When it comes to music, I am an old fogey. I admit it. My name is Timothy and I am an old fogey. It's true though! I enjoy the oldies. Nat King Cole? Johnny Mathis? Yup. Stretch it back further? How about Hoagy Carmichael and a little "Stardust"? And for exercise, throw in the Lindy Hop dance. To paraphrase Nat, "Life is still worthwhile if you just smile".
But when it comes to 401k plans, I am decidedly contemporary in what makes me smile. Defendable and repeatable. Prudent. Loyalty. Those factors make me break out in an ear to ear grin. And smile I did as I read "Natixis v Waldner".
Case Background
Parties & Plan: Brian Waldner sued Natixis Investment Managers, its Retirement Committee, and individual members. The plan had ~$440 million in AUM.
Claims: The plaintiff argued that since 2014, the plan had a large number of proprietary funds (i.e. Natixis-affiliated), some of which were “high-cost” and underperformed compared to non-proprietary peers. The claims alleged breaches of both:
-Duty of Loyalty (self-dealing / putting employer interests ahead of participants)
-Duty of Prudence (failing to monitor, remove poorly performing funds, etc.)
Court’s Findings & Rulings
Judge Leo T. Sorokin (District of Massachusetts) ruled in favor of Natixis.
Key findings
Statute of Limitations: Some claims were time-barred (i.e. plaintiff had actual knowledge by 2017 of key facts).
Loyalty Duty: Having proprietary funds isn’t per se disloyal under ERISA. A fiduciary can use them, even exclusively, so long as the fiduciary is wearing the “fiduciary hat,” not the corporate/employer hat, when making decisions.
The Committee did consist entirely of Natixis officers and used many proprietary funds (18 of 28 during the class period) but also included non-proprietary options.
The court found no convincing evidence of subjective motive: no incentives documented pushing proprietary funds over non-proprietary; no proof the Committee put its own interests first.
Prudence Duty: The Committee engaged Mercer (independent consultant) regularly, used outside counsel, maintained a written Investment Policy Statement; held trainings on fiduciary duties.
Although there were periods where structured reviews were delayed or meetings infrequent, those were not shown to have caused a loss or to be material breaches.
Only one fund removal was found as procedurally imperfect, but plaintiffs could not prove that caused harm.
Outcome (isn't this what all plans want?)
The court dismissed the claims. No breach of loyalty; no breach of prudence.
Implications for 401(k) Committees
A process that is imperfect but documented, with independent advice, periodic review, inclusion of non-proprietary options, and transparency, can satisfy ERISA duties.
Having proprietary funds is not automatically a conflict so long as they are evaluated alongside non-proprietary alternatives, the decision process includes due diligence, and there is no motive of self-enrichment.
Meeting frequency, structure reviews, monitoring are important — but courts may require a specific, proven failure(e.g. a decision point where a better alternative was obviously available and improperly ignored), not just general “could have done better” criticisms.
The Parting Glass
This ruling reinforces that ERISA doesn’t demand perfection, but demands reasonableness, documentation, and loyalty. For your plan, the takeaways are:
Make sure your fund selection/monitoring process is well documented: request regular third-party analyses, maintain minutes, compare proprietary vs non-proprietary.
Ensure your Investment Policy Statement is up to date and reflects how decisions are made, including criteria for adding/removing funds.
Be proactive in reviewing underperforming funds and removing them when justified. Delays or weak documentation create risk.
And above all, "light up your face with gladness and smile..."