Why are so many courts seemingly determined to promote and protect the interests of the investment industry at the expense of 401(k) plan participants? Prime example - the courts' continued reliance on the absurd "apples -to-apples" defense.
The 1st Circuit nullified that argument in its well-reasoned Brotherston decision. As the Court pointed out, the primary purpose of ERISA is to protect plan participants and promote their financial security, "retirement readiness."
One of the best ways to do so is to ensure that plans only offer cost-efficient investment options to plan participants, regardless of the investment's classification. Plans need to be especially vigilant against "closet index"/ "index hugger"/"shadow"funds.
Whether it be an inability or an unwillingness to understand the harm caused by "closet indexing," courts need to realize that "active share" does not guarantee performance. It only suggests potential for performance. Correlation of returns is based on actual performance.
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