James W. Watkins, III, J.D., CFP Emeritus^TM, AWMA®

THESIS

THE BURDEN OF PROOF ON CAUSATION PROPERLY RESTS WITH THE FIDUCIARY DUE TO ERISA’S REMEDIAL PURPOSE AND STRUCTURAL INFORMATION ASYMMETRY

I. ERISA’s Remedial Purpose Requires Burden Allocation That Enables, Not Defeats, Enforcement

ERISA “was enacted to protect … the interests of participants in employee benefit plans and their beneficiaries” by imposing fiduciary standards and “appropriate remedies for violations.” 29 U.S.C. § 1001(b). As the Supreme Court has explained, ERISA’s fiduciary duties “are derived from trust law,” and liability must be workable in practice, not illusory. Varity Corp. v. Howe, 516 U.S. 489, 497 (1996); Tibble v. Edison Int’l, 575 U.S. 523, 528 (2015). A rule that effectively requires plan participants to prove what alternative investment the fiduciary would have chosen would frustrate those remedial objectives.

II. Trust Law and ERISA Jurisprudence Allocate the Burden on Causation to the Fiduciary

Under trust law principles incorporated into ERISA §§ 404 and 409, once a plaintiff establishes that a fiduciary breached a duty and that the plan suffered a loss, the trustee bears the burden to prove that the loss would have occurred even if the breach had not happened. Restatement (Third) of Trusts § 100 cmt. f(1) (“Where a trustee has committed a breach, the loss is measured by…the extent to which the…trust assets have been diminished…in comparison with what they would have been had the breach not occurred. The burden is on the trustee to prove that the loss…would have occurred in the absence of the breach.”).

Multiple courts agree that this trust-law allocation is “faithful to ERISA’s text, structure, and purposes.” Brotherston v. Putnam Invs., LLC, 907 F.3d 17, 40 (1st Cir. 2018).

In Brotherston, the First Circuit recognized that fiduciaries have exclusive access to information about their own decision-making process, alternatives considered, and the specific conduct that gave rise to the loss. As Brotherston explained:

“Because fiduciaries’ decisionmaking processes are … often exclusively within the control of the defendants … it makes little sense to require plaintiffs to prove all aspects of their case before they have had any discovery.” Id. at 40.

The court observed that fiduciaries, not participants, control key documents and internal deliberations, and that shifting the burden on causation to fiduciaries “accords with ordinary trust principles and minimizes the unfairness to plaintiffs.” Id.

III. Sacerdote and the Solicitor General Confirm That ERISA Imposes Burden-Shifting Where Information Asymmetry Is Acute

In Sacerdote v. N.Y. Univ., 328 F. Supp. 3d 273 (S.D.N.Y. 2018), the district court adopted the same approach: once a plaintiff proves breach and prima facie loss, the fiduciary must demonstrate that the loss would have occurred irrespective of the breach. The court described this burden allocation as rooted in equity and necessary given the structural information imbalance in ERISA plans.

The United States, through the Solicitor General’s amicus brief supporting affirmance in Brotherston, likewise articulated the appropriate burden allocation:

“Once a plaintiff establishes that a fiduciary breached a duty and that the plan suffered a loss, it is consistent with ERISA’s text and purposes to place on the fiduciary the burden of showing that the loss would have occurred even if the fiduciary had fulfilled its obligations.” U.S. Br.otherston Amicus at 22, Brotherston v. Putnam Invs., LLC (1st Cir. No. 17-1561).

The Solicitor General further explained that requiring plan participants to prove a negative counterfactual — what would have happened absent the breach — without access to the fiduciary’s processes would effectively immunize imprudent conduct:

“Because fiduciaries are in possession of the information necessary to assess alternative actions and their effects, placing the burden of proof on them is consistent with ordinary principles of equity.” Id. at 23.

These statements underscore that ERISA’s remedial design contemplates burden shifting to redress information asymmetries, not to shield fiduciaries from accountability.

IV. Information Asymmetry Makes Traditional Participant Burden on Causation Unworkable

Fiduciary breach cases inherently involve information uniquely possessed by the fiduciary: investment committee minutes, rejected alternatives, risk analyses, benchmarking, internal correspondence, and contemporaneous deliberations. Requiring participants — pre-discovery — to allege and eventually prove a precise counterfactual causation “would force plaintiffs to plead facts that lie peculiarly within the knowledge of defendants,” contrary to Supreme Court precedent. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002). This is especially true where the fiduciary’s duty is procedural — a duty to follow a prudent process rather than a promise of performance.

As Brotherston explained, “[m]uch of the universe of relevant information about a fiduciary’s conduct (and the alternatives that were considered and rejected) resides with the fiduciary.” 907 F.3d at 40. Absent burden shifting, fiduciaries could maintain opacity, depriving participants of a meaningful remedy.

V. Proper Standard for Causation Burden Shifting

I found it interessing to compare the Solicitor General’s position in the amicus brief submitted in the Brotherston to the EBSA’s recent amicus brief:

When a plaintiff brings suit against a plan sponsorr for breach of trust,the plaintiff generally bea the the burden of proff. The general rule, however, is moderated in order to take account of the plan sponsor’s duties of disclosure….as well as the plan’s sponsor’s often unique access to information about the plan and its activities, and also to encourage the plan sponsor’s compliance with applicable fiduciary duties.
U.S. Brotherston amicus @37

The Supreme Court has made clear that whatever the overall balance the common law might have struck between the the protection and beneficiaries, ERISA’s adoption reflected Congress’ desire to offer employees enhanced protecion for their benefits…In other words, Congress sought to offer beneficiaries, not fiduciaries, more protection than they had under common law, albeit while still paying heed to the counterproductive effects of complexity and litigation risk. (emphasis added)
U.S. Brotherston amicus @37

The proper standard consistent with ERISA’s remedial purpose, trust-law roots, and equitable principles is:

Once a plaintiff plausibly alleges and later proves a breach of fiduciary duty and a prima facie loss to the plan, the burden shifts to the fiduciary to demonstrate that the loss was not caused by the breach.

