Lawsuits against 401(k) plan fiduciaries are on the rise. The bigger settlements came from class action lawsuits. Attorneys asserted employee’s retirement lifestyle was harmed by paying high fees, and it was the employer’s fault.
- ABB Mismanagement Cost 401(k) Plan $35.2 Million(Bloomberg.com, April 2, 2012)
- “Bechtel Settles 401k Fee Case for $18.5M,” (PlanSponsor.com, October 14, 2010)
- “Court OKs $16.5M Caterpillar 401k Fee Pact,” (PlanSponsor.com, August 12, 2010)
Most employers and employees don’t understand how fees are charged.
By the way, the retirement committee members were named in the suit as plan fiduciaries are personally liable.
Small companies are not immune t0 401k plan risks. The DOL has originated these suits:
- US Labor Department sues Wisconsin-based B & K Builders, co-owners to recover more than $114,000 for company’s employee benefit plans, (DOL Release Number: 11-383-CHI, October 17, 2011)
- US Department of Labor sues architectural design company to restore more than $135,000 in assets to company’s 401k plan, (DOL Release Number: 11-684-ATL (235), May 23, 2011)
- US Labor Department sues trustee of defunct Mentor, Ohio, company to recover $97,000 in profit sharing plan assets, (DOL Release Number: 11-562-CHI, May 11, 2011)
By the way, the DOL has been aggressively hiring more investigators to regulate this year’s fee disclosure.
What can you do to decrease your 401k plan risks? If you don’t have time to learn about the ins and outs of fees that the DOL holds you responsible for scrutinizing or have the benchmarking tools to investigate consider the following actions:
- Hire a qualified ERISA 3(38) investment manager to delegate your investment duties
- Hire an independent fiduciary to delegate your overall operational duties
- Hire a retirement plan advisor with 401(k) credentials such as Accredited Investment Fiduciary, Professional Plan Consultant™ or Qualified Plan Financial Consultant
- Hire an attorney that specializes in 401(k) matters
- Buy fiduciary liability insurance. Don’t assume that your D & O covers the 401(k).