According to the Groom Law Group, 90 401k lawsuits focused on defined contribution plans have been filed since 2006, highlighted by the $140 million settlement paid by Nationwide (see top 10 defined contribution lawsuit settlements and awards). 401k lawsuits and associated litigation windfall are attracting more and more law firms learning from each other and the courts, on how to either win a case or get big settlements. And while most cases have been filed against larger defined contribution plans or service providers, a small Ohio based personal injury law firm recently filed a suit alleging excessive fees in a $1.1 million plan with 27 participants.
Perhaps adding fuel to the fire, the Wall Street Journal (subscription required) highlighted the rash of lawsuits filed against 401k and 403b plan sponsors and providers. With lawsuits now a top concern by plan sponsors according to a recent Pimco survey, the litigation horizon continues to expand with 25 such suits filed in 2016..
Recent settlements against plan sponsors like American Airlines and NYLife alleging the improper use of proprietary funds have exposed the use of affiliated investments (and accompanying fees), however some cases like the ones against Putnam and Wells Fargo have been dismissed because plaintiffs failed to show that fees were unreasonable even if they were affiliated.
Smaller plan sponsors and their advisors, most of whom are or will be acting as a fiduciary, should pay close attention before smaller law firms, like the one in Ohio, are beginning to join the retirement litigation bonanza, suing plans and their advisors trying to emulate the successful cases now being settled against larger organizations.
Along with the sole benefit rule, plan fiduciaries must ensure that fees are reasonable through a prudent, documented process. Proprietary funds of the plan’s record keeper, especially target date funds, or whatever is used as the default option, should be evaluated with care and must be scrutinized independently from the other services being provided.
And for staff on Investment Committees or those acting as a plan fiduciary, getting ERISA insurance to protect them also seems prudent with personal assets at risk under ERISA.
Mr. Kelly is an expert in online marketing, search engine optimization, content development and content distribution. He has consulted some of the top brokerages, media companies and financial exchanges on online marketing and content management including: The New York Board of Trade, Chicago Board Options Exchange, International Business Times, Briefing.com, Bloomberg and Bridge Information Systems and 401kTV.
He continues to be a regular market analyst and writer for ForexTV.com. He holds a Series 3 and Series 34 CFTC registration and formerly was a Commodities Trading Advisor (CTA). Tim is also an expert and specialist in Ichimoku technical analysis. He was also a licensed Property & Casualty; Life, Accident & Health Insurance Producer in New York State.
In addition to writing about the financial markets, Mr. Kelly writes extensively about online marketing and content marketing.
Mr. Kelly attended Boston College where he studied English Literature and Economics, and also attended the University of Siena, Italy where he studied studio art.
Mr. Kelly has been a decades-long community volunteer in his hometown of Long Island where he established the community assistance foundation, Kelly's Heroes. He has also been a coach of Youth Lacrosse for over 10 years. Prior to volunteering in youth sports, Mr. Kelly was involved in the Inner City Scholarship program administered by the Archdiocese of New York.
Before creating ForexTV, Mr, Kelly was Sr. VP Global Marketing for Bridge Information Systems, the world’s second largest financial market data vendor. Prior to Bridge, Mr. Kelly was a team leader of Media at Bloomberg Financial Markets, where he created Bloomberg Personal Magazine with an initial circulation of over 7 million copies monthly.
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