Plan sponsors will say it all the time: they are too small to be sued in a class action lawsuit. That may be true, but a class action lawsuit isn’t the only thing to fear.
Most plans aren’t big enough to have a class action lawsuit against them, but they have other fears that plan sponsors aren’t even aware of. While a $1 million plan isn’t going to be sued by an ERISA attorney in a class action lawsuit unless they’re starving, retirement plans can be targeted by an employee or two to get a quick, inexpensive settlement or the government can audit them. The fact is that small plans have been sued from time to time, so a small lawsuit can happen.
In addition or instead of a lawsuit, a plan can be targeted by the Department of Labor (DOL) for an audit. Speaking from experience, an audit can be painful and as costly as any lawsuit. There are more audits of smaller plans than lawsuits and they can be costlier.
The days where plan sponsors can look the other way about their retirement plan is long over. They either need to shape up or get shipped out to participants and/or the DOL.