of a 401(k) plan suit

From the Desk of Jim Eccleston at Eccleston Law LLC:

In May, 2015, the Supreme Court ruled in Tibble v. Edison, 135 S.Ct. 1823 (2015), that plan advisers have a “continuing duty … to monitor and remove imprudent trust investments.” As a result of this ruling, in November, 2015, Boeing paid $57 million to settle a lawsuit related to excessive fees and an improper fund selection process in its 401(k) plan.

In order to avoid potential lawsuits in the future over 401(k) plan recommendations, an advisor should draft a detailed Investment Policy Statement (IPS). An advisor should consider the following:

1.  The IPS should include detailed investment criteria.                                                                   

2.  The IPS should require there to be thorough investment monitoring.                                          

3. The IPS should include a list of the different asset classes.                     

4.  The IPS should allocate the proper roles and responsibilities of those involved in the process of executing the strategy of a 401(k) plan.                                                                                 

5. When drafting the IPS, the plan and investment objectives need to be detailed and reviewed frequently in order to determine if any modifications need to be conducted.

6. The IPS should require that expenses be reviewed comprehensively because it is an adviser’s responsibility to know the true and total cost of the plan and disclose any expenses potentially incurred by clients.

7. Educational investment materials need to be distributed frequently to 401(k) plan participants because it is imperative that clients understand what is happening with their money.

Those are just some examples of what an advisor needs to focus on when drafting an IPS. Drafting an effective IPS can help protect a financial advisors from potential litigation initiated against them by their clients. 

The attorneys of Eccleston Law LLC represent investors and advisers nationwide in securities and employment matters. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

Related Attorneys: James J. Eccleston

Tags: Eccleston, Eccleston Law, Eccleston Law LLC, James Eccleston

Return to Archive



Thank you for your professional assistance with this matter. You are very good at what you do.

John T.


January 25, 2022
Top FINRA Initiatives For 2022

A host of new initiatives are ahead in 2022 at the Financial Industry Regulatory Authority (FINRA), according to CEO Robert Cook.

January 24, 2022
FINRA Set To Issue Crypto Notice And Consider Expungement Reform

The Financial Industry Regulatory Authority (FINRA) is set to issue a regulatory notice pertaining to cryptocurrency as well as expungement reform.

January 21, 2022
CFP Board Establishes New Appeals Commission

The Certified Financial Planner (CFP) Board of Standards has established a new Appeals Commission. As the name suggests, the Appeals Commission possesses the sole authority to adjudicate appeal hearings.