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Princeton Joins List of Schools Sued Over Retirement Plans
"Like many other schools, Princeton is accused of failing to effectively negotiate for lower plan fees; choosing high-fee investment options that consistently underperformed their benchmarks; overpaying for record-keeping services by using multiple plan record keepers; and offering a TIAA-affiliated fixed-income fund that unreasonably restricted investors' options." (Bloomberg BNA)
Will the Fiduciary Rule Save Investors Money?
"According to a Morningstar report, the implementation of the fiduciary rule will spark the launch of more than 3,500 shares of two new classes of low-fee offerings in individual retirement accounts.... [T]he idea behind the new share class is to create uniformity in what brokers are selling to avoid perceived favoritism. The question for investors is whether these new shares will yield any significant savings in their retirement portfolios over time." (U.S. News & World Report)
The Latest on Higher Education Fee Litigation
"The University of Chicago lawsuit is very similar to the earlier 12 lawsuits, but additionally asserts that TIAA's loan program constitutes a prohibited transaction and that TIAA failed to disclose indirect fees related to that loan program. While the Schlichter Bogard & Denton law firm ... has filed the majority of these lawsuits, two have been filed by other law firms. This suggests that more law firms are likely to jump into the fray[.]" (Ice Miller LLP)
Average Fund Fees Paid by Investors Continued to Decline in 2016
"The asset-weighted average expense ratio across all funds was 0.57% in 2016, down from 0.61% in 2015 and 0.65% three years ago.... The simple average expense ratio of the largest 2,000 funds (in 2013), which accounted for 85% of assets in mutual funds and ETFs, was 0.72%, in 2016, unchanged from 2014 and 2015.... The asset-weighted average expense ratio of passive funds was 0.17% in 2016 compared with 0.75% for active funds. This wide fee gap, coupled with record flows of $429 billion into passive funds and $326 billion out of active funds in 2016, contributed to falling industrywide asset-weighted average expense ratios." (Morningstar)
University of Chicago Latest College Hit with Retirement Plan Suit
"The lawsuit alleges the university selected and retained investment funds and insurance company annuities that caused the plans to incur far higher administrative fees and expenses relative to the size of the plans, causing participants millions of dollars in economic loss. The university selected numerous underperforming investment options when lower-cost alternatives were available, according to the complaint filed May 18 in federal court in Illinois." (Bloomberg BNA)
Trends in the Expenses and Fees of Funds, 2016 (PDF)
32 pages. "The average expense ratios for money market funds rose 5 basis points in 2016 to 0.18 percent.... Expense ratios of target date mutual funds averaged 0.51 percent in 2016.... Average expense ratios for both actively managed and index equity mutual funds have fallen since 1996.... Economies of scale and intense competition are putting downward pressure on expense ratios of exchange-traded funds (ETFs)." [Also available: Supplemental Tables (XLS)] (Investment Company Institute [ICI])
Court Decisions on Investment Fees Provide Hope for Plan Sponsors
"[I]t is important for plan sponsors to understand that it is not their responsibility to include only the lowest cost investments in each asset category within their retirement plan. It is not required, and it should not be the case, that plan fees are the sole determining factor when selecting investments.... Each investment must be evaluated in the context of its overall performance, cost, and the value received through its role in the plan portfolio. Plan sponsors using cost as the only factor are potentially failing to fulfill their responsibility to finding investments that are reasonable and competitive." (Cammack Retirement Group)
401(k) Plan Fees: The Wrong Choices Could Land You in Court
"Before determining if their plan fees are reasonable, employers need to ... answer a number of critical questions including: [1] What am I buying? [2] How much does it cost (investment, administrative and advisory services)? [3] Who is going to pay (participants and employers)? [4] How are they going to pay? [5] What model is best for us?" (CFO Daily News)
Vanguard Growing Faster Than Everybody Else Combined
"In the last three calendar years, investors sank $823 billion into Vanguard funds, the company says. The scale of that inflow becomes clear when it is compared with the rest of the mutual fund industry -- more than 4,000 firms in total. All of them combined took in just a net $97 billion during that period, Morningstar data shows. Vanguard, in other words, scooped up about 8.5 times as much money as all of its competitors." (The New York Times; subscription may be required)
