One of the most dangerous phrases in the 401(k) world isn’t “lawsuit” or “DOL audit.” It’s: “Everyone does it this way.”
I hear it all the time from plan sponsors. Everyone uses revenue sharing. Everyone uses forfeitures to offset employer contributions. Everyone has the same default investment lineup. And yes—many of those practices may be permitted. But ERISA doesn’t ask whether something is common. It asks whether it’s prudent.
Fiduciary duty is not a popularity contest. Courts don’t care how many other plans do the same thing you do. They care whether your fiduciaries engaged in a thoughtful process, understood the impact on participants, and made a reasoned decision based on facts—not habit.
That’s why “everyone does it” has become such a weak defense in recent litigation. Plaintiffs’ lawyers love industry norms, because norms often hide complacency. And complacency is kryptonite under ERISA.
If your plan uses a common practice, ask the uncomfortable questions:
· Why does this plan do it this way?
· Who benefits?
· What alternatives were considered?
· When was the decision last reviewed?
The goal isn’t to be different for the sake of being different. It’s to be deliberate. Fiduciary best practices come from process, not tradition.
In the retirement plan world, comfort is often the enemy of compliance. If you’re relying on the idea that “no one ever gets sued for this,” you’re already thinking about fiduciary duty the wrong way.
