In our opinion at TEPI, it is uniquely interesting when a company’s own employees sue it for using their own funds in their own employees’ retirement plan.  What message does that send to that company’s clients to whom they are marketing those same funds (Northern Trust’s, in this case)?  This has also happened with The Principal, one of the biggest providers of 401(k) plans in the U.S. 

Reputational damage to the plan sponsor company and to individual plan trustees?  Certainly . . . and there is no insurance to cover this reputational damage (the plan sponsor’s fiduciary liability insurance policy doesn’t cover this). 

Here are some interesting questions to answer: 

1. If you are a trustee of a 401(k) with the very same Northern Trust funds in your investment choice lineup, what does this mean / of what significance, if any, is the fact that Northern Trust’s own employees have sued it for including such funds in their own investment choice lineup? 
2. Is there any heightened risk or cause for concern that your company’s employees might do the same (for the same reasons)?
3. Are attorneys representing plan sponsors and trustees (of plans with the same Northern trust funds in their lineups) letting their clients know that actions like this are being filed?  Should they?
4. Are pro-active, protective strategies possible for them and their clients to implement?

These are not simply “rhetorical questions.”  They are questions much better asked and answered before an action is filed.

The Crain’s Chicago Business article…