Sharp Attention Needed to Interpret Retirement Plan Fee Data
"Even with huge amounts of data available, there is not very much simple or straightforward about retirement plan fee benchmarking.... Perhaps even more helpful to plan sponsors and participants than the massive amounts of raw data on their own product choices is the increased prevalence of third-party fee comparison studies, which aggregate and benchmark information from broad pools of retirement plans and investment providers." (PLANSPONSOR)
Quantitative Methods Identify Significant Fee Waste in Retirement Plans (PDF)
15 pages. "[This study] analyzed 52,529 retirement plans from the DOL EFAST database. Using quantitative methods [the authors] estimate that participants could save .25% a year on a weighted average basis by switching into lower cost investments that are quantitatively very similar to those they already hold.... As of March 2015 total defined contribution plan assets stood at $6.8 trillion. This means that savings of approximately $17.07 billion annually are being wasted in the retirement industry." (RiXtrema Research)
BlackRock Accused of Self-Dealing with 401(k) Plan
"The proposed class action ... alleges that participants in the 401(k) plan were subjected to higher hidden fees through excessive fund layering, where one BlackRock fund invested in a 'rabbit hole' of other BlackRock funds.... [T]he lawsuit ... alleges that the fees plus the poorly performing funds have caused participants to lose $60 million in retirement savings. The plan has more than 9,700 participants." (Bloomberg BNA)
Fee Study of 525 401(k) Financial Advisors Shows Why Trump Can't Reverse Tide of Fiduciary Advice
"Even if this ban on conflicted retirement plan advice is squashed, ... the die is cast. Following several high-profile excessive fee lawsuits, more 401(k) plan sponsors than ever are hiring fiduciary-grade financial advisors to lower their liability. The kicker? Their impartial advice is often cheaper than potentially-conflicted, non-fiduciary advice. And [here are] the numbers to prove it!" (Employee Fiduciary)
[Opinion] Updated Website Aims to Simplify Teachers' Retirement Choices
"[CalSTRS] has finally upgraded the website where public-school employees can get educated about their 403(b) retirement plan options, making it easier to compare fees and performance and sign up for a plan. While the upgrade of could save teachers some serious bucks, it's still not perfect because there is no easy way to compare the thousands of options available in the public schools. What it does do is highlight the shamefully daunting task teachers face trying to save for retirement." (Kathleen Pender, in San Francisco Chronicle)
Jackson National Sued Over In-House Funds in 401(k)
"The proposed class action claims that Jackson's retirement plan invested 89 percent of its assets -- about $542 million -- in investment funds that earned high fees for the company and its affiliates. Eighteen of the plan's 21 investment options were affiliated with Jackson, the lawsuit claims, and most of those options were 'virtually identical' to funds that other institutions offered at 'a fraction of the cost.' " [Pease v. Jackson Nat'l Life Ins. Co., No. 17-284 (W.D. Mich., complaint filed Mar. 29, 2017] (Bloomberg BNA)
USC Can't Force Retirement Plan Fee Claims Into Arbitration
"The participants' ability to bring claims of fiduciary breach under [ERISA] is unaffected by their arbitration agreements with USC because those claims are, by their nature, plan claims and the plan didn't consent to arbitrate, Judge Virginia A. Phillips of the U.S. District Court for the Central District of California held March 23." [Munro v. Univ. of So. Calif., No. 16-6191 (C.D. Cal. Mar. 23, 2017)] (Bloomberg BNA)
Anthem Workers Advance Challenge to 401(k) Plan Fees
"The proposed class action accuses the committee of including high-fee mutual fund share classes in Anthem's 401(k) plan and paying excessive record-keeping fees to Vanguard Group Inc. A federal judge largely denied the committee's motion to dismiss on March 23, saying that choosing high-fee share classes when identical lower-fee classes were available could constitute fiduciary breach under [ERISA]." [Bell v. Pension Comm. of ATH Holding Co., No. 15-2062 (S.D. Ind. Mar. 23, 2017)] (Bloomberg BNA)
Can Smaller Plan Sponsors Dream Big? Yes! A Case Study
"Recordkeeping fees were cut in half and a new best-in-class investment menu with a low cost index tier was implemented, along with transparent, direct-billed participant fees to replace revenue sharing (a unique arrangement for a 403(b) plan of this size). How did a plan sponsor such the size of [the Anglican Church in North America] accomplish so much and so quickly?" (Cammack Retirement Group)
