High-profile court cases that pit participants indefined-contribution retirement plans against the plans' sponsorshave dominated news headlines lately. Participants in some planshave sued, claiming their plan's sponsor violated its fiduciaryduty by offering investment options that carry excessive fees. Ifyou sponsor a defined-contribution plan, the implications of caseslike Tibble v. Edison and Tussey v. ABB might have you feeling a bit ofpressure. You wouldn't be alone.

Heightened scrutiny on defined-contribution plan fees has ledsome sponsors to decide to move their plan investments tolower-cost passive options. The rationale is that if courts havedecided high fees are bad, then funds with the lowest possibleoverall cost must be good. Unfortunately, things are not thatsimple.

At the core of several court cases is ERISA Section 404(a)(1), known as the “prudent investorstandard.” It specifies that a plan fiduciary has a duty to actsolely in the interests of participants and beneficiaries, defrayreasonable expenses of administering the plan, and act in the samemanner that a prudent person would in the same circumstances. Theseprovisions do not suggest that the plan's fees must be the loweston an absolute basis, just that they must be reasonable.