PLANADVISER - January/February 2022 - 14

trends
A Good Defense Against Lawsuits
Advisers can suggest provisions to lessen a plan's exposure
BY ADDING a trio of defensive provisions to retirement plan
documents, advisers might reduce plan sponsor clients'
exposure to claims brought under the Employee Retirement
Income Security Act (ERISA), according to industry
experts.
Many retirement plans include a basic provision whereby
participants, before they can bring suit, must first exhaust
the plan's claims procedure. Beyond this, plan advisers
should consider suggesting that their clients add limitation
periods, implement mandatory arbitration clauses,
and include class action waivers and venue provisions;
each of these three defensive measures reduces exposure
to lawsuits, says Michael Weddell, director, retirement, at
Willis Towers Watson.
" At least the first two should be considered, " Weddell
says. " Whenever Willis Towers Watson does a voluntary
compliance review, we'll say, 'If your plan doesn't already
have these provisions, think about adding them, and think
about making sure they're prominently displayed in the SPD
[summary plan document], as well.' "
For plan sponsors, being able to include the defensive
clauses in plan documents is an opportunity- " and they're
not all taking advantage of it, " Weddell says.
" It is tremendously good news for employers, and it's
underutilized, " he continues. " It's an area where the courts
have been much more employer-friendly than employers
talking points
Wealth Plus Health Shapes Spending Trends
As households age, overall consumption declines, says a CRR study.
Household
consumption declines
about 1.5% to 1.6%,
on average, every 2
years into retirement.
Therefore, 20 years in,
households consume
about 12% to 13% less
than at the start.
Households with poor
health tend to consume less,
earlier on, as health issues
restrict lifestyle.
Households with very good
or excellent health consume
about 1.3% less every 2 years.
The wealthiest households
consume about 0.7% less
every 2 years.
Middle- and low-wealth
households consume 1.6%
and 2% less, respectively,
every 2 years.
Source: Center for Retirement Research at Boston College, " Do Retirees Want to Consume More, Less, or the Same as They Age? "
realize. Employers can write the provisions into their plan
document. " These set the ground rules if a dispute arises
between the participants and the employer, he notes.
Adopting the provisions gives a plan sponsor added
control, one benefit of which can be money saved, says
Matthew Renaud, a partner in law firm Jenner & Block.
They may be used to " reduce the cost of administering the
plan, because the plan sponsor is in more control of the
pace and cadence of when litigation arises and where it
arises, " he says.
When weighing the pros and cons of including each
defensive measure, advisers may want sponsor clients to
choose among the three, says Joseph Torres, a partner in
Jenner & Block.
" Historically, there wasn't much movement from plan
sponsors to try to take on issues such as: 'Where am I
going to be sued?' Or, 'Can I require arbitration?' " Torres
says. " There's now a movement among plans to think
about whether they in particular should include these
types of provisions, and I don't think this is a one-size-fitsall
proposition. "
According to Weddell, " [To add] only the mandatory arbitration
clause is debatable. " He says Willis Towers Watson
advises sponsor clients that consider going that route to
work with in-house or retained legal counsel to ensure the
clause is written properly. -Noah Zuss
14 | planadviser.com January-February 2022

http://www.planadviser.com

PLANADVISER - January/February 2022

Table of Contents for the Digital Edition of PLANADVISER - January/February 2022