Once again we are presented with news that a Plan Sponsor (company), A trust company, an Investment Manager and a Plan Committee, all had a hand in the ERISA violations occurring within a company retirement plan. Plaintiff Counsel, Arthur Bekker, has accused Neuberger Berman and the plan’s investment committee of violating fiduciary duties under the Employee Retirement Income Security Act (ERISA). The case contends that by offering and permitting plan participants to use investments managed by Neuberger or an affiliated entity, that those actions benefited Neuberger and the managers of the proprietary funds. The filing also accuses Neuberger of charging excessive fees to those who utilized specific Neuberger investments.
Some of the claims may have merit; however, some of the comparisons used and conclusions drawn have little bearing on a plan participant’s ability to save sufficiently for retirement. What I find speaks volumes in these types of cases is the deafening silence toward the plan’s participant’s ability to save sufficiently for retirement; as does the avoidance of the plaintiff to address the results of “how many plan participants are retirement ready at age 65.”
All retirement plan advisors should find personally offensive the fee comparison between the Neuberger fund(s) with an institutional Vanguard Index fund. If the ill-logical comparisons among such funds are permitted to stand as the basis for a meritorious suit then someone is not doing their homework. Fees alone do not serve as the endpoint of a tax-qualified retirement plan. The ability of a participant to be able to retire at normal retirement age is infinitely more important that the fees being charged with the funds. Put another way – How much support in the form of employee education does the plaintiff assume would be available to a plan that used 100% Vanguard funds? Most likely, “None” is the correct answer.
The question becomes, “Is a Plan with next to nothing (2 basis points) in fees – with no employees participating, preferable to a plan with higher fees, over 2,600 participants and an educated workforce where the plan assets total over $800 Million? That is a ridiculous question with an obvious answer. All plans will be in a safer place when the courts can realize this.
