NEW YORK – Several major U.S. companies face a challenge over 401(k) fees from lawsuits that allege they allowed employees to be overcharged in retirement plans.
The suits could open the door to more legal action over 401(k) fees depending on their outcome, according to David Wray, president of the Profit Sharing/401(k) Council of America, a not-for-profit association of companies that sponsor plans.
Lockheed Martin Corp., General Dynamics Corp., United Technologies Corp., Bechtel Group, Caterpillar Inc., Exelon Corp. and International Paper Co. are named in the complaints, which were filed by Schlichter Bogard &Denton, a law firm in St. Louis.
The suits contend that 401(k) fees and expenses paid by the plans – and borne by employees – are too high, and that the companies didn’t disclose them properly.
“This is important,” Wray said. “The question is whether the plan sponsors can convince the court that these lawsuits are so meritless that they shouldn’t go forward.”
At issue are rules under the Employee Retirement Income Security Act of 1974, a federal law that sets standards for private pension plans. ERISA requires that pension fees be reasonable and fully disclosed, and that they be charged solely for the benefit of the people in the plans.
In the Lockheed Martin suit, the argument is that pricing and fee structures developed by third-party plan administrators, record-keepers, consultants, investment managers and other vendors in the 401(k) industry are at best “complicated and confusing when disclosed to plan participants.”
“At worst, they are excessive, undisclosed and illegal,” according to the lawsuit, which argues that Lockheed Martin violated its fiduciary duties under ERISA.
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