There is a growing trend of using participant data to cross-sell financial products unrelated to plan recordkeeping by large recordkeepers and asset custodians of employer-sponsored retirement plans. In light of the fact that plan fiduciaries are ultimately legally responsible for the management and mismanagement of a retirement plan, this trend to use participant data may raise issues for employers in their role as plan sponsors and fiduciaries.
Recently, numerous plan fiduciaries have been swept up in a wave of excessive fee litigation for failing to provide prudent investment options at a reasonable fee for plan participants—a trend that is likely going to continue and reach more retirement plans. Excessive fee litigation has pressured plan fiduciaries to renegotiate and monitor fees charged by service providers. Due to reduced fees, service providers have turned to other options to expand their businesses. Some service providers are using participant data acquired through the administration of retirement plans to sell and market services unrelated to those plans.
There is no definitive case law or other legal guidance prohibiting or restricting service providers from using plan participants’ personal information to cross-sell financial products. Nevertheless, there are several reasons plan fiduciaries may want to be wary of allowing such personal information gleaned from plans to be used for non-plan–related purposes.
Excessive Fee Litigation
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