fiduciary

Plan Sponsors: How to Review Plan Costs to Avoid Lawsuit

If you're a plan trustee, I hope you're paying attention. Employees have been increasingly active fighting against “excessive fees.” Just in the 4th quarter of last year alone, there were eleven major class-action lawsuits filed in federal courts against 401(k) sponsors or providers of retirement products. Most suits allege that participants’ retirement savings were compromised because employers, as plan fiduciaries, failed to act in participants’ best interests and breached their duties under the Employee Retirement Income Security Act (ERISA) by allowing high fees, poor fund choices, and conflicts of interest.

If you are among those who thought only multibillion-dollar plans (Cigna, Edison International, ABB, International Paper, Boeing, Lockheed Martin) were at risk because small- and mid-sized plans won't get sued, think again. A new class-action lawsuit was filed in the Minnesota federal court targeting excessive 401(k) fees in a $9.2 million plan with 114 active participants. Damberg v. LaMettry’s Collision Inc., claims that plan fiduciaries breached their duties under ERISA for allowing excessive fees to be charged for plan investments, record keeping, and administration.

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401k Fees: An Employee Checklist

18-years ago, I worked for a company whose 401k offering had high fees, poor investment choices, and poor service. Employees felt powerless with exception to trying to ask good questions at the meeting once a year when the 401k provider came in. Unfortunately, our questions were never well answered and our employer did not hear our desire for improvements to the plan. The good news is that those days are fading quickly and employees are increasingly empowered.

Employees Advocating For Fiduciary Duty

Defined contribution plans like 401k's transferred a lot of responsibility for managing one's retirement investments from the employer to the employee. In an effort to best achieve retirement goals, it makes sense for employees to also be involved in fighting back against high 401k fees and for better investment options. After all, you've got to fight for your own self-interests.

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You just gave your annuity agent a great vacation, cruise or Rolex

U.S. Senator Elizabeth Warren, a consumer advocate and prominent critic of Wall Street, has taken aim at a new target: the biggest sellers of annuities and the cruises, international travel, iPads, cash and stock options she says they're using to entice brokers to sell their annuity products. She is particularly worried about near retirees and baby boomers who are especially vulnerable to poor investment decisions.

Warren is planning to send letters today to the 15 largest annuity providers which include Allianz SE's U.S. life division, Security Benefit Life Insurance, Jackson Life, AIG, New York Life Insurance, Prudential Financial, Aegon NV's Transamerica, Axa, Metlife, Nationwide Mutual Insurance and Pacific Life Insurance. She wants to know whether perks they provide encourage brokers to put personal interests ahead of the retirement goals of clients.

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The Madoff Effect: Do you trust family businesses?

Madoff Effect

Ever since Bernie Madoff’s $50 billion ponzi scheme hit the news in 2008, as a family investment firm we inevitably face the question, in no uncertain terms, “How do we know that you aren’t another Madoff?” First of all, I don’t think one bad apple should spoil the bunch. America has been built on the backs of great entrepreneurial families whose businesses are still thriving today. Walmart, Mars, Aflac and Fidelity Investments are family owned shops that have grown into multi-billion dollar corporations. I don’t think anyone questions them just because they are family businesses. But I understand people’s concerns especially when their hard earned savings are on the line.

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How much are your mutual fund fees? Much more than you realize!

In a recent AARP survey, a shocking 71% responded that they didn’t pay any fees for their 401(k) mutual fund investments. I didn’t realize that Wall Street had suddenly earned a reputation for working pro bono. Well this simply isn’t the case, and investors need to better educate themselves on the cost of owning mutual funds which can be very reasonable (index funds) to exorbitant (load funds.)

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