401K Plans Being Taken To Court For High Fee’s
401k Plans and Pension Plans are typically some of the highest cost plans in the industry. Most small business owners and pension plan board members are ‘unaware’ of the rules and responsibilities that come with administering a 401k/pension plan. Don’t fall prey to brokerage firms trying to sell their plan designs with mutual funds and other high cost alternatives. Be particularly cautious of the biggest cash cow–the stable value fund. In most cases the stable value fund of a plan will pay anywhere from .75 to 2% LESS THAN the current going market rate. Why? You guessed it–profits for the firms managing the accounts.
Set yourself free from the 401k Trap by having The Financial Coach & Blue Ocean Portfolio’s manage your account while advising your plan participants in a ‘Fiduciary Capacity.’ Call us today to arrange an overview of your current plan and costs along with a comparison of exactly what Blue Ocean Portfolio’s can do for you.
November 10, 2009
Ruling A Boost For 401(k) Fee Lawsuits
(Dow Jones) The tentative settlement of a lawsuit against Caterpillar Inc. over 401(k) fees could signal that this type of litigation will not disappear.
While similar cases have been thrown out, last week’s resolution in the Caterpillar case may be a first big win for 401(k) plan participants. A number of other big U.S. companies still face lawsuits accusing them of overcharging employees participating in the plans.
“I think that it brings a little wind back into the sails of the plaintiffs,” says Greg Ash, an attorney with Spencer Fane Britt & Browne in Kansas City, Mo.
While not involved in the Caterpillar case, Ash often represents companies in similar disputes. He called the settlement “a bit of a surprise.” ”This is at least a partial victory for them. They’ve exacted some money and actions from the plan sponsor,” he noted.
The U.S. District Court in central Illinois still needs to approve the settlement. Among other things, it calls for the construction-equipment maker to pay $16.5 million, which will be distributed to about 80,000 current and former plan participants based on the number of years they maintained account balances.
“We believe we would’ve prevailed, but we made a strategic decision to settle” because the complex litigation would have taken five to seven years, and Caterpillar already has closed its investment management subsidiary, says Jim Dugan, a Caterpillar spokesman. Plaintiff’s attorney Jerome J. Schlichter of Schlichter Bogard & Denton in St. Louis says Caterpillar also agreed to offer lower-cost institutional mutual funds rather than retail mutual funds for its core investment choices and to have an independent monitor of the plan for at least two years. Ed Ferrigno, vice president, Washington affairs for the Profit Sharing/401k Council of America, a not-for-profit association of companies that sponsor plans, says: “What we’re seeing is that generally the courts have not supported the fee lawsuits.”
But many of the pending lawsuits against large employers—while each unique—have similarities to the Caterpillar case. “Any victory for the plaintiff is going to energize additional litigation,” says Ash.
