Staying Out of the Legal Spotlight: DCFB Teams Play Defense

# Risk Management

# Retirement Benefits

As litigation risk rises, retirement plan sponsors double down on documentation and fiduciary discipline.

With employers including American Airlines facing lawsuits over retirement plan practices , teams responsible for defined contribution and financial benefits (DCFB) are doubling down on governance—quietly. In an environment where even routine decisions can attract scrutiny, practitioners are focused on transparency, documentation and staying out of the headlines.

At a recent session of NeuGroup for DC and Financial Benefits , members discussed avoiding unwanted attention by taking steps to manage the complexities of proxy voting, forfeiture accounts and regulatory pressure.

Proxy voting: Quiet oversight, not activism. For plan sponsors offering only passive index funds, proxy voting may feel far removed from day-to-day fiduciary duties. But members said even limited involvement demands scrutiny—particularly around how fund managers exercise voting rights.

“You’re receiving attestation that they’re voting their proxies,” one consultant said. “But you also want a third party to say it’s been reviewed—that BlackRock is voting proxies according to the fund policy.” That’s one takeaway from the American Airlines case.

One practitioner emphasized that oversight doesn’t mean pushing an agenda: “The only thing in our lineup is passive index funds. We have a brokerage window as well; we’re just curious on proxy policies and what we should be looking at as a committee.”

The goal, the member said, is ensuring fiduciary integrity, avoiding surprises and minimizing reputational exposure.

Forfeitures: A useful tool with tight guardrails. Unvested participant balances—known as forfeitures—can be a valuable funding source for covering administrative costs or reducing employer contributions. But members stressed the need to follow strict plan document guidelines and to avoid letting the assets sit idle.

“Forfeitures are plan assets, yes,” a consultant said, “and can only be used for certain uses.” Common uses include recordkeeping fees, oversight expenses and offsets to employer contributions—but the uses must be clearly defined in plan documents.

“The timeliness of using it is important too,” a member noted. “You could be charged if the money is just sitting there unused for a while.”

Several members said they’ve amended plan documents to tighten up oversight. “We’ve made two amendments to our plans around this,” one said. “The first was clarifying it was a settlor decision, and we’re in the process of doing a second one.”

Another added, “Every year I would go to the committee and ask for approval for using forfeitures to use for contributions.”

Float income: Renewed scrutiny. Float income—in this case, primarily from uncashed checks—resurfaced as a topic in light of earlier legal challenges that questioned whether such earnings should benefit participants or providers.

“The primary source for float income is uncashed checks,” one consultant said. “There was litigation around this years ago, on the premise it was additional revenue being made off of a plan.”

“They should be tracking compensation and communicating that with you,” the consultant added. “Some recordkeepers will say they can give it to you, but with a fee.”

Audit risk: A new legal channel? Some members expressed concerns that information collected during Department of Labor audits may be reaching plaintiff attorneys.

“We’re reading where DOL has funneled information to lawyers,” one participant said, referring to articles published in late 2024 amid calls for an investigation into the DOL’s policy practice regarding so-called common interest agreements and a legal case involving an employee stock ownership plan (ESOP).

The issue has added another layer of risk awareness to corporates’ already cautious approach.

No headlines, please. The message from members was consistent: Stay transparent, stay rigorous and stay out of court.

“We’re not trying to make headlines,” one participant concluded. “We’re trying to stay out of them.”

Want to learn more about NeuGroup’s Defined Contribution and Financial Benefits Group? Write to [email protected] . The group’s next meeting will be June 10–11, 2025, in New York City.