In our Feb. 5, 2013 blog, we discussed the importance of periodically reviewing the performance of your 401(k) retirement funds with your investment advisor and CPA. A good example of the importance of doing so can be found in the suit filed by a group of workers at Ameriprise Financial Inc. (“Ameriprise”) requesting class action certification against their employer. Named in the suit, in addition to Ameriprise, were the firm’s employee benefit administrator and the 401(k) investment committee. The worker’s allege that Ameriprise and its committees, as the plan’s overseers, violated their fiduciary duty to the retirement plan. The workers allege that the fees that the investment advisors charged were excessive (in excess of $20 million) when compared to The Vanguard Group. The plaintiffs are charging that the Ameriprise funds lagged their benchmarks, received poor ratings from Morningstar Inc., and that the defendants chose funds with high fees to generate more revenue ultimately for Ameriprise. The complaint states that by placing the workers’ funds in costly proprietary funds, Ameriprise violated its fiduciary duty under the Employee Retirement Income Security Act of 1974 (ERISA).
This type of lawsuit is not isolated to Ameriprise. In addition to ERISA requirements, in December 2010 the Department of Labor introduced regulation 408(b)(2) that changed how retirement plan fees are communicated to employees. Readers can refer to our July 16, 2012 blog posting that discusses the DOL regulation in more detail. In addition, employers should visit the DOL website to learn more about their fiduciary responsibilities (http://www.dol.gov/ebsa/publications/fiduciaryresponsibility.html) or call the DOL at 1-866-444-3272 for assistance.
Please be sure to read the disclaimer page on our blog. This blog is for educational purposes only and should not be considered as the rendering of tax advice.
