In a relatively unnoticed lawsuit against one of the largest 403b providers as reported by NAPA Net, a participant alleges that the provider sent him multiple mailings which he claims were unnecessary, expensive and unreasonable. As a result, the DC lawsuit claims participants suffered unnecessary costs.
Starting in August of 2008, the retired participant started receiving 15 account mailings each month whereas previously, these notices were consolidated by household. The participant complained bitterly and frequently and, while receiving responses, got no relief with the provider citing technical issues.
The suit alleges that the provider was “…engaging in expensive duplicative mailings to beneficiaries in retirement plans it administers, unnecessarily mailing individual monthly statements to beneficiaries in separate mailings.” The costs are estimated to be $60.48 per month compared with what should have been $5.04 for that one participant, who was an accountant, and estimated to be $60 million annually for all participants.
A cynic might say that communicating with participants is essential and that providers should not be penalized for trying. And if TIAA was experiencing technical issues, can the courts impose penalties based on some unset or undefined standards of practice?
Though anyone can file a lawsuit against anyone else, which does not mean that the suit is valid, the point is that more and more people are being affected by DC plans like 401ks and 403bs and that lawyers are more and more willing to file lawsuits on their behalf with the hope of big judgements against larger plans or class actions against larger providers based on the growing success of these suits.
With provider consolidation, the survivors tend to provide better service with more sophisticated technology but there are still issues out there evidenced by this recent lawsuit. Though time will tell about the efficacy of this lawsuit, there is no doubt that more are coming and that plan sponsors should look to see if their plan or provider has any obvious litigation triggers.
