Most employees who have 401(k) plans focus mostly on fund performance and the growth of their nest egg. But, a growing number of participants are scrutinizing plan fees, and are launching lawsuits against their employers based on their findings.
Lawsuits have been filed against some of the nation’s largest companies, alleging that they allowed employees to be overcharged to participate in the tax-deferred investment plans, reports the Associated Press. The outcome of these suits will most likely have an impact on the volume of future, similar suits.
So far, the St. Louis law firm, Schlichter Bogard & Denton, has filed suits on behalf of plan participants against Lockheed Martin, General Dynamics, United Technologies, Bechtel Group, Caterpillar, Exelon. and International Paper, according to the AP. The suits assert that 401(k) fees and expenses paid by the plans—and ultimately paid by the employees—are too high and not properly disclosed. “The question is whether the plan sponsors can convince the court that these lawsuits are so meritless that they shouldn’t go forward,” David Wray, president of the Profit Sharing/401(k) Council of America, told the wire service.
Under the Employee Retirement Income Security Act (REISA), pension fees must be reasonable, fully disclosed, and charged solely for the benefit of the people in them, noted the AP. Lynn Dudley, vice president of retirement policy at the American Benefits Council, a trade group that represents employers on benefits issues, told the wire service that most plan sponsors provide the necessary information to participants. “I think most companies feel extremely confident that they’ve been following protocol,” he said.
Reportedly, Caterpillar and Northrop Grumman declined to comment, citing policy. Exelon told AP that its fees are reasonably and adequately disclosed. UT said its 401(k) savings plan is well-managed, that fees are “extremely competitive and reasonable,” and that the lawsuit is devoid of merit. “We intend to vigorously defend ourselves,” UT spokesman John M. Moran reportedly said in a statement.
The wire service noted that Lockheed Martin said the suit is without merit and that it intends to defend against it vigorously.