“This isn’t a case of fiduciaries benefiting themselves at the expense of participants—it’s a case of fiduciaries being accused of being asleep at the switch,” he added.

The distinction is vital.

The lion’s share of participant claims under the Employee Retirement Income Security Act that have been successfully litigated, or settled, involved claims of self-dealing—specifically in the form of prohibited transactions—and not mere breaches of fiduciary duty, explained Clark.

The core claim in Bell v. Anthem is notable for the fact that it alleges excessive fees on Vanguard funds.

Vanguard is, of course, the fund family that has built its brand on low-cost passive investment strategies and transparency for investors.

A battle of process

Beyond that irony, there isn’t much new ground being broken in the case, thinks Clark.

“Like all ERISA claims, this will purely be a battle of process: what was the process for selecting investments, and does the process prove the fiduciaries acted prudently,” said Clark.

Jason Roberts, CEO of the Pension Resource Institute, agrees, and says the case against Anthem fiduciaries will be won or lost on documentation.

“ERISA doesn’t require sponsors to make perfect decisions, it requires them to make prudent decisions,” says Roberts.

“Any degree of documentation means the plaintiffs will have an uphill battle. If Anthem can come forward showing the basis for well-informed decisions, then I can’t imagine these claims getting very far,” added Roberts.

At the heart of the complaint is the decision by the Anthem 401(k) plan fiduciaries to remove retail class shares of funds from the investment lineup and replace them with cheaper institutional class shares in 2013.

The plan is among the country’s largest, with more than $5 billion in assets.

Most of the investment lineup was outfitted with Vanguard mutual funds and target-date funds.

About the same time in 2013 when plan fiduciaries swapped out retail class shares for cheaper institutional versions of the same funds, they also implemented a fixed per-participant dollar cost of recordkeeping fees.

The case appears to hinge on the premise that those improvements to the plan demonstrate fiduciaries’ previous imprudence.

Moving to cheaper institutional shares, and thereby reducing revenue-sharing agreements and overall recordkeeping costs—Vanguard was the recordkeeper—effectively proves that participants should have never been offered retail-class shares in the first place, according to the plaintiffs’ argument.

A decision validating that argument could have implications for any sponsor looking to improve their plan—even those that already use low-cost Vanguard funds.

Subsequent remedial measures

Clark and Roberts both cut their teeth arguing ERISA cases in the courtroom—Clark mostly on the plaintiffs side, and Roberts mostly on the defense side.

These days they both commit a good portion of their time advising sponsors on their fiduciary obligations.

And each said that they’ve encountered sponsors that are reluctant to make changes to investment lineups for fear that doing so will implicate previous actions.

“Doing what is in the best interest of participants is not an option, it is a mandate,” says Clark. “Anytime a sponsor changes course, you raise the question of what was previously done. But if a sponsor has to make changes than the changes have to be made.”

Roberts said procrastination in amending investment lineups is no option when sponsors are aware they need to evolve their approach.

“What is the alternative? To continue to do something that you think is suspect—that won’t cut it,” said Roberts. “The key is to start documenting the basis for the moves, and thoroughly.”

Roberts doubts that evolving a plan’s design can in and of itself prove previous imprudence of the part of fiduciaries.

In considering the context of the claims in Bell v. Anthem, he harkens back to his law school days, and suggests the legal doctrine of “subsequent remedial measures” should ally sponsors’ fears that making prudent improvements will expose them to new claims.

“It goes against public policy to allege that the decision or action to improve a 401(k) plan is in and of itself evidence of what was previously imprudent,” said Roberts.

He does not think the fact that Anthem fiduciaries took steps to improve the plan in 2013 automatically establishes the liability that the plaintiffs claim in the complaint.

“That in and of itself will not carry the day in this case,” speculated Roberts. “Public policy encourages something to be fixed when it needs to be fixed. What this case will come down to, as it does in all ERISA cases, is the question of prudence, and whether or not it can be established by plan documentation.”

Proving that prudence, and illuminating the process of arriving at the decision to amend the Anthem plan in 2013, will most likely not happen without the long, painstaking and expensive process of discovery that has been the hallmark of excessive-fee claims, assuming the complaint survives Anthem’s likely motion to have the case dismissed.

“These cases can literally involve millions of pages of documents to prove whether defendants had a prudent process in place—that’s the stark reality of ERISA law,” added Clark.