This allocation neither presumes liability nor imposes strict liability; it merely requires fiduciaries to justify their conduct and its consequences—precisely what ERISA demands.

This allocation permits meaningful adjudication of fiduciary duty claims without unfairly insulating fiduciaries from liability simply because they control the evidentiary record.

GOING FORWARD

Because ERISA is a remedial statute grounded in trust law, and because fiduciaries exclusively control the information necessary to assess causation, the burden of proof on causation properly rests with the fiduciary once a breach and loss are shown. Any contrary rule would undermine ERISA’s core purpose, reward informational asymmetry, and render fiduciary duties unenforceable in practice.

So, the obvious question is – why would the EBSA submit an amicus brief that is totally inconsistent with legal precedent and tries to burden plan participants with an impossible task, a task which reuires them to plead the mental processes of a plan’s investment commitee without the benefit of discovery, a task which is contrary to Rules 8 and 9 of the Federal Rules of Civil Procedure.

I have two theories:
1. The financial services industry and plan sponsora know, or should knon from their fiduciary duty to investigate and evaluate, each investment offered within a [plan, that they cannot carry the burden of proof on causation These product vendors are well aware that their products are designed to ensure that their products are in thei rown best interests, not the best interests of plan participants, a clear violation of the fiduciary duty of loyalty.

2. Experience has shown that many plan sponsors do not properly conduct their legally required investigation and evaluation. In most cases they fail to do so, choosing to blindly trust the product vendors, because the plan spsonors do not personally know how to conduct the necessary investigation and evaluation, even though AI can now quickly perform cost-benefits analyses and/or annuity breakeven analyses which typically expose the legal imprudence of a plan’s investment optio. AI now makes properly preparing a breakeven analysis on an annuity, including factoring in present value and mortality risk, very simple. As ERISA sets out, if a plan sponsor cannot perform such duties, , the plan sponsor, it has a duty to hire someone who can.

I believe that the volume of ERISA breach related litigation is going to rise significantly as plan sponsors needlessly expose themselves to fiduciary liability as a result of offering more inherently risky investments in their plans. Prudent plan sponsors would be well served to follow Jack Welch’s admonition – “Don’t make the process harder than it is.”

In closing, Judge Kayatta’s Brotherston opinion provided excellent risk management advice for plan sponsors:

The federal government’s highly successful retirement plan, the Thrift Savings Plan (TSP), adopts Judge Kayatta’s advice. The fact that more plan sponsors do not model the proven TSP never ceases to amaze me, and proves my point that most plan sponsors simply do not understand what they are, and, more importantly, are not, required to do under ERISA.

In closing, Judge Kayatta’s Brotherston opinion provided excellent risk management advice for plan sponsors:

nothing in our opinion places on ERISA fiduciaries any burdens or risks not faced routinely by financial fiduciaries. While Putnam warns of putative ERISA plans forgone for fear of litigation risk, it points to no evidence that employers in, for example, the Fourth, Fifth, and Eighth Circuits, are less likely to adopt ERISA plans. Moreover, any fiduciary of a plan such as the Plan in this case can easily insulate itself by selecting well-established, low-fee and diversified market index funds. And any fiduciary that decides it can find funds that beat the market will be immune to liability unless a district court finds it imprudent in its method of selecting such funds, and finds that a loss occurred as a result. In short, these are not matters concerning which ERISA fiduciaries need cry “wolf.”
Brotherston v. Putnam Investments 907 F.4d. 17, 39 (1st Cir. 2018)

The federal government’s highly successful retirement plan, the Thrift Savings Plan (TSP), adopts Judge Kayatta’s advice. The fact that more plan sponsors do not simply model the proven TSP never ceases to amaze me, and proves my point that most plan sposnors simply do not understand what they are, and, more importantly, are not, required to do under ERISA.

At some point, SCOTUS will have another oppounity to resolve the burden of proof on causation issue.Hopefully, that opportunity will come sooner than later. The current split in the federal courts on the burden of prood as to causation has resulted in the inequitable situation where em[ployees’ rights and protections guaranteed under ERISA are determined solely by their place of residence. The interpretations of ERISA in the courts need to be uniform and not dependnety on which party is in office. If the DOL’s and EBSA’s argumnets in future ERISA litigations are based on it’s recently submitted, flawed amicus brief, expect a quick decision in favor of the plan participants. The EBSA’s amicus brief is relatively weak given current legal precedent which suppots the applicationof trust trust law The amicus brief is a poorly veiled and desperate attempt to avoid the application of trust law, specifically Section 100, comment f, of the Restatement (Third) of Trusts. Section 100, comment (f) , expressly places the burden of proof on causation on the plan sponsor once the plan participants establish a breach and resulting financial loss/

© Copyright 2026 InvestSense, LLC. All rights reserved

This article is for informational purposes only and is neither designed nor intended to provide legal, investment, or other professional advice since such advice always requires consideration of individual circumstances. If legal, investment, or other professional assistance is needed, the services of an attorney or other professional advisor should be sought.