By Alison L. Martin | June 25, 2020 at 09:30 AM
Almost every employer sponsoring a retirement plan should to be mindful of potential fiduciary liability under the Employee Retirement Income Security Act of 1974 (ERISA).
According to an article published by the America Bar Association, between increased regulatory scrutiny by the Department of Labor and private litigation brought by the ever-expanding plaintiff’s bar, ERISA lawsuits are at an all-time high.
One of the most significant ERISA litigation trends is “excessive fee claims.” In a nutshell, these allege that a retirement plan’s fiduciaries allowed the plan to overpay for recordkeeping and use expensive and underperforming investments. These claims can cost millions of dollars to defend, and settlements can reach tens of millions of dollars.
A financial services company that sponsors a retirement plan may be sued, along with its executives, for excessive fee claims even when they don’t provide any professional services to the plan.
This is because, as plan fiduciaries, they have a duty to ensure that plan fees and investments provided by third parties are reasonable. Moreover, pursuant to ERISA, plan fiduciaries may be personally liable for these losses and the plans do not provide indemnification for them.
What About Smaller Plans?
Although these claims were historically filed against fiduciaries of large plans, the last few years have seen an uptick in lawsuits against fiduciaries of smaller plans, including plans well under $100 million in assets.
It’s apparent that fiduciaries of smaller plans should no longer consider themselves immune from litigation risk.
With a surge in litigation, it’s important that all advisors, regardless of their or their client’s plan size, understand the recent trends pertaining to excessive fee claims and the characteristics that may make them more susceptible to litigation.
What can they do to protect themselves? Of course, plan fiduciaries should always act with care andundivided loyalty to the plan and its participants. And while there’s no foolproof way to avoid an excessive fee claim, there are a few steps that may help reduce exposure:
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March 25, 2020
Coronavirus (COVID-19) Regulatory Resources for Employee Benefit Plans
The past week has brought an onslaught of changes for the world, including changes in U.S. federal legislation to address the COVID-19 pandemic.
ComplianceDashboard has compiled a list of resources we feel may aid your everyday. The resources provide access to the following:
- COVID-19 information for advisers and employers.
- A summary of the Families First Coronavirus Response Act (FFCRA).
- A list of state websites where businesses and individuals may access state-specific guidance regarding legislation and government actions.
- Links to federal agency sites including CMS, DOL, and IRS.
- A listing (by most recent date of release) of articles from reputable sources re: employer considerations for benefit plans.
Click here to continue reading the full ComplianceDashboard Resource List.
ABB, Workers Get Early Approval for $55M 401(k) Settlement
Posted April 3, 2019, 1:08 PM
Landmark settlement in the longest running Erisa lawsuit, what were the conclusions:
- Recordkeeping fees were excessive causing losses to participants (failure to bid and monitor service providers).
- The plan replaced funds with proprietary, underperforming funds offered by the recordkeeper.
- Indirect revenue received from funds must be paid back to plan participants.
This creates a foundation for breaches and penalties moving forward. Advisors and firms are going to be forced to change their way of doing business.
Click here to read the full story.