401(k) plan lawsuits

By J. Saunders Wiggins, CFP®, AIF®

J. Saunders Wiggins, CFP®, AIF®

J. Saunders Wiggins, CFP®, AIF® CEO/President

401(k) plans don’t get much media attention, and many employers view 401(k) plans as a necessary benefit they must provide for employees. However, they often don’t understand the vast fiduciary duty that accompanies sponsoring a 401(k) plan. As participants have become more informed, and online tools make it easier to get educated, participants have taken the lead to force plan sponsors to improve plans. Unfortunately, this sometimes involves lawsuits. 

One such lawsuit is making it to the Supreme Court – Tibble v. Edison International. At the center of the case is the ongoing discussion about fees, transparency, and legal liability. Edison International’s 401(k) plan included retail share class mutual funds, which are more expensive than available institutional share classes. While this may have been a prudent decision when the plan was instituted, the case centers around Edison’s responsibility to monitor investments and fees over time, and make changes that would benefit participants.

Other recent lawsuits include:

  • Fifth Third Bancorp v. Dudenhoeffer
  • Krueger v. Ameriprise Financial
  • Abbott et al v. Lockheed Martin Corp et al
  • Haddock v. Nationwide

What can you do as a plan sponsor? First, work with a knowledgeable consultant that specializes in retirement plans and is willing to act as a co-fiduciary. Make sure the consultant acknowledges his or her fiduciary duty and responsibility in writing. Then work to create a documented process for all the decisions that are made. And finally, train the other fiduciaries involved, such as your investment committee, internal administrator, and anybody else who might be a fiduciary.