Nordstrom was hit with a lawsuit alleging the company violates the Employee Retirement Income Security Act (ERISA) by charging excessive fees on its 401(k) plan.
According to the Nordstrom 401k lawsuit, fees for the plan boomed by 30% over a five-year period. The complaint alleges that Nordstrom failed to use its massive bargaining power to protect plan participants from these fees.
The Nordstrom 401k lawsuit alleges that a reasonable fee per person is $30.00, but plan administrators charged $55.60 to $66.56 — double the reasonable amount.
The department store, alleges the Nordstrom 401k lawsuit, has one of the largest employee 401(k) plans in the country with 2.6 billion in assets. Plan administrators should have used that power to obtain lower costs for management of the plan, plaintiffs allege. Instead, alleges the lawsuit, fees increased from 3,799,000 to $4,695,000 from 2011 until 2016.
“The extra costs incurred by Nordstrom participants from 2011 to 2016 were $13.7 million,” alleges the Nordstrom 401k lawsuit.
Further, alleges the complaint, the 401(k) plan committee breached their fiduciary duty to plan participants. In addition to allowing the unreasonable fees, the committee did not act prudently when it came to plan costs, did not use lower cost investment vehicles, and did not adequately disclose fee information to plan participants.
According to the lawsuit, plan participants were not provided information about revenue sharing payments or how these payments applied, making it impossible to determine whether revenue sharing amounts were reasonable in relation to administrative costs.
The Nordstrom 401k lawsuit contends that plan participants should have been offered lower cost options, like index funds or collective investment trusts, rather than the higher fee options provided.
“Collective investment trusts provide yet another much lower cost investment option for Plan holdings. They are pooled tax exempt investment vehicles which are available for 401(k) plans and are cheaper than mutual funds. While a few of the Plan’s holdings were in collective trusts, the Plan failed to utilize this much cheaper option with respect to the $1.1 billion in Nordstrom Target Retirement Funds,” alleges the lawsuit.
The Nordstrom 401k lawsuit seeks to recover losses from the alleged breaches of fiduciary duties by the plan committee. Additionally, the lawsuit seeks reimbursement for all investment losses and for the Nordstrom 401(k) to come into compliance with ERISA.
ERISA Protections for Workers
Retirement plans, as well as some forms of insurance, are protected under the Employee Retirement Income Security Act of 1974 (ERISA). Insurance, retirement, and pension providers must meet the following standards under ERISA when administering a covered plan or policy;
- Information about the plan must be provided to participants
- Administrators must set minimum standards for participation, vesting, funding, and benefit accrual
- Plan fiduciaries must be provided and meet principles of conduct for plan fiduciaries
- Plan fiduciaries must be held accountable
- Participants are provided the right to file a lawsuit against fiduciaries
If you are concerned that your retirement or other ERISA covered insurance plan is not being appropriately managed, an experienced attorney with Bradley/Grombacher can help protect your legal rights.
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