By: Louise Kennedy These days, more of us than ever are realizing how events can take a sudden turn and present us with a financialread More
News, Class Actions, Commercial Litigation
401(k) Hidden Fees & Mismanagement for Retirement Plans Under Investigation
Some employers are violating that duty by failing to monitor fees associated with 401(k) plans.
Employees are always looking to save money for retirement. Section 401(k) of the Internal Revenue Code permits employers to set up a trust fund to which an employee may elect to have pre-tax amounts of the employee’s salary contributed to the trust under the plan instead of receiving the amount of salary in cash in order to save for retirement. 401(k)’s are offered by employers, who have a fiduciary duty to safeguard their employees’ retirement accounts.
However, some employers are violating that duty by failing to monitor fees associated with 401(k) plans. These fees are often hidden, so the employee (a 401(k) participant) has no knowledge that the fees are being deducted from his or her plan. In addition, some employers have violated their duty by placing plan participants in high-cost retail mutual funds when cheaper institutional choices were available.
A string of 401(k) class action lawsuits have been filed, with some settling for hundreds of millions of dollars for people who lost money due to hidden fees and/or general misconduct of companies who breached their fiduciary duties to their employees.
One case involving a major California corporation settled because that company failed to use its size and bargaining power to negotiate lower expenses for the more than 17,000 people in its 401(k) plan. The settlement required the company to seek bids of various investment plans from vendors instead of simply offering high-priced retail mutual funds to its employees.
As a result of these class action suits, the Department of Labor has instituted a new policy whereby employers must disclose to participants in their retirement plans the fees and investment performance in a standard format accessible by employees. The goal of the new policy is to drive the cost of 401(k) investigating down over time.
If you or someone you know is a 401(k) holder, who suspects they may have been a victim of hidden fees or any other mismanagement of your retirement plan by your employer, please contact us for a free consultation.
With experienced attorneys and locations throughout the United States, our firm strives to provide the highest quality of service to our clients. We treat each case with careful attention to ensure that consumers get the justice they deserve. Seeger Weiss has office locations in New York, New Jersey, and Pennsylvania.