It was bound to happen – class action law suits against 401(k) fiduciaries.
The October 2006 Client Advisory Bulletin published by the law firm of KattenMuchinRosenman LLP nicely summarizes several class action suites recently filed against the fiduciaries of several large employer 401(k) plans.
All of the law suits, report Katten, involve participant direction of investments and the expenses paid by the participants directly or indirectly.
What’s the lesson for today? Katten says:
Therefore, for every plan, fresh attention should be paid to the plan’s governance structure, specifically, who the fiduciaries responsible for selection and monitoring of plan investments are. Next, the procedures to identify and benchmark plan expenses and returns, as set out in the plans investment policy statement or elsewhere, should be reviewed, and expanded or updated as appropriate. The plan should also provide for oversight to ensure that these structures and policies are being carried out.
Here are two more:
- Small employers have the same issues.
- The expense issue can be further exacerbated in 2007 if careful attention is not paid to the selection of investment advisory services for plan participants.
Here is the link to the Client Advisory Bulletin on the Katten website.