Class Action Lawsuit over Excessive Hidden 401K Fees

Laura Rowley wrote an article two weeks ago discussing a pending lawsuit in which employers allowed 401k plan admins and third party providers to charge “excessive, hidden fees” in their 401k offerings. Specifically, this was was a breach of their fiduciary duty under ERISA, the Employee REtirement Income Security Act. For some cases, the admins and providers were just ignorant while in other cases they were complicit and used those as leverage for other things.

“The duty of the plan fiduciary is to look out for interest of employees and operate the plan for their exclusive benefit,” says Schlichter. “The cases that we have filed allege a pattern of ignoring fiduciary responsibility, and also in some instances, putting the interest of the fiduciary ahead of that of employees and retirees.

“If the employer uses the company’s investment managers in the plan with whom it has other relationships — investment banking, lines of credit — you can’t have the 401(k) plan participants subsidize those other services,” Schlichter continues. “You can’t have them pay a higher fee so their employer can get lesser fees on corporate services. That’s not putting plan participants ahead of plan sponsors.”

Get Ready for the 401(k) Wars [Yahoo! Finance]