Was McDonalds 401k Fiduciary Duty to its Managers Breached?

Planning for the future and retirement is important, and McDonald’s knows that. According to McDonald’s policies, employees can set aside one percent of their wages and receive a 300 percent match from McDonald’s ($3 for every $1 invested). The next four percent is matched 100 percent. Employees can put up to half of their income aside into McDonald’s 401k retirement plan. However, none of that helps if the 401k investments aren’t being managed wisely, as current allegations claim.

A 2013 analysis compiled by NerdWallet and reported on in the Huffington Post said, “a McDonald’s employee working overtime for nearly four months straight would make as much as the company’s former CEO earned in just 60 minutes.” McDonalds receives criticism for its low wages paid employees, but it does offer a generous 401k plan to employees and managers. This benefit is vital to the livelihood of many, but investments in risky ventures put the fund in jeopardy.

Now, current and former McDonalds managers and employees have the potential to join a free class action lawsuit investigation against their employer over accusations that McDonalds violated its fiduciary duty by making unwise 401k plan investments, causing them to suffer fiscal losses.

Employee Protection — a Fiduciary Duty

McDonalds is not alone in facing allegations of irresponsible portfolio investments, causing their employees’ 401k plans to lose value. As holders and managers of their employees’ retirement funds, these companies become fiduciaries. Their duty in this role, their fiduciary duty, is to act solely in their employees’ (also called principals) interest.

The Employee Retirement Income Security Act of 1974 (ERISA) exists to protect these principals. A federal law that sets minimum standards for most voluntarily established health and pension plans in private industry, ERISA exists to ensure benefit plan managers (administrators, plan trustees and investment committee members) act in the best interest of their employees.

Those who do not act in the best interest of the participants, or fail to provide information and support, have breached their fiduciary duty and are in violation of ERISA. Scrutiny of 401k plans by the Department of Labor and Internal Revenue Service has increased over the years, and all federal agencies are serious about enforcing the law.

One such example are the current lawsuits against Edison International, wherein the U.S. Supreme Court will consider ‘imprudent investments’ as they revolve around 401k fees. Plaintiffs allege that Edison added mutual funds to its 401k plan back in 1999, offering them at a higher price rather than the lower fee institutional class shares that were available. The Supreme Court should make a final decision on this by June 2015.

The IRS explains to fiduciaries, “There are actions you can take to demonstrate that you carried out your responsibilities as well as ways to limit your liability. Since a fiduciary needs to carry out activities through a prudent process, you should document the decision-making process to demonstrate the rationale behind the decision at the time it was made.” Suggested policies for managing plans efficiently include:

• Document everything and follow processes
• Delegating fiduciary duty to a Section 3(38) investment manager
• Manage fees, and ensure participants are aware of those costs (transparency)

In addition to ERISA, the IRS and U.S. Department of Labor have programs to help 401(k) plan sponsors correct plan errors and protect participants, like McDonalds managers, and other potential victims of risky 401k investments.

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.

Join the Investigation Now