In the face of allegations of ERISA violations for allegedly high fee plans, major universities and other employers are looking to cut 401(k) and other retirement plan fees.
According to a recent report in Investment News, nearly half of all plan sponsors have cut retirement plan fees, while over eighty percent have conducted a review of their fee structure. A spate of retirement plan lawsuits brought employers and plan administrators to task for allegedly high fees and other ERISA violations.
The retirement plan lawsuits began in 2006, when two major companies, Lockheed Martin and General Dynamics, were hit. Legal action over high fees ramped up in 2015, as plaintiffs began winning major awards and agreeing to substantial settlements.
In 2016, the US Department of Labor helped spur on retirement plan lawsuits by issuing a rule regarding fiduciary duty. The rule clarified and brought awareness to the obligations of plan sponsors under ERISA.
Excessive recordkeeping fees have also been an issue in retirement plan lawsuits, and, reports Investment News, these fees have been cut by nearly a third since 2012.
Retirement Plan Lawsuits
In addition to 401(k) plan sponsors, universities and other organizations offering 403(b) plans have been hit with retirement plan lawsuits. Eight major universities were hit with lawsuits alleging excessive fees in 2016, including Duke, Emory, Johns Hopkins, Vanderbilt, New York and Yale Universities, the University of Pennsylvania and the Massachusetts Institute of Technology.
The retirement plan lawsuits allege that employees were offered too many investment options at an unreasonable cost, leading to huge losses for the employees and fat fees for plan administrators. The plaintiffs alleged the universities and other employers failed to provide low-cost options and retained expensive, underperforming investments in their offerings to employees.
University employees, as well as more common 401(k) plan participants, have billions in these retirement plans. Under ERISA, plan administrators have an obligation to manage those funds in the best interests of the employees – they must set and adhere to a code of conduct.
Other ERISA protections include:
- Providing sufficient information to plan participants about their retirement plan;
- Minimum standards for vesting, funding, and benefit accrual;
- Providing plan participants notice of their right to hold plan administrators accountable; and
- Providing plan participants notice of their right to file a retirement plan lawsuit;
If plan administrators violate their duty, for example, if they charge excessive fees, offer high cost or high-risk investments, or fail to keep adequate records, plan participants can hold them accountable. Generally, plan participants must start with an appeals process; however, plan participants also have the right to file a retirement plan lawsuit if they suspect their plan administrators are violating ERISA.
ERISA is a complex set of regulations. If you are concerned about excessive fees or another ERISA violation when it comes to your retirement or pension plan, contact an experienced ERISA attorney. The attorneys at Bradley/Grombacher are currently investigating ERISA complaints.