{"id":9039,"date":"2021-10-14T06:15:00","date_gmt":"2021-10-14T11:15:00","guid":{"rendered":"https:\/\/rixtrema.com\/blog\/?p=9039"},"modified":"2021-10-28T08:56:24","modified_gmt":"2021-10-28T13:56:24","slug":"rise-in-retirement-plan-excessive-fee-litigations","status":"publish","type":"post","link":"https:\/\/rixtrema.com\/blog\/rise-in-retirement-plan-excessive-fee-litigations\/","title":{"rendered":"Rise in Retirement Plan Excessive Fee Litigations"},"content":{"rendered":"\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<ul class=\"wp-block-list\"><li><strong><a href=\"#h-davis-v-salesforce-com\">Davis v. Salesforce.com<\/a><\/strong><\/li><li><strong><a href=\"#h-kurtz-v-the-vail-corporation\">Kurtz v. The Vail Corporation<\/a><\/strong><\/li><li><strong><a href=\"#h-the-lawsuit-factors\">The lawsuit factors<\/a><\/strong><\/li><li><strong><a href=\"#h-key-points\">Key Points<\/a><\/strong><\/li><\/ul>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p><span style=\"font-weight: 400;\">The number of lawsuits involving&nbsp; 401(k) plans has increased significantly in recent years, peaking in 2020. The number of ERISA lawsuits in 2020 saw an <\/span><a href=\"https:\/\/www.groom.com\/resources\/2020-erisa-litigation-trends-hint-at-whats-ahead-this-year\/\"><span style=\"font-weight: 400;\">80% increase<\/span><\/a><span style=\"font-weight: 400;\"> compared to 2019. This trend has continued in 2021, including an increase in the number of lawsuits against small plans.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">Many of the suits were filed due to the plans&#8217; high fees and unfavorable investment options with low returns. Such a tendency makes many companies cautious, and to take measures to avoid litigation. The following examples illustrate the need for plan sponsors to be prepared for potential excessive fee litigation.<\/span><\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"has-white-color has-text-color has-background wp-block-heading\" id=\"h-davis-v-salesforce-com\" style=\"background-color:#b2ac8a\"><strong>Davis v. Salesforce.com<\/strong><\/h2>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p><span style=\"font-weight: 400;\">On October 5, 2020, a federal district court dismissed a case brought against the Salesforce.com 401(k) planning committee for failing to monitor its fiduciary duties. The case was brought by former employees.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The plaintiffs accused the defendants of failing to select low-fee share classes and choosing to ignore the fees charged by actively managed funds. They also accused them of not looking into other investments such as pooled accounts and mutual funds.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The court found that since mutual funds have different management styles and different risks, claims that the funds are cheaper than those offered by the Plan do not meet the requirements of the fiduciary duty. Also, failing to choose a share class with the lowest fees is not enough to support a claim of a breach of loyalty. The accusation of not offering alternative investment vehicles to mutual funds was also not found to be a fiduciary duty.&nbsp;<\/span><\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"has-white-color has-text-color has-background wp-block-heading\" id=\"h-kurtz-v-the-vail-corporation\" style=\"background-color:#b2ac8a\"><strong>Kurtz v. The Vail Corporation<\/strong><\/h2>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p><span style=\"font-weight: 400;\">On January 6, 2021, the federal district court dismissed the lawsuit against the Vail Corporation\u2019s 401(k) plan. Similar to the previous case, the plaintiff alleged that the plan&#8217;s investments were excessively costly compared to similar plans, passively managed funds and low-fee share classes were not selected and that the plan&#8217;s fiduciaries violated their duties of loyalty and prudence.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The court noted that in order to claim \u2018excessive fees\u2019 a fund must show that the fees it charges are so disproportionately large that they cannot have been the product of bargaining. The court noted that it was not unreasonable for a plan participant to believe that the plan&#8217;s selection was poor based on the availability of lower-cost options. However, \u2018nothing in ERISA requires every fiduciary to scour the market to find and offer the cheapest possible fund\u2019, the court cited Hecker v. Deere &amp; Co.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The court noted that these claims should not be based on hindsight or the performance of selected investments. Instead, they should be based on the conduct at the time when the claims were made.