Litigation moving to small plans
Litigation involving 401(k) plans has ramped up since last year and plan sponsors need to be on alert. All plans are now coming under the legal microscope, as a recent case may be setting a precedent for smaller 401(k)s.
The lawsuit Damberg et al. v. LaMettry’s Collision Inc. et al. is focused on excessive 401(k) fees. This complaint claims that management’s lack of due diligence in evaluating service providers resulted in participants being overcharged hundreds of thousands of dollars. We’ve seen this type of legal action against big publically traded companies, but what’s different about this case is the fact that the LaMettry plan had only $9.2 million in assets and 114 active participants.
What should companies be evaluating to avoid a lawsuit?
Regardless of plan size, 401(k) fiduciaries need to understand the services and the fees paid by the plan for recordkeeping, administration and investment options. Every company should be working with an independent financial advisor who is experienced and qualified to provide conflict-free advice about 401(k) plans. A skilled advisor will be able to help establish a monitoring process for the plan, and benchmark fees against plans of a comparable size. The right advisor should also have a solid understanding of the retirement plan industry.
How can we help?
Understanding your responsibilities as a plan fiduciary, and working with independent advisors to ensure that you are fulfilling those responsibilities are the best defenses against litigation. CSH employs professionals who have expertise in Qualified Plan Administration and Consulting and Employee Benefit Plans Audits. We can facilitate the hiring of an independent financial advisor and can review the structure of 401(k) plans to identify any fiduciary weaknesses. Contact us for more information or to discuss your plan.