Magazine article Workforce Management

RULING ON 401(k) FEES A RELIEF TO PLAN SPONSORS

Magazine article Workforce Management

RULING ON 401(k) FEES A RELIEF TO PLAN SPONSORS

Article excerpt

RETIREMENT BENEFITS

As Congress, regulators and the plaintiffs bar increase their scrutiny of 401 (k) fees, plan sponsors received a bit of good news late last month when a judge threw out part of a class-action lawsuit against Chicago-based Exelon.

The suit was one of a dozen similar class-action lawsuits filed by St. Louisbased law firm Schlichter, Bogard & Denton, alleging that companies violated pension laws by allowing 401 (k) participants to be overcharged by the managers of the plans.

Other companies named in the suits include Lockheed Martin, Northrop Grumman, Boeing, General Dynamics, United Technologies, Bechtel Group, Caterpillar and International Paper.

In several of these suits, including the complaint against Exelon, plaintiffs claim that since the companies violated their fiduciary duties under the Employee Retirement Income security Act, the employers should be liable for all investment losses that 401(k) participants realized.

But on February 21, U.S. District Judge John Darrah in Chicago dismissed that part of the complaint, questioning the causal relationship between excessive fees and investment losses.

The judge's dismissal came much to the relief of 401 (k) plan sponsors, says Michael Crowley, associate general counsel at the National Futures Association, a Chicago-based organization for the futures industry with 249 employees and a $51 million 40l(k) plan.

"If this had gone the other way, it would have been really bad for small plans with expenses much greater than ours because it would have meant employers were now insurers for their participants," Crowley says. …

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