Managing Principal Lee Heavner Publishes Article on Use of Simulation Analysis in ERISA Litigation

July 21, 2014

When a retirement plan investment incurs substantial losses, litigation often follows in which plaintiffs allege that the selection or retention of the investment was imprudent. In a recent article, "Expert Analysis: Using Simulation to Assist Courts in Assessing the Prudence of Retirement Plan Investment Decisions" (Bloomberg BNA's Pensions & Benefits Daily, July 15, 2014), Managing Principal D. Lee Heavner describes some of the approaches that experts use to evaluate issues related to procedural and substantive prudence in these cases. The article also describes an approach (simulation analysis) that experts can use in many cases to evaluate whether the outcome of the challenged investment decision was an appropriate combination of expected return and risk without burdening the court with comparisons of standard deviations and other statistical concepts.

In the article, Dr. Heavner contends, "Simulation not only offers a way to evaluate the statistical properties of longer-period returns, but it also provides experts with a more ready format to communicate these complex findings in a way that is more intuitive and accessible to the court."

Read the article