Just for fun, I worked out how much the Schlichter law firm might get in its settlement of the Liberty Mutual 401k case (five years in the making). My guess? Roughly $4.9 million. A couple of things caught my eye in this case though.
Case overview: The case, filed in April 2020, alleged that Liberty Mutual’s 401(k) plan fiduciaries failed to prudently monitor and control plan costs and investment options, specifically challenging the plan’s record keeping fees, managed account fees, a mid-cap value portfolio, and a Wells Fargo money market fund. After nearly five years of litigation and discovery, the parties agreed to a settlement on the eve of a rare ERISA jury trial.
Settlement terms: • The defendants agreed to contribute $13.4 million in monetary relief to a settlement fund for the class. • Class counsel will seek fees of up to one-third of the fund plus expenses, consistent with typical ERISA class action practice, but not for time related to enforcing the settlement. • The settlement also includes meaningful equitable provisions: – A three-year restriction on cross-selling non-plan products to participants by the recordkeeper, unless participant-initiated or otherwise in the best interest of the plan. – A requirement for the plan fiduciaries to conduct an independent RFP for investment and administrative consulting services, including at least three unaffiliated candidates, within 180 days of the settlement effective date. Benchmark (measure with a tape measure?!) the existing plan's services and fees.
Process and timeline: Litigation progressed through motions, extensive document production (>105,000 pages), depositions (22 total, including 16 fact witnesses), expert disclosures, and partial summary judgment rulings. The trial was set for early February 2026, prompting renewed settlement negotiations that culminated in the January 14, 2026 agreement.
Action items for plan sponsors
Ongoing, documented monitoring of fees and services matters. The case centered on alleged failures to evaluate and control recordkeeping and other charges over many years. Adopt and maintain a robust, documented review process for administrative fees, investment fees, and service arrangements.
Benchmarking and competitive pricing are essential. Regular benchmarking of recordkeeping and managed account fees against appropriate comparators — not just blindly accepting proprietary structures — can reduce risk. Get out your tape measure!
Equity provisions may be as important as cash. The settlement’s restrictions on cross-selling and the requirement to conduct an RFP highlight that courts increasingly expect not just monetary relief but changes to governance processes that benefit participants.
Prepare for litigation risk even without obvious high fees. This suit was filed despite Liberty Mutual’s large plan size. Sponsors should assume that fee and monitoring practices will be scrutinized and ensure processes are defensible and well documented.
Consider independent fiduciary oversight where conflicts could arise. The settlement’s RFP requirement for unaffiliated consultants reflects concerns about conflicted advice; plan fiduciaries should critically assess external relationships and conflicts of interest.
What I would all your attention to is the benchmarking and cross-selling. I have just finished rewriting my IPS statements for all of my plans to follow the latest from this administration (think "pecuniary"). I am now starting on benchmarking each plan in keeping with DOL guidance. In this fiercely competitive low-fee environment, this is not an easy exercise to undertake. We advise over 100 plans across the US.
In addition to benchmarking each plan, I need to discuss it with the plan sponsor, see if they want to take action, and document with the sponsor and me signing off on any action (non-action taken) and why that decision was arrived at. This makes my IPS rewriting exercise look like a picnic but it is essential from a fiduciary point of view as well as peace of mind. When did you last benchmark your plan? Can you find the signed outcome document?
Cross-selling is an interesting topic. I understand why a company does it (ie, asset retention, revenue growth) but it must be done with the client's needs in mind. When an employee leaves one of my 401k plans, I explain their options (ie., transfer to a new employer's plan/ rollover to an IRA) but I do not promote my services. I recognize my services are not a right fit for everyone. I am very selective in who I choose to work with.
But what happens if there is a sales contest for asset retention? What happens if an advisor is looking at looming bills and a paltry income stream? I do not know what the issues were with cross-selling in this case but I have seen plenty of poor behavior when it comes to selling. My preference is to use record keeping platforms that are agnostic on investment choices and that are not cross-selling. Avoid perceived conflicts of interest.
The Parting Glass
Your retirement plan likely is not a $7 billion one like Liberty Mutual's. The lessons still apply. A documented investment selection process. Consistent fee reviews. Demonstrable benchmarking (get out those tape measures). And really ask yourself if cross-selling is in the best interest of your participants. This is certainly was an interesting case.