Indiana 401(k) Class Action Attorneys
For many Americans, 401(k)s are the only significant form of retirement savings they have. We work for years to build up these funds in the hopes of having comfortable retirement years. Ideally, the parties that manage our 401(k) retirement funds would treat them with the respect they deserve.
Sadly, this isn’t always the case. 401(k) plan sponsors often let excessive fees chip away at people’s retirement savings. These fees are common and difficult to monitor, which means that countless Americans have little to no idea how much money they’re losing because of these hidden charges.
401(k) holders should know that they don’t have to accept this outcome. Many are now banding together in class action lawsuits to recover the money they’ve lost because of these excessive fees.
If you’d like to speak to an attorney about your legal options, contact Wagner Reese today to schedule a free consultation.
Who Can Be Held Accountable for a 401(k) Plan’s Excessive Fees?
Employers typically sponsor 401(k) plans, which means they can be held accountable. As the sponsor, the company owes a fiduciary duty to everyone participating in the plan. Any damages awarded would be designed to make all employees participating in the class action suit whole, which means putting additional funds into the plan to make up for the excessive fees charged by the plan.
Why Class Actions Are So Important in 401(k) Cases
A class action is a type of lawsuit where a defendant is a group of people who are represented by a specific member or, in some cases, members of that group. In general, the arguments made by plaintiffs are strengthened when more join the class action.
Specifically, in 401(k) class actions, the legal fees to file a lawsuit are often too expensive for an individual filing on their own. By filing a class action, those costs can become shared by everyone participating in the plan who joins the lawsuit.
Hiring an Attorney to Handle Your Case
The legal system is complex, and that’s especially true for class action lawsuits. However, when you have an attorney handling your case, you can let them do the heavy lifting. Experienced class action lawyers have an in-depth understanding of how this area of the law works and what’s required to get results for those involved in the class action.
It’s important to understand that you shouldn’t be concerned about the cost of hiring our team. These types of class actions are brought under the Employee Retirement Income Security Act of 1974 (ERISA), which is the federal statute that governs employer retirement plans.
ERISA not only creates a private cause of action for mismanaging the retirement plan but also permits the court to award attorney fees as part of the damages. While the fee agreement may talk about possible contingency fees, our goal is to file your 401(K) case as part of a class action so it passes the cost of our legal fees onto your employer instead of you. The entire goal is to file these 401(K) cases as class actions so that they will address the entire 401(K) plan and apply to all plan participants.
Answers to Commonly Asked Questions About 401(k) Plans
WHAT IS A 401(K)?
- A 401(k) is a qualified retirement plan created under ERISA – a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to protect individuals in these plans.
- A 401(k) plan is a retirement savings account that allows an employee to divert a portion of their salary into long-term investments. The employer may match the employee’s contribution up to a limit. The diverted salary is invested for the employee’s retirement- typically in a limited group of mutual funds or other investment offerings selected by the employer.
- A 401(k) is technically a “qualified” retirement plan, meaning it is eligible for special tax benefits under IRS guidelines. Because a 401(k) is a defined contribution plan, the available balance in the account is determined by the contributions made to the plan by the employee as well as the performance of the investments included in the plan. The investment earnings in a traditional 401(k) plan are not taxed until the employee withdraws that money, typically after retirement.
WHAT DUTIES DOES THE EMPLOYER/ADMINISTRATOR OWE TO THE EMPLOYEES (CURRENT AND FORMER)?
As the sponsor of a 401(k) plan that oversees the investments of its employees, an employer owes the highest duty – called a “fiduciary duty” – to the plan participants to properly manage and administer the plan.
An ERISA fiduciary is any person who:
- Exercises discretionary authority or control over the management of the plan or its assets
- Renders investment advice for direct or indirect compensation with respect to plan assets or has authority or responsibility to do so, or
- Has discretionary authority or responsibility in administering the plan
ERISA contains four requirements for 401(k) plan fiduciaries:
- Duty of Loyalty
- Duty of Prudence
- Duty to Diversify Investments
- Duty to Follow Plan Documents
HOW IS A 401(K) SUPPOSED TO BE MANAGED?
A person who is a fiduciary for a 401(k) plan has an absolute obligation to operate plans for the “exclusive benefit” of the plan’s participants. This means that any decisions made by the fiduciary must be in the best interests of the plan members – NOT the employer.
For example, an employer is required to undertake an independent investigation into the merits of an investment decision, including comparable alternatives. Once these decisions are made, the fiduciary must continue to monitor investment performance on an ongoing basis and alter available plan investments if circumstances change or if investment performance targets are not met.
Importantly, a fiduciary is required to ensure that administrative expenses paid by the plan are reasonable. The most inexpensive services need not be utilized, but fees must reasonably reflect the services rendered.
Since these “administrative expenses” are often deducted from the employee’s account, improper or excessive administrative expenses can reduce the amount of the employee’s retirement savings. These expenses are often small and can be hard to locate; however, the cumulative effect of excessive fees on multiple investments can compound over time and adversely affect the value of the employees’ investments.
Because of this, class action lawsuits are often the best route to correct a 401(k) plan and ensure that every employee is receiving the full benefit of their contributions to this retirement plan.
WHAT ARE THE USUAL AND CUSTOMARY MANAGEMENT FEES AND COSTS?
Usual and customary fees and costs vary greatly depending upon the type of investments offered as well as the size of the plan. Once a 401(k) plan reaches a certain size it can purchase shares in various investments at a “wholesale rate” as opposed to a “retail rate.”
Simply stated, the “wholesale rate” for an investment is what larger institutional investors receive and have lower fees and expenses while smaller non-institutional investors – who invest smaller amounts – do not receive these lower fees and expenses.
Many employers do not take advantage of these institutional rates and the plan participants end up paying more in fees and expenses than they should. An in-depth financial analysis of each plan is required to determine if the administrative expenses being charged are reasonable or not.
WHAT ARE THE MOST COMMON WAYS THAT EMPLOYERS/ADMINISTRATORS BREACH THIS DUTY?
As noted above, employers often select investments with high administrative expenses when similar (or even the same) investments are available at a lower rate. Other employers fail to diversify the investments offered through the plan, which can limit an employee’s choices of where to invest.
Still others continue to include various investments in the plan even though those investments are not performing in a competitive manner. While each of these actions are relatively small on their own, when they are combined and then applied to a 401(k) plan over a period of years, the cumulative effect on all plans participants can be significant.
The ultimate goal of a 401(k) class action lawsuit is to force the employer to contribute additional funds to the plan to make up for the excessive fees or under-performing investments that should not have been included in the plan.
Let Wagner Reese Help You Recover Your Retirement Savings
The Indianapolis 401(k) class action lawsuit attorneys at Wagner Reese have years of experience recovering the compensation our clients are entitled to. Contact us today to schedule a free case evaluation.