With 401(k) plans taking over from pensions as the chief employer-provided means of saving for retirement, there’s plenty of ground to cover in keeping up with fiduciary obligations of those who have to administer the plans and their assets.
A new brief from the Center for Retirement Research at Boston College looks at the proliferating phenomenon of lawsuits over those fiduciary obligations, the reasons for the lawsuits and the effects they have on the 401(k) plans they challenge, including the potential to throttle innovation.
The stakes are high: The percentage of workers who have access to a retirement plan at work who are covered by a 401(k) or other DC plan has risen from just 12 percent in 1983 to 73 percent in 2016. And when it comes to dollars, the report points out, “401(k)s now hold over $5 trillion in assets, without counting the even larger amount of assets that start in 401(k)s but end up in … IRAs.”
The brief reports that although the number of suits had dropped in the wake of the Great Recession, that’s changed and the numbers are now “surging”—with data from Bloomberg’s Bureau of National Affairs indicating that more than 100 new 401(k) complaints were filed in 2016–2017; that’s the highest two-year total since 2008–2009.
Why are so many suits suddenly being brought again?
The brief cites three chief reasons: inappropriate investment options, excessive fees and self-dealing.