&nbsp;<\/span><\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"has-white-color has-text-color has-background wp-block-heading\" id=\"h-the-lawsuit-factors\" style=\"background-color:#b2ac8a\"><strong>The lawsuit factors<\/strong><\/h2>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p><span style=\"font-weight: 400;\">According to <\/span><a href=\"https:\/\/news.bloomberglaw.com\/employee-benefits\/401k-fee-suits-flood-courts-on-pace-for-fivefold-jump-in-2020\"><span style=\"font-weight: 400;\">Bloomberg Law<\/span><\/a><span style=\"font-weight: 400;\">, the number of 401(k) lawsuits keeps rising due to the maturing body of law, new tools available to help plaintiffs&#8217; attorneys, and the COVID-19 pandemic. New tools and databases now allow fiduciaries to investigate the actual fee level of 401k plans. Before, it was difficult for plaintiffs&#8217; lawyers to uncover the fees involved in retirement plans. Through the use of new tools, they were able to gather vital information that can be used to generate potent complaints.&nbsp;<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"font-weight: 400;\">The global pandemic also boosted the number of retirement lawsuits because it motivated people to take advantage of their savings. Many people started to make inquiries about their fees and investment plans.<\/span><\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h2 class=\"has-white-color has-text-color has-background wp-block-heading\" id=\"h-key-points\" style=\"background-color:#b2ac8a\"><strong>Key Points<\/strong><\/h2>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p><span style=\"font-weight: 400;\">These two documents remind fiduciaries that their duties are not based on hindsight. Instead, they are based on the decisions made at the time. Thus, it is critical that fiduciaries follow a good investment policy and document how and why they make their decisions.<\/span><\/p>\n<p>\u00a0<\/p>\n<p><span style=\"font-weight: 400;\">RiXtrema offers a wide variety of products for fiduciaries such as 401k Fiduciary optimizer which allows one to analyze the funds and find an alternative in a lower fee share class. <\/span><a href=\"https:\/\/rixtrema.com\/landings_401k?source=blog13102021\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">Schedule a Demo<\/span><\/a><span style=\"font-weight: 400;\"> with us to see how you can find lower fee alternatives or reach out to clientsuccess@rixtrema.com to set up a demo.<\/span><\/p>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/rixtrema.com\/landings_401k?source=blog13102021\" target=\"_blank\" rel=\"noopener\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"305\" src=\"https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2021\/04\/2-banner-401k-min.jpg\" alt=\"\" class=\"wp-image-7797\" srcset=\"https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2021\/04\/2-banner-401k-min.jpg 700w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2021\/04\/2-banner-401k-min-300x131.jpg 300w, https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2021\/04\/2-banner-401k-min-500x218.jpg 500w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/a><\/figure>\n\n\n\n<div style=\"height:40px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n","protected":false},"excerpt":{"rendered":"<p>The number of lawsuits involving\u00a0 401(k) plans has increased significantly in recent years, peaking in 2020. The number of ERISA lawsuits in 2020 saw an 80% increase compared to 2019.<\/p>\n","protected":false},"author":24,"featured_media":9358,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[168],"tags":[41,7],"class_list":["post-9039","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-401kfiduciaryoptimizer","tag-financial-advisor"],"jetpack_featured_media_url":"https:\/\/rixtrema.com\/blog\/wp-content\/uploads\/2021\/10\/\u0418\u043b\u043b\u044e\u0441\u0442\u0440\u0430\u0446\u0438\u044f_\u0431\u0435\u0437_\u043d\u0430\u0437\u0432\u0430\u043d\u0438\u044f-13-min-scaled.jpg","yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v15.9.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Rise in Retirement Plan Excessive Fee Litigations<\/title>\n<link rel=\"canonical\" href=\"https:\/\/rixtrema.com\/blog\/rise-in-retirement-plan-excessive-fee-litigations\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Rise in Retirement Plan Excessive Fee Litigations\" \/>\n<meta property=\"og:description\" content=\"The number of lawsuits involving\u00a0 401(k) plans has increased significantly in recent years, peaking in 2020. 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