Meredith Friesen  |  June 11, 2015

Category: Legal News

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401k retirement planCurrently, a 401k class action lawsuit investigation is underway, scrutinizing the accusations that 401k providers are charging excessive and/or hidden fees that violate the Federal Employee Retirement Income Security Act (ERISA). Many individuals may be unaware of their 401k fees or if they qualify as ERISA violations. Here are some important facts that may help you in managing your 401k and in deciding if joining a 401k class action lawsuit is the right choice for you.

401k Fee Disclosure

As of July 2012, 401k providers have the legal obligation to include all fees and expenses in a quarterly statement to the investor. This includes investment rates of return, administrative costs, and all other fees. Many, if not most, people may not even notice that 401k fees are disclosed. If they did notice, it is unlikely that they made any change. This is because 401k fees can be extremely confusing for many individuals.

401k fees are divided into three categories: Plan administration fees, investment fees, and individual service fees. Plan administration fees are mostly self-explanatory. They pay for the administration of the funds including records, accounting, and other basic services. Some fees are taken from investment returns, though in other cases they are separate. This is not one annual administrative fee. If this 401k fee is charged against the assets, then those who have large accounts are paying more than those with small accounts. It is not one number across the board.

Investment 401k fees are the largest fees. While it may look like a small percentage, the amounts can add up quickly. The difference between a .5 percent investment fee and a 1.5 percent investment fee over the course of years and even decades can add up to tens of thousands of dollars loss on the return (depending on investment amount and length of investment).

Individual service fees are often an option if you take out a loan on your 401k.

401k fee disclosure can be confusing for the investor depending on how the 401k providers disseminates the information to investors. Experts have recommended spending the time to figure out exactly where the fees are coming from.

ERISA Reasonable 401k Fees

After the process of determining what the 401k fees are, an investor can determine if these fees are reasonable according to ERISA. While the law is not specific in number, reasonable numbers tend to range from .5 to 1.4 percent. This usually depends on the size of employer, as larger employers can usually offer lower rates.

While sometimes even the higher 401k fees may be worth it, many employers have allegedly violated ERISA by charging their employees unreasonable rates. The Supreme Court gave a ruling that allowed individuals to file or join a 401k class action lawsuit if they believe their employer has broken fiduciary duty. Employers need to offer the lowest fees available. In Tibble v. Edison, the 401k provider allegedly gave the plaintiff  (an employee) the same shares that non-employees could purchase instead of offering them a lower cost share.

Plaintiffs in a 401k class action lawsuit may be able to recover the fees that they paid to the 401k provider in addition to other awards.

Join a Free 401K Class Action Lawsuit Investigation

If you believe you have been overcharged for 401k fees by your employer’s retirement plan, or that the investments were otherwise imprudent, you may be eligible for a FREE class action lawsuit investigation and pursue compensation for these violations.

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