Avoiding Accountant Liability for Retirement Plan
Edward J. Krill and Kevin M. Murphy*
Many accounting firms have ventured beyond their traditional role as plan auditor and have
assumed a variety of new responsibilities as service providers for pension and retirement plans.
This article identifies some of the major responsibilities and risks to accounting firms in regard
to non-attest services for pension and retirement plans, and discusses recommendations to
minimize this potential liability. Limiting liability with respect to plan administration services is
especially important in today’s volatile market, and in the wake of the Supreme Court’s recent
decision that expands potential liability for errors in plan administration. In LaRue v. DeWolff,
Boburg & Assoc.,128 Sup. Ct. 120 (2008), the Supreme Court held that a plan administrator
could be sued by individual plan participants for mismanagement, such as failing to timely
execute a buy or sell order, reversing a decades old position of federal courts that barred
individual participant claims.
While LaRue did not address the question of liability of a service provider to an individual plan
participant, other case law provides some indication of an accountant’s potential exposure to
claims by participants, as well as by the plan sponsor or administrator. The primary risk for
claims by participants is upon plan “fiduciaries” such as the plan sponsor or plan administrator.
However, plan service providers also face potential risks, especially where they become aware of
prohibited acts being performed by the fiduciaries, or where their services place them in a
“control” position such that their actual function makes them a fiduciary. For example, if the
service provider has the discretionary ability to transfer plan assets from one investment account
to another or to make investments on behalf of a plan, regardless of whether or not the service
provider actually undertakes these functions, a court would