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Class Action Lawsuits on 401(k)s

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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 [email protected]. Kate McBride is editor in chief of Wealth Manager and a member of The Committee for the Fiduciary Standard.

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