Many of us older hands lived through the financial collapse of 2008 and, with any luck, learned a lesson or two from the experience that may come in handy now. When 2008 began, my legal practice was basically one half IP litigation, one half ERISA litigation and one half insurance coverage and bad faith counseling and litigation (yes, I know that adds up to one and a half, but that’s how it felt at the time and was the joke with which I opened every one of my speaking engagements back then). Within months of the start of the Great Recession, my IP clients had stopped suing their competitors or being sued by their competitors, in the hope of conserving enough capital to simply survive until the economy turned around, while my insurance practice remained stable. What changed, though, was my ERISA litigation practice, which grew exponentially almost as soon as the market collapsed and then consumed every spare moment thereafter. It was literally eight years later, standing in a Pennsylvania appeals court arguing in support of overturning a trial verdict on a pierce the corporate veil claim against a private equity investor and corporate officer, that my last piece of litigation from the ’08 events finally concluded.

In between the ’08 stock market downturn and that argument, I represented ERISA plans, sponsors and fiduciaries in ESOP valuation disputes, pension claims, a host of LTD cases, ERISA retaliation cases, breach of fiduciary duty actions and class actions, among other types of cases. I like to think I learned a few things from that experience with regard to the risks and liabilities faced by plans, their sponsors and their fiduciaries in a significant downturn: I share four of them below.

First, it is important to remember that plan participants ignore operational errors or debatable practices when the market is climbing, but not when it collapses. As I used to say in all of my post-Great Recession talks, employees may not sue if their 401(k) account only goes up 8% when it arguably, with better management or investment options, should have increased 10%, but they will absolutely sue over those same issues when their account drops 10%. We can assume the same will be true today. So what does that mean for plan sponsors, administrators, fiduciaries and advisors? Tighten up your ship – attend to any operational concerns immediately. It may not protect against liability for problems that previously existed, but it will limit your risks and exposures going forward.

Second, you can expect disability claims to rise, both legitimate ones from employees who have tried to work through their health problems but now cannot (either because the current health risks pose one too many barriers to working, or because they simply cannot work remotely) and more questionable claims from employees anticipating potential job losses. Actuaries in the field may have data to the contrary, but this was my experience in the ‘08-‘10 window. The lesson learned then? Process all claims as though they are legitimate and follow the controlling claim regulations to the letter, for at least two reasons. The first is that you cannot actually know, particularly if you have a large workforce, which claims are legitimate and which ones may not be. The second is that case law, as it has developed over the years, along with current regulations, have a fair number of traps in them that can trip up a plan administrator who doesn’t carefully follow the controlling rules and regulations.

Third, beware of ERISA exposures buried within corporate transactions that were started before the downturn but either will conclude in the near future or be abandoned. I spent years after 2008 litigating cases where plans were supposed to have been merged but weren’t when deals collapsed, or where plans were effectively ignored after transactions failed to close. The short term cost of tying up those problems when a corporate acquisition or other transaction concludes or is abandoned is far less than the long term expense of solving those problems much later, as part of litigation.

And finally, the fourth lesson concerns how to proceed if you decide that certain benefit plans are simply too expensive to maintain in their existing form in the downturn. Over the years, I have seen many sponsors simply decide to not fund certain benefits or to otherwise deviate from the written plan to reduce costs in the short term. History has shown that this is as close to a certain route to being sued as exists. If costs are too high and cannot be sustained, you can make changes – but first seek out counsel who can ensure you do so legally and safely.