Federal Law Requires 401k Trustees to Present All Options

Some companies have allegedly withheld cheaper payment options for their employees’ 401k plans. While it is normal for employees to pay fees to fund their 401k plans, it is considered unethical for companies not to provide more affordable options for employees, when they are available.

Under the Federal Employee Retirement Security Act (ERISA), companies have the civil responsibility to make sure that 401k fees are reasonable. Failure to do so could result in a major compromise to the employees’ retirement savings.

According to the Labor Department, even a 1 percent change in 401k fees that are charged to an investor, can equate a 28 percent difference in the employee’s retirement savings.

Adding to the pressure, it has recently been discovered that Americans who are saving for their retirement using these company-sponsored 401k plans, may have paid billions of excess expenses to Wall Street investment firms.

There are numerous fees attached to 401k plans, such as consulting, money management, transaction, marketing, education, and administration. Most of these fees are associated with investment plan assets and the 401k administration plans set by Third Party Administrators (TPAs).

Experts explain that investment firms were able to garner these fees because many trustees of 401k plans did not take their responsibilities to their participants too seriously.

These trustees relied on consultants and advisers from Wall Street to make any major decisions, which ultimately created a mutually beneficial relationship where the trustees were protected from taking responsibility of bad decisions.

Overview of 401k Plan Trustee Responsibilities

A recent ruling by the Supreme Court now mandates that companies and 401k plan trustees are responsible for monitoring the amount of expenses extracted from employee accounts each month.

This trial was initiated by benefit investors, who had wanted more control of their 401k plans and were fed up with the fees they had to pay for their 401k plans.

If companies or trustees fail in this duty, they could be held legally responsible for any unnecessary fees. While the court decision did not explicitly state that the 401k plan administrators, trustees, or companies “will be sued,” but rather “can be sued,” experts state that this is a good start and will encourage these parties to take their duties to 401k participants seriously.

However, the ruling had officially transferred the obligation of monitoring the plans from 401k participants to their employers and appointed trustees. This has allowed for massive corrections against companies and trustees who completely control 401k plan investment options.

Even when participants were responsible for monitoring their 401k plans, they had no control in the money that was deducted from them, making the entire situation for participants all the more stressful.

Despite this new line of protection, legal experts advise 401k participants to take precautions to protect their retirement assets. These steps include:

• Require a full written disclosure from trustees for every single expense that is deducted from their retirement account.
• Ask the trustees to document the services they provide the participants.
• Ask the trustees to compare the performance of the participant’s plan to the performance of a generally-accepted benchmark.
• Ask that the trustees document in writing that there are no lower-cost alternatives to their 401k plans, or any alternative finance plans that may result in better numbers.

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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