The Responsibility of Plan Fiduciaries

Protecting against the Self-Interest of Others for the Good of Participants

Fiduciaries of the JP Morgan Chase 401(k) Savings Plan have recently been sued by Plan participants. Listed allegations include:

  • failing to monitor and evaluate the cost of investment options
  • imprudently allowing the Plan’s assets to remain in various proprietary (JPMorgan) investment vehicles rather than lower fee, similar investment vehicles, and
  • failing to remove fiduciaries whose performance was sub-par.[1]

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Morin, et al v. Essentia Health:  A New Twist on Fee-based Cases against Plan Sponsors

Excessive Fee LawsuitA case recently filed in Minnesota took a unique approach to accusing a plan sponsor of charging participants excessive fees. Essentia Health and its subsidiary maintained two plans. One retirement plan established in 1965. The second was a 403(b) plan established in 2009. The original plan consisted of approximately 16,848 participants and $982 million in assets and was recordkept by BMO Harris. The 403(b) plan consisted of $103 million in assets and was recordkept by Lincoln Financial.[1] Continue reading

Checksmart Excessive Fee Suit Requires Closer Look at Fund Performance

Excessive Fee Lawsuit FiledA recently filed lawsuit attempts to hold plan fiduciaries to what has been an unprecedented standard until now. Previous lawsuits accused plan fiduciaries (with a slight amount of industry knowledge) of what could be considered “a no brainer”: don’t pay too much. If there is an identical or nearly identical investment option offered at a lower cost, choose the lowest cost option. If it is not feasible to switch to the lowest cost option, retain the fund but rebate revenue sharing. Simple, provided you know what you’re looking for. This new lawsuit requires fiduciaries to put more thought into the plan’s fund lineup, particularly with respect to fund expenses relative to fund performance. Continue reading

Lawsuit threats no longer remote possibility for small and mid-sized retirement plans

Lawsuit threats a potential reality for small and mid-size retirement plansThere are three sources of threats to any qualified plan: the DOL, the IRS, and lawsuits. Until recently, lawsuits had only been filed against plans with assets in the billions and had only been filed by Schlichter, a St. Louis-based firm.  The threat of lawsuits seemed remote to small and mid-sized plans; a reality for larger plans only until just recently. On May 18, 2016, a lawsuit was filed in Minnesota by a law firm named Madia, LLC on behalf of Participants of the LaMettry’s Collision, Inc. 401k plan.  The LaMettry’s plan has $9.2 million in assets.  No longer can smaller plans pull the covers over their heads.

The threat of a lawsuit is now real to plans of all sizes.

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