Class Action Lawsuits on 401(k)s

One such lawsuit was advertised in The Wall Street Journal on April 9. In bold letters, the suit proclaims, "If you are a fiduciary of a 401(k) or 401(a) ERISA plan that contracted, or may contract in the future, with Hartford Life Insurance Company, you should be aware of a class action settlement."

The ad goes on to summarize the action:

"In a lawsuit in federal court in Connecticut, the plaintiff, Phones Plus, Inc., has alleged that Hartford Life violated ERISA by receiving payments from mutual fund companies whose funds are offered as investment options to 401(k) or 401(a) retirement plans ("revenue sharing payments").

The ad further says that, "The Court has not made any rulings about whether Hartford Life did anything wrong and Hartford Life denies any wrongdoing."

The settlement fund is $13,775,000, with attorneys seeking half of that for their "fees and expenses."

The case has settled and a judge will rule on June 15 whether "the settlement is fair, reasonable and adequate and to consider the motion for attorneys fees and expenses."

This leads to some important questions:

? Are investors being twice gouged here?

? Will individuals who contribute to their 401(k) retirement accounts will in fact be able to retire when they are often paying higher fees than they realize because of the continued lack of transparency and inadequacy of many companies' administrators of 401(k) retirement plans--who don't understand their fiduciary responsibilities?

? Will regulators enforce the new transparency and fiduciary requirements for retirement plan participants?

? Does a public bailout of boomer retirements in the U.S. loom because those who save in these accounts have simply become a cash cow of fees for certain 401(k) providers, bleeding off the top 2%--or more--of assets each year?

Stay tuned. There will be more on this important issue.

Comments? Please send them to kmcbride@wealthmanagerweb.com. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.

Read more Wealth Manager: Viewpoint blog posts: Six Choice Pieces of Fiduciary Misinformation March 18, 2010 There is a great deal of chatter surrounding the fiduciary movement that is just plain incorrect--as in, not fact--whether from ignorance or deliberate obfuscation. Why Shouldn't Investors' Best Interests Come First? February 25, 2010 Are Senators strong enough--and do they have enough integrity--to stand up on behalf of retail investors and insist on extending the fiduciary standard to cover those who provide advice to retail investors?... Greater Good: The Unintended Consequences of Repaying TARP January 29, 2010 Did the requirement to repay TARP funds in order to pay bonuses for 2009 prompt some banks to repay the bailout funds too early? ... Smart Money January 19, 2010 Goldman Sachs Chairman and CEO Lloyd C. Blankfein testified that at Goldman Sachs, "...we do support the extension of a fiduciary standard to broker/dealer registered representatives who provide advice to retail investors." ... Ever Hopeful December 29, 2009 As we emerge from a challenging economic crisis, there is reason to hope that changes and opportunities we will see in this new year--some as a direct result of the economic crisis--will be positive.... Schapiro's Call for Fiduciary Standard Reflects SEC's Original Mandate December 07, 2009 "I believe that all securities professionals should be subject to the same fiduciary duty," says SEC Chair Mary L. Schapiro.... Mr. Dodd's Message from Washington November 16, 2009 Now that we have heard from both the House and Senate committees on finance and banking about investor protection, let's not misinterpret what they are saying. Can the DJIA at 10,000 Inspire "Animal Spirits?" October 16, 2009 The Dow Jones Industrial Average hit a year-to-date high and jumped above 10,000 on Oct. 14, and the next day hit another high of 10,062.94. Unless you are short, this is good news for you and for your clients.
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