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401(k) Fee Suits on the Rise [By Anique Gonzalez] Following the surging trend of employees filing lawsuits against their employers, employers have yet another reason to be wary: 401(k) plans. Recently, fees associated with 401(k) plans have come under close scrutiny and are resulting in mounting lawsuits against small and large corporations alike.
The timing of the suits, whether planned or
question were “excessive,” “unreasonable,”
information associated with 401(k) fees
not, coincides with investigations by three
or related to “revenue sharing.”
charged to employees. Moreover, the legal
federal entities: the U.S. Department of
pressure on such companies continues to
Labor, the U.S. Securities and Exchange
However, Schlichter Bogard is not the
mount. Three months ago, for instance,
Commission, and a congressional
only firm filing suits. Keller Rohrback and
financial experts appeared before a
committee. These inspections are looking
McTigue & Porter have also filed similar
congressional hearing related to excessive
into the fees employees must pay for
claims against major corporations such
401(k) fees.
401(k) plans, mutual funds, annuities, and
as ING Life Insurance Annuity Company,
other retirement programs, as well as the
General Motors Corporation, and Radio
Thus far, the likely outcome of these cases
accessibility of the information associated
Shack Corporation. These claims not only
is unclear. What is clear, though, is this: if
with those fees. Interestingly, some suits
address the availability of fee information but
401(k) suits are increasingly found in favor
are even going after employees who are
also whether offering plans with excessive
of employees, the number of lawsuits filed
aware of excessive fees but choose to
fees is in the best interest of the employee.
will drastically rise and the landscape of
participate in such plans anyway.
401(k) and associated retirement plans will The majority of the suits filed by Schlichter
dramatically be altered by companies and
Starting in the fall of 2006, Schlichter,
Bogard have been able to withstand motion-
the government alike.
Bogard & Denton began filing class action
to-dismiss claims filed by the defendants,
lawsuits claiming the companies they filed
although not all claims have been found
against, including The Boeing Company,
in the firm’s favor. A case against Exelon
Kraft Foods, Inc., and Bechtel Group,
Corporation, for example, was dismissed after
Schlichter, Bogard & Denton
Inc., did not act in good faith. Namely,
a judge found that there were no unwarranted
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they allegedly permitted intermediaries
fees associated with the company’s 401(k)
to charge employees unnamed and often
plan. Additionally, in another claim, a federal
U.S. Department of Labor
excessive fees in relation to their 401(k)
judge rejected defendants in a case against
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plans. Thus far, Schlichter Bogard has filed
Northrop Grumman. U.S. Government Accountability Office
13 suits in all. It is likely the number of suits will continue The claims have been filed under ERISA,
to grow in the coming years. The U.S.
the Employee Retirement Income Security
Government Accountability Office released
Act of 1974, which the firm believes will
a report stating that increasingly mutual
substantiate the allegations that the fees in
fund companies do not properly divulge
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