Nonprofit organizations are confronting rising legal and operational risks tied to employee benefit plans, as evolving fiduciary standards, litigation trends, and compliance expectations reshape how these programs must be managed. In a detailed discussion, Venable partners Juliana Reno and Lisa Tavares outlined how compliance expectations are reshaping how nonprofits oversee health, retirement, and welfare benefits. The conversation underscored that strong documentation and proactive oversight are essential to avoiding liability.
Fiduciary Duties and Legal Risk
Speakers emphasized that many of the most common compliance failures stem not from complex legal questions, but from breakdowns in process and oversight. Reno stressed that, unless specified in governance documents, fiduciary responsibility falls on a nonprofit's board of directors. She added that they "are personally liable for breaches of fiduciary duty." Tavares noted that fiduciary obligations include the "selection, oversight, and monitoring" of service providers, investments, and plan operations, underscoring that reliance on consultants and vendors does not shift accountability away from the fiduciaries themselves.
Compliance Failures and Best Practices
Attorneys highlighted common breakdowns in compliance, including weak documentation, infrequent committee oversight, and errors in benefit calculations. Tavares noted that fiduciaries must actively supervise vendors or third-party administrators, emphasizing the continuous monitoring of fees and performance. Reno advised formal, periodic market checks, stating, "We recommend RFPs every three to five years at the most," and cautioned that employers cannot assume vendors are handling legal compliance. Tavares identified late employee contributions as the "number one failure for retirement plans," while also pointing to errors in benefit calculations and misalignment between plan documents and operations as recurring issues that can trigger and the need for corrections as well as penalties.
Litigation Trends and Emerging Fiduciary Responsibilities
The speakers also described a litigation environment that is becoming more favorable to plaintiffs and more difficult for employers to navigate. Reno explained that a recent Supreme Court decision would allow claims to proceed without an initial showing that service provider fees are unreasonable, calling the shift "a sea change" that could "open the floodgates for litigation involving service provider contracts." At the same time, the scope of fiduciary responsibility continues to expand. Tavares noted that cybersecurity is a fiduciary obligation, reflecting Department of Labor guidance that places data protection squarely within ERISA duties.
Together, these developments indicate that nonprofits must be prepared to show not only that their decisions are reasonable, but that the process behind those decisions is disciplined, current, and consistently documented.
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