Something incredibly important just happened in the 401(k) plan sponsor space. An excessive fee lawsuit has been filed against a $9.2M plan with 114 participants. As we’ve been saying for months, smaller plan sponsors better stop being complacent. Conventional wisdom had it that smaller plans can fly under the radar and avoid such lawsuits. False. Here are some important statements from the lawsuit (Debbie Damberg and Tony Severson vs LaMettry’s 401K Profit Sharing Plan):
43.Defendants did not disclose to Plan participants that: similar investments to those selected by Defendants for the Plan were available from other providers at significantly lower expense to the Plan; the selected funds charged higher fees than readily available alternatives designed to track the same market indices; the selected funds underperformed readily available and more cost-effective alternatives; all fees were paid from Plan assets and therefore depleted retirement savings; or Defendants did not select the Plan funds or continually evaluate them based on the reasonableness of fees charged.
44.Defendants failed to have or engage in a prudent process – or any process – for the consideration, evaluation, selection, and active monitoring for these funds or lower fee alternatives. Defendants failed to implement a prudent and adequate procedure to ensure that reasonably priced, prudent investment options were selected for the Plan.
401kFiduciaryOptimizer helps you come to the rescue of plan sponsors, diagnose problems with the plan and save money for participants before they get in touch with lawyers.