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Lawyers are investigating whether the world’s largest hamburger fast food chain may have breached its fiduciary responsibility for the McDonalds 401k plan by including unsuitable investments in its portfolio, resulting in the portfolio losing value.
Tax-deferred 401k plans – characterized as “employee pension benefit plans” for purposes of the Employee Retirement Income Security Act of 1974 (ERISA) – are the most popular retirement vehicles offered by employers.
The people responsible for the administration and management of 401k plans are called “fiduciaries” and are subject to the same standards that apply to the fiduciaries of other retirement plans. Typically, a broker or adviser who renders investment advice is considered a fiduciary.
ERISA dictates that plan sponsors – employers – must operate their retirement plans in the best interests of their employees. This means the employer is the fiduciary on behalf of the employee.
“Fiduciary liability and responsibility has been a growing concern among sponsors of retirement plans during the past few years, with three consecutive years of declines in the equity markets and losses incurred by employees of companies like Enron, who held significant amounts of company stock in their retirement accounts,” according to OneAmerica.com.
McDonalds employee benefits include the opportunity to save between 1 percent and 50 percent of their pay into a McDonalds 401k plan, with McDonalds matching employees’ contributions by 300 percent for the first 1 percent of pay the employee contributes and 100 percent for each $1 on the next 4 percent contributed. McDonalds claims its employees are “always 100% vested in their contributions and the company matches.”
McDonalds has some 35,000 stores that serve approximately 68 million customers per day in 119 countries.
By the 2000, McDonalds concentrated the bulk – 81 percent – of its employee retirement savings in company stock, a practice begun by many large American corporations in the 1980s.
By 2000, 62 percent of Enron Corporation’s 401k plan funds were invested in Enron stock, while Sherwin-Williams invested some 92 percent of its plan’s assets in company stock and Procter & Gamble was at nearly 95 percent.
Following a 2001 bankruptcy filing by Texas-based Enron, an energy and commodities company, it was revealed that Enron officials engaged in systematic accounting fraud, wiping out the retirement savings of thousands of employees.
Employers, or fiduciaries, are responsible for acting prudently, avoiding conflicts of interest. A fiduciary that fails to act in the best interest of the 401k plan participants has breached its fiduciary duty and may be vulnerable to a lawsuit for ERISA violations.
Join a Free McDonalds 401k Class Action Lawsuit Investigation
A class action lawsuit investigation is currently underway to pursue the possibility of taking legal action against McDonalds for potentially violating ERISA. If you are a McDonalds employee who signed up for a McDonalds 401k account since 2007, you may have a legal claim.
