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Nov 14

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Cost disclosures will generate the next wave of 401(k) litigation

Now that fee disclosures under section 408(b)(2) disclosures have been made, some plan sponsors will face the logical next step of being sued because of these disclosures. Some plans participants are paying unreasonable costs, yet some plan sponsors will not take the necessary next step of making this assessment and making investment changes.

The largest plans should be able to obtain institutionally-priced mutual funds and collective trusts. Smaller plans will not have this bargaining position, but they still should not have to pay front-end commissions. Simply because the largest plans have the possibility of generating the largest damages (and the most profits for plaintiff-side lawyers) plan sponsors of large plans need to ensure that they have not just disclosed costs charged to participants, but have made changes when their fiduciary duties indicate that this is prudent.

 

 

About the author

David Nolte

I am a founding principal of Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I am a Certified Public Accountant (CPA) and an Accredited Senior Appraiser (ASA), as well as having other professional credentials. I regularly serve as an expert witness involving damages measurement. My litigation-oriented resume is on Fulcrum's website.

Permanent link to this article: http://betweenthenumbers.net/2012/11/cost-disclosures-will-generate-the-next-wave-of-401k-litigation/

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