Multiple employer pension (MEP) plan sponsors should brace themselves as a potential target for litigation as the plans continue to emerge as a provider-based alternative to single-employer 401(k) plans, according to consulting firm October Three.

In a recent article, the firm said that as MEPs begin to accumulate participants and assets, it is “inevitable that plaintiffs’ lawyers will train their sights on MEPs as a fiduciary litigation target” with the “the same sort of fiduciary litigation that has afflicted the single-employer 401(k) plan community.”

The firm said the flood of defined contribution (DC) litigation over the past 15 years has focused on a relatively narrow set of issues: 401(k) plan fees, including investment management fees, recordkeeping fees, and revenue sharing, as well as fund performance, particularly related to actively managed funds and target-date funds (TDFs).

October Three said there have been more participant lawsuits against DC/401(k) plan fiduciaries than against defined benefit (DB) plan fiduciaries because in DB plans, “imprudent fiduciary judgments—that may result in, e.g., excessive costs or fund underperformance—generally must be made up by the employer/sponsor, who is the ‘ultimate’ plan fiduciary,” adding that “obviously, there’s no point in the sponsor suing itself.”

The firm said that in a DC plan, those type of losses directly affect participant benefits even though plan fiduciaries are the employer/plan sponsor.

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