401(k) Lawsuits Increase in 2020
From the Desk of Jim Eccleston at Eccleston Law LLC:
Lawsuits filed against 401(k) sponsors were on the rise in 2020. According to InvestmentNews, there have been approximately 95 such 401(k) lawsuits filed this year. Those lawsuits focused on the fees charged by the sponsors, and usually allege that those fees constitute a breach of the sponsor’s fiduciary duty. As InvestmentNews noted, the increased number of lawsuits has caused an increase in the cost of fiduciary liability insurance for 401(k) sponsors while also causing a decrease in limits on those policies. Lawsuits against 401(k) sponsors have reaped over $1 billion in settlements.
In addition to allegations regarding the fees charged, the lawsuits against 401(k) sponsors allege issues with the investment management of the plan. Allegations surrounding investment management can include usually focus on underperformance of funds, a failure to purchase the most cost-efficient share class, and the use of actively managed funds over passive funds, according to InvestmentNews.
According to InvestmentNews, the 401(k) lawsuits have targeted large retirement plans at employers such as Costco, MGM Resorts and Teva Pharmaceuticals. Additionally, financial firms such as Allstate, Liberty Mutual, and John Hancock have also been named as defendants in 401(k) lawsuits.
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