Two recent lawsuits have opened up a big can of worms for benefits pros.
As if you didn’t have enough to worry about already. Now employer-sponsored 401(k) plans have come under attack. And if the fees employees are paying under your plan are found to be excessive, you could end up with a costly lawsuit on your hands.
Caterpillar, Inc., just agreed to pay $16.5 million to settle an excessive fee lawsuit in federal court, and General Dynamics Corporation just agreed pay $15.1 million to settle a similar lawsuit.
Both companies were charged with running 401(k) plans that charged participants excessive investment fees.
Under the Employee Retirement Income Security Act (ERISA), 401(k) plan sponsors have a legal responsibility to select the best plan possible. That means choosing plans that don’t include hidden fees that undermine the potential growth of participants’ savings accounts.
The problem, of course, is that plan fees are difficult to decipher — which is what prompted the Department of Labor (DOL) to release new fee disclosure rules that will force 401(k) service providers to give employers a clearer picture of the fees being charged.
However, the rules don’t go into effect until July 16, 2011. So for now you’re on your own.
So what can you do to avoid a lawsuit? Here’s a suggestion from the financial experts at the Loring Ward Group: Ask your plan administrator to disclose all the fees included in your plan. If the total fee level exceeds 2% of the total assets currently in the plan, it’s time to consider making some changes.
During your free trial, you can cancel at any time with a single click on your “Account” page. It’s that easy.
