Second, and of the most potential relevance to the largest number of plan sponsors and their service providers, the court reversed summary judgment Second, and of the most potential relevance to the largest number of plan sponsors and their service providers, the court reversed summary judgment as to whether defendants acted prudently in paying recordkeeping fees of between $43-$65 per participant per year where the defendants had not initiated an RFP for recordkeeping services since 1995. The defendants and the court below relied on the assessment of the defendants’ consultant that the fees were reasonable. The Seventh Circuit held that the lower court erroneously discounted the plaintiffs’ industry expert, who opined that it was imprudent not to get market prices every three years, and that the plan paid approximately twice as much as it should have for recordkeeping services. According to the Seventh Circuit panel, a fiduciary’s reliance on a consultant may be evidence of prudence, but is not itself sufficient to establish prudence. The court also explained that the defendants appeared to not follow a recommendation by their consultant that as the plan size grew, recordkeeping fees should be reduced. For a discussion by Goodwin Procter partner Jamie Fleckner and Analysis Group economist Lee Heavner criticizing the court’s decision on legal and economic principles, see “Seventh Circuit Creates Uncertainty About 401(k) Provider RFPs,” 100 Pensions & Benefits Daily (BNA), May 24, 2011.

As to whether defendants acted prudently in paying recordkeeping fees of between $43-$65 per participant per year where the defendants had not initiated an RFP for recordkeeping services since 1995. The defendants and the court below relied on the assessment of the defendants’ consultant that the fees were reasonable. The Seventh Circuit held that the lower court erroneously discounted the plaintiffs’ industry expert, who opined that it was imprudent not to get market prices every three years, and that the plan paid approximately twice as much as it should have for recordkeeping services. According to the Seventh Circuit panel, a fiduciary’s reliance on a consultant may be evidence of prudence, but is not itself sufficient to establish prudence. The court also explained that the defendants appeared to not follow a recommendation by their consultant that as the plan size grew, recordkeeping fees should be reduced. For a discussion by Goodwin Procter partner Jamie Fleckner and Analysis Group economist Lee Heavner criticizing the court’s decision on legal and economic principles, see “Seventh Circuit Creates Uncertainty About 401(k) Provider RFPs,” 100 Pensions & Benefits Daily (BNA), May 24, 2011.