July 13, 2024

Decreasing Plan Sponsors’ Fear of Making Certain Plan Changes

Adding automatic deferral escalation and stretching the match are settlor functions because they are plan amendments, so plan sponsors should not fear fiduciary litigation, even if to some participants these changes seem to be not in their best interest

During the recession of 2008/2009, a number of employers suspended or reduced their employer matches to their retirement plans.

While this could potentially be seen as an action taken against the best interest of participants, employers need not fear Employee Retirement Income Security Act (ERISA) participant lawsuits regarding such decisions. Why? Because these decisions are settlor decisions.

“A settlor function would typically be something that is a business decision as it relates to the employee benefits plan,” explains Rhonda Prussack, SVP and head of Fiduciary and Employment Practices Liability at Berkshire Hathaway Specialty Insurance in New York City. “Establishing a plan, terminating a plan and amending plan terms are typically considered settlor functions.” (read more)