401(k) Stock Drop Litigation - Back in Fashion Again?
Back from a somewhat relaxing weekend (I had to work part of the time), I opened my mail to find two publications, each with a front page article about 401(k) "stock drop" cases. Is it coincidental or a harbinger of next season's hottest trend in litigation?
According to "401(k) fee suits not soon to retire" by Amanda Bronstad (The National Law Journal, May 28, 2007), earlier filed cases focus on undisclosed fees levied by mutual funds. In contrast, more recent lawsuits look at fees charged for annuities while "others challenge the prudence of employers that invest in funds that charge high fees - even if they're fully disclosed to employees."
In "Stock-drop suits hitch 401(k) ride," writer Susan Kelly describes a resurgence in ERISA lawsuits (Financial Week, May 28, 2007) with companies of all sizes now vulnerable to allegations that stock in the 401(k) plan is a no-no.
Outcomes remain unknown at this time with federal judges in three cases having refused to dismiss (Kraft, Boing, Bechtel). Not all cases are home runs for the plaintiffs. As the National Law Journal article details, the federal judge in a case against Exelon Corp. "dismissed claims that excessive fees in a 401(k) plan caused investor losses." In the Northrup Grumman case, some of the defendants, "including the board of directors," were dismissed.
Along these lines, we think our forthcoming June 4 webinar on the topic of 401(k) plan governance is timely. Click here to get more details and/or to register. We'll start at noon and end at 1:15 p.m. EST. The webinar is free to Pensiongovernance.com subscribers. The cost to non-subscribers is $125. Pension Governance, LLC is registered with CFA Institute as an Approved Provider of professional development programs. This program is eligible for 1.5 PD credit hours as granted by CFA Institute.
Topics to be discussed include the following:
- Description of fiduciary duties under ERISA
- Discussion of procedural prudence as relates to 401(k) plan selection of fiduciary advisors
- Overview of safe harbor and selection of fiduciary advisor pursuant to the Pension Protection Act of 2006
- Litigation trends in the area of investment fiduciary breach as relates to plan sponsors and service providers such as consultants
- Fiduciary investment process for assessing 401(k) provider fees
- Role of fiduciary advisor in providing financial education
- Governance considerations with respect to selection of default investment
- Structural changes in money management industry in response to material shift away from defined benefit plans
- Fiduciary advisor “red flag” practices such as soft dollar questions, revenue-sharing, limited disclosure.
- Mr. Blaine F. Aikin, AIF®, CFA, CFP® - Managing Partner, Fiduciary360
- Mr. David J. Bauer - Partner, Casey, Quirk & Associates LLC
- Mr. David Vriesenga - Chief Rating Officer, Cefex - Centre for Fiduciary Excellence, LLC.
