Rash of 401k Lawsuits – Navigating Dangerous Waters
401k Lawsuits: Where we are and where we are headed
In the first of a series of TPSU Master Classes aired on March 9th, 2016, a panel of ERISA attorneys and industry experts review what’s causing the rash of 401k lawsuits, what have we learned so far and how plan sponsors can take steps to protect themselves.
The world has changed with over $200 million of attorneys’ fees generating copycat 401 k lawsuits and a race to the courtroom. Plan sponsors have a bull’s eye on their backs making it more important than ever to make sure their defined contribution (DC) plan is being run prudently by experts. The March 9th TPSU’s Master Class led by a panel of leading ERISA attorneys and industry experts provides a compelling and simple review of the issues with concrete and practical suggestions.
The class includes a review of the various lawsuits against plan sponsors led by David Levine (Groom Law Group), Thomas Clark (Wagner Law group) which can be put into two categories:
- Self-Dealing – Plans or fiduciaries received benefits from their DC service provider like payroll or healthcare subsidiaries at the expense of the plan violating ERISA’s exclusive benefit rule.
- Asleep at the Switch – Plan sponsors were not paying attention and did not negotiate properly to get best possible pricing violating the requirement that fees be reasonable.
The second part of the Master Class led by Tom Kmak (Fiduciary Benchmarks) reviews how plan sponsors can protect themselves especially against the high fee cases with a discussion by the other panelists of how fiduciaries can take steps to avoid self-dealing issues.
Like it or not, the world is different with more access to data and people leading plaintiffs’ attorneys to get more aggressive filing suits that are resonating with the courts and generating eye-popping judgements. Once overmatched by defense lawyers, these law firms led by Schlichter, Bogard and Denton are getting smarter and richer which will only mean more lawsuits coming down market to smaller plans through class actions.
Status quo or denial will only lead to trouble, wasted time and liability for DC plans and advisors. TPSU’s Master Class on the rash of 401(k) lawsuits is a must watch for any plan fiduciary or advisor seeking to protect themselves against what many experts predict will be an onslaught of legal cases.
