Last week, Pension360 covered the lawsuit against the so-called “most expensive 401(k) plan in America.”
According to experts, there are more lawsuits where that came from as lawyers target out-of-control 401(k) fees.
Lawsuits such as this one are just the beginning, said Marcia Wagner, a principal at the Wagner Law Group who represents plan sponsors and vendors under the Employment Retirement Income Security Act. The case follows a parade of high-profile suits filed by Jerome Schlichter, of the St. Louis law firm Schlichter Bogard & Denton, alleging breaches of fiduciary duty at some of the largest plans in the U.S. The mega-settlements Schlichter has won, along with a U.S. Supreme Court ruling last year that put plan fiduciaries on high(er) alert about the need to continuously monitor plan investments, has encouraged more law firms to develop and expand their fiduciary litigation practices.
“It started with Schlichter doing cases against very large corporations in America,” Wagner said. “And now it’s going to start to be a free-for-all.”
The focus of the suits is expanding as well, with a wider array of plan permutations and fees coming under scrutiny. “The pace of cases being filed has quickened, and the areas of challenge have broadened,” said Richard McHugh, a lawyer and vice president of Washington affairs for the Plan Sponsor Council of America, which represents defined contribution plans. Additionally, he thinks the U.S. Department of Labor’s new fiduciary rule will widen the number of defendants who are named in these lawsuits.
With more attorneys seeing an opportunity, smaller plans are starting to feel the heat. After launching four 401(k) lawsuits alleging breach of fiduciary duty late last year, Minneapolis-based Nichols Kaster has filed four more in 2016, most recently against Fujitsu and American Century’s $600 million plan. This year has even seen a 401(k) plan with less than $10 million in assets get hit with a lawsuit, a development that garnered the attention of many players in the small plan universe.