Excessive Pension Fund Fee Lawsuits
Several large corporations have settled lawsuits with their employees regarding their retirement plans. Boeing Co agreed to pay $57 million to settle a lawsuit in which employees accused the company of mismanaging their 401(k) retirement plan.
- Participants in the Estee Lauder 401(k) Savings Plan filed a class action lawsuit, alleging the company breached fiduciary duties under the Employee Retirement Income Security Act (ERISA) by failing to prevent the plan from paying lower investment and recordkeeping fees. Plaintiffs said that as a large plan, the company should have had bargaining power regarding the fees and expenses that were charged on the participants’ investments. Attorneys claimed the company did not try to reduce expenses or scrutinize investment options to the best of their ability. The plaintiffs allege those in charge of the Estee Lauder accounts breached their duties by failing to adequately review the plan’s investment portfolio. They say these breaches cost 401(k) participants millions of dollars.
- Huntington Bancshares Inc. has made a $10.5 million deal to settle a proposed class action that challenged its decision to make allegedly underperforming company-owned mutual funds the centerpiece of its 401(k) retirement plan for company employees.
- Fidelity Investments settled a lawsuit involving their 401(k) plan for $28.5 million, which resolved a class-action case filed in 2018 that alleged the firm breached its fiduciary responsibility by adding its own products to the plan menu. The company had settled a similar claim in 2014 for $12 million. Fidelity has been accused of charging excessive infrastructure fees. Lawyers say the company reportedly adjusted its discretionary profit-sharing contributions to participants based on the amounts that had been returned to their accounts.
- A trade association representing more than 900 electric cooperatives and public utility districts announced plans to settle a class action lawsuit challenging the fees embedded in its 401(k) plan. The settlement would resolve a lawsuit that alleged the National Rural Electric Cooperative Association mismanaged its 401(k) plan in violation of ERISA.
- A participant in the Costco 401(k) Retirement Plan filed a lawsuit against the company, alleging violations of their ERISA duties. The lawsuit says the fiduciaries of the plan authorized unreasonably high fees for recordkeeping. Attorneys claimed the plan generally chose more costly, managed funds rather than index funds that offered a substantially lower cost.
Other companies that have settled ERISA-related lawsuits include:
- Verizon Communications Inc.
- Chevron Corp.
- Intel Corp.
- Oracle Corp.
- American Airlines Inc.
- Anthem Inc.
- Deutsche Bank Americas
- Insperity Inc.
- M&T Bank Corp.
- BB&T Corp.
- DST Systems Inc
- Putnam Investments LLC
- Allianz Asset Management
401(k) Plan Class Action
Plaintiffs have filed a class action excessive fee lawsuit against defendant AT&T Services Inc. for allegedly mismanaging its $35 billion 401(k) retirement plan. AT&T has informed a federal judge in California that it would not dispute the participants’ request for class status.
In the complaint, almost 245,000 retirement plan participants and beneficiaries are challenging the administrative 401(k) fees paid to Fidelity Investments. AT&T plan participants have sued the company and the plan, alleging the company’s calculations for early retirement benefits violate the Employee Retirement Income Security Act (ERISA).
The class members claim they are forced to relinquish accrued, vested pension benefits if they retire before age 65, or receive their pension benefit in the form of a joint and survivor annuity. The complaint alleges that AT&T’s calculations for early retirement benefits and joint and survivor benefits offer “less than the actuarial equivalent of their vested accrued benefit as required by ERISA.”
Attorneys say AT&T has violated ERISA standards because the plan’s early retirement payments aren’t actuarially equivalent to the payments for normal retirement payments, and plaintiffs allege that the calculated early retirement benefits formula has not been updated in over a decade, despite increases in participants’ average longevity.
Joe Lyon is a Cincinnati, Ohio class action attorney reviewing alleged AT&T ERISA violations and other cases involving excessive retirement plan fees.
Pension Fund Class Actions
In the last year, plaintiffs have brought claims new against 401(k) plans that offer Vanguard and Stable Value Funds as investment options. These claims are surprising, since plaintiffs previously argued that fiduciaries should use funds like Vanguard in 401(k) plans because they offer relatively lower index-based fees as compared to other investment options.
Plaintiffs have brought cases against Anthem and Chevron based on their inclusion of Vanguard funds that plaintiffs claim charged excessive fees in relation to other share classes that were allegedly available.
Plaintiffs have alleged that Anthem’s 401(k) plan, worth over $5 billion, failed to use its sizeable bargaining power to demand lower cost investment options.
The most publicized settlements are levied against large companies because of the massive sums involved. However, many American workers in small companies providing retirement plans have also been victims of excessive fees. Research shows that smaller plans typically carry higher fees than larger plans that can use their size as leverage to negotiate better deals.
Nearly 75,000 401(k) plans have $25 million or fewer in assets, and over four million workers have their retirement savings in these plans.
In a recent class action lawsuit, a Minnesota auto body repair company with around 100 participants and less than $10 million in assets was sued for excess fee violations.
Most cases concern mega plans with assets in the billions of dollars, but this lawsuit, filed in May against LaMettry’s Collision and its $9 million 401(k) plan, has the attention of many companies and employers of the small-plan variety.
Several highly-respected American universities such as, Columbia, Yale, Duke, New York University, MIT, Johns Hopkins, the University of Pennsylvania, Vanderbilt and Emory have been targeted with claims that retirement plans cheated employees through excessive fees.
In contrast to the 401(k) plan cases, most of the suits, including the newest one against Columbia, concern university 403(b) plans.
Retirement Plan Fraud
Over 60,000 workers filed a recent class action lawsuit against Morgan Stanley. The suit claims that the company mismanaged its own employees’ retirement plans by offering poorly performing funds and charging excessive fees.
The suit also alleges that the company used the 401(k) plan as an opportunity to promote its own business and maximize profits at the expense of its employees. It offered its own funds, without considering funds from other companies.
ERISA Pension Fund Cases
Employee benefits attorneys have shown ERISA lawsuits are reshaping the 401(k) industry, pointing to lower industry-wide fees. To keep fees down, employers increasingly turn to index funds, which track a major index such as the Standard & Poor’s 500, since they’re cheaper than actively managed ones.
However, some companies and funds are still neglecting what is financially best for retirement plan participants in favor of maximizing profits for fund managers and banks.
The Employee Retirement Income Security Act (ERISA) is a federal law that sets standards for most voluntarily established retirement plans in private industry to provide protection for individuals. ERISA provides the following guidelines and regulations:
- Plans must provide participants with plan information, including information about plan features and funding
- ERISA sets minimum standards for participation, vesting, benefit accrual and funding
- ERISA outlines fiduciary responsibilities for those who manage and control plan assets
- ERISA requires plans to establish a grievance and appeals process for participants to get benefits from their plans
- The law also gives participants the right to sue for benefits and breaches of fiduciary duty. If a benefit plan is terminated, the law guarantees payment of certain benefits through a federally chartered corporation.
The Lyon Firm is proud to litigate ERISA violation claims and Excessive Fee cases on behalf of employees whose 401(k) and pensions have suffered losses as a result of a breach of fiduciary duties by plan administrators and corresponding companies.
Joe Lyon has recovered millions of dollars for American workers and consumers in a variety of consumer protection lawsuits and class action employment litigation.