Three Rulings, One Message: Why Documenting Your Fiduciary Process Is the Only Defense You Need
In the high-stakes world of ERISA litigation, many financial advisers believe that their primary job is to deliver superior investment returns. They are wrong. While clients certainly want growth, the legal reality of the Employee Retirement Income Security Act (ERISA) is far more rigid. ERISA is a law of process, not a law of outcomes. You are not legally required to have a crystal ball; you are, however, required to have a paper trail.
Within the last 60 days, three major court rulings have sent a thunderous message to the advisory community: The process is your shield. If you have your "ducks in a row" and can prove you followed a repeatable, reasoned methodology, you win. If you cannot, you are a sitting duck for the next wave of class-action litigation.
As your mentor in this complex regulatory landscape, I am here to guide you through these rulings and show you exactly how to insulate your practice. Let’s break down the lessons from the front lines.
LESSON 1: THE THIRD CIRCUIT’S QUEST DIAGNOSTICS RULING (JUNE 22, 2026)
THE SUPREMACY OF PROCESS OVER PERFORMANCE
On June 22, 2026, the Third Circuit Court of Appeals delivered a massive victory for fiduciaries in In re Quest Diagnostics ERISA Litigation. The core of the plaintiffs’ argument was familiar: they claimed the plan fiduciaries were imprudent because they retained underperforming Fidelity Freedom target-date funds and an Invesco real estate fund.
The court’s response? ERISA demands prudence, not perfection.
Quest Diagnostics didn't win because their funds were the best in the world. They won because they had a documented, persistent process. They hired an independent advisor (Mercer), held consistent quarterly meetings, and actively monitored their lineup. When funds lagged, they didn't just ignore it; they placed them on a formal watch list.
THE RENFRO TWO-STEP TEST
The court applied what is known as the "Renfro two-step test," a powerful tool for any advisor to understand:
- Check the Process: If the fiduciary’s process is found to be prudent, the claim fails immediately. The court doesn't even look at the investment's performance.
- Evaluate the Outcome: Only if the process is found to be imprudent does the court ask what a hypothetical prudent investor would have done.
Because Quest had documented its quarterly reviews and its rationale for retaining funds on a watch list, the court stopped at Step 1. This means that as long as you are doing the work, you don't have to fear the "Monday morning quarterbacking" of a bad market quarter.
YOUR PRACTICAL TAKEAWAY
- Watch, Don’t Just React: Short-term underperformance is not a breach of duty. Documenting why you chose to keep a fund on a watch list is just as important as documenting why you replaced one.
- Review Your Data: Ensure you are reviewing advisor data annually and asking pointed questions. Don't just "rubber stamp" recommendations.
- Time-Saving Tip: Automating your quarterly reporting through a dedicated Operating System like PlanConfidence can reduce the time spent on these "proof of process" documents to less than one minute, ensuring you are always protected.
LESSON 2: THE SUPREME COURT’S INTEL CASE (ANDERSON V. INTEL, PENDING)
THE BATTLE OVER MEANINGFUL BENCHMARKS
The legal world is currently watching Anderson v. Intel, which the Supreme Court will hear in the 2026-2027 term. At the heart of this case is a simple question: Can a plaintiff sue you just because a fund did poorly, or do they need to provide an "apples-to-apples" comparison?
On July 16, 2026, the Department of Labor (DOL) filed an amicus brief supporting Intel. The DOL’s stance is clear: Plaintiffs need a meaningful benchmark to prove imprudence. You cannot compare an equity-heavy index to a risk-mitigated target-date fund and call it a "breach."
ESTABLISHING THE COMPARATOR
Intel’s defense rests on the fact that their investment choices: which included hedge funds and private equity: were part of a specific risk-mitigation strategy. The DOL agrees that unless a plaintiff can find a "meaningfully similar" comparator fund with the same risks and rewards, their claim is merely speculation.
This is a massive win for advisers who use complex or personalized advice models rather than generic, off-the-shelf guidance. It forces the opposition to play on your level of sophistication.
YOUR PRACTICAL TAKEAWAY
- Provide Context: When selecting a fund, document exactly which benchmark it should be measured against. If it’s a specialty fund, state why standard indices don't apply.
- Ensure Proper Alignment: Review your Investment Policy Statement (IPS) to ensure the benchmarks listed actually match the funds in the lineup.
- Establish Credibility: Use industry-specific terminology when documenting your selection process. Terms like "alpha," "standard deviation," and "Sharpe ratio" show that your process is rooted in professional standards, not guesswork.
LESSON 3: THE EIGHTH CIRCUIT’S MATULA V. WELLS FARGO RULING (MAY 12, 2026)
THE NEW FRONTIER OF FORFEITURE LITIGATION
On May 12, 2026, the Eighth Circuit provided the first appellate-level guidance on the "forfeiture wars." In Matula v. Wells Fargo, a plaintiff sued because the company used 401(k) forfeitures (unvested money from departing employees) to offset its own matching contributions.
The court dismissed the case, but not because the practice is inherently legal. Instead, they dismissed it because the plaintiff lacked standing. He couldn't prove that he personally lost a single penny because of how the company used those forfeitures.
THE RISK OF SILENCE
While Wells Fargo won this round, the case of UnitedHealth is still moving forward. The message here is that the "silence" of your plan document is not a protection. If your plan is vague about how forfeitures are used, you are leaving the door open for creative trial lawyers to claim you are "self-dealing" by saving the employer money.
Advisers who want to avoid these common 401(k) mistakes must be proactive. Don't wait for a lawsuit to clarify your plan's language.
YOUR PRACTICAL TAKEAWAY
- Review Plan Language: Ensure the plan document explicitly states that forfeitures can be used to offset employer contributions. "Clear and unambiguous" is your goal.
- Document Usage: Keep a record of how forfeitures are applied each year. If they are used to pay plan expenses first, document that. It shows the participants' interests were prioritized.
- Quick Check: Ask your plan sponsors during your next review, "Are our ducks in a row regarding forfeiture language?" This simple five-second question could save thousands in legal fees later.
CONCLUSION: THE COMPETITIVE ADVANTAGE OF DOCUMENTATION
THE BOTTOM LINE FOR ADVISORS
The common thread across the Third Circuit, the Eighth Circuit, and the Supreme Court is undeniable: The courts are tired of "Monday morning quarterbacking."
They are looking for advisers who act like professionals. They want to see a repeatable, defensible, and above all, documented process. The advisers who can produce a timestamped report showing their quarterly reviews, their watch-list deliberations, and their benchmarking rationale are the ones who will sleep easy at night.
By focusing on process, you gain a massive competitive advantage. You transition from being a "commodity" investment picker to a "fiduciary partner." You provide value that cannot be replaced by a simple index fund.
The era of "trust me, I'm doing a good job" is over. We have entered the era of "here is the documentation of the good job I am doing." Ensure your process is robust, your records are digital, and your confidence is backed by facts.
Call to action: ERISAnerd will continue tracking these cases as they develop. The landscape of fiduciary duty is shifting rapidly. Bookmark this page and check back for updates on the Intel Supreme Court ruling and the evolving forfeiture landscape. For those looking to streamline their documentation today, explore how the right OS can make fiduciary compliance a one-minute task.