Four Questions to Guide Your Fee Evaluation Process (PDF)
"[1] Who is receiving compensation from your plan? ... [2] What are the fees and expenses associated with your plan? ... [3] How do your fees and expenses compare to other service providers or investment options? ... [4] Why is the compensation warranted?" (TIAA)
Updated SEC Investor Bulletin: How Fees and Expenses Affect Your Investment Portfolio
"The SEC's Office of Investor Education and Advocacy is issuing this updated bulletin to educate investors about how fees you pay for investment services and products can impact the value of your portfolio.... These fees may seem small, but over time they can have a major impact on your investment portfolio. [A] chart shows an investment portfolio with a 4% annual return over 20 years when the investment either has an ongoing fee of 0.25%, 0.50% or 1%." (U.S. Securities and Exchange Commission)
Eight Circuit Remands Tussey v. ABB, Inc. for Second Time, Instructs District Court to Evaluate Methods of Measuring Plan Losses Caused by Fiduciary Breach
"[T]he Eighth Circuit had proposed an alternative method of calculating losses ... but on remand the district court erroneously considered itself bound by that proposal. The Eight Circuit in the second appeal stated that the district court was not bound to follow that proposal but instead was required to: [1] Evaluate several different possible methods for measuring losses before choosing the proper method. [2] Consider the plan participants' contentions about why, in their view, the Eighth Circuit's proposed method of valuing the plan participants' losses was not the correct method to apply." [Tussey v. ABB, Inc., No. 15-2792 (8th Cir. Mar. 9, 2017)] (Practical Law Company)
401(k) Fees: Questions Frequently Asked by Plan Fiduciaries
"What are the basic types of 401k fees? ... How are 401k providers compensated today? ... What's the best resource for finding my 401k provider's fees? ... What's the process for totaling my 401k plan fees? ... How do I benchmark my 401k plan fees?" (Employee Fiduciary)
Is It Time to End the 12b-1 Fee?
"[T]he reality is that financial advisors, custodians, broker-dealers, and product providers still need to get paid for what they do, which means eliminating the 12b-1 fee still won't necessarily bring down costs for the end client. Instead, it would likely just shift where and how financial advisors and their platforms get paid. Nonetheless, given the 12b-1 fee's implicit conflicts, and their declining relevance, arguably it's time to create a more appropriate pricing structure for the realities of today's investment marketplace!" (Nerd's Eye View)
Fiduciary Fee Reasonableness
"There is no shortage of legal activity surrounding fee reasonableness. Fiduciaries can draw a variety of lessons from the alleged breaches, complaints filed, settlements, and court decisions. [This article provides] an overview of the most frequently litigated issues relating to fees, and the corresponding lessons that fiduciaries should learn." (Manning & Napier)
401(k) Plan Fees Continue to Crater
"The average total plan cost for a small retirement plan (defined as 100 participants and $5 million in assets) declined from 1.28 percent to 1.25 percent over the past year, while the average total plan cost for a large retirement plan (defined as 1,000 participants and $50 million in assets) declined from 0.97 percent to 0.96 percent.... Reflecting economies of scale, the average cost for a micro plan (10 participants and $500,000 in assets) is 1.85 percent ... [T]he range between the high and low total plan costs on a small plan is .46 percent to 1.69 percent, while a large plan is 0.28 percent to 1.21 percent." (401K Specialist)
Schwab Employee 401(k) Lawsuit Uses Vanguard as Exhibit 'A'
"Schwab is just the latest in a line of quality firms being sued by their own employees ... for serving up allegedly subpar home cooking when it comes to pension care.... [S]imilar firms sued under similar circumstances tend to have to settle for big amounts.... What's certain is that this type of suit is especially toxic for a firm whose value proposition is tied so closely to trust." (RIABiz)
[Opinion] Why Planning Fees Should Be Payable from Retirement Accounts
"[If] the aim of tax policy is to facilitate better outcomes for consumers, it's worth acknowledging that the current framework unintentionally exhibits poor behavioral characteristics by limiting the ability of consumers to pay for long-term financial planning advice from accounts that are ear-marked for long-term goals (or forcing those financial planning fees to be bundled with [assets-under-management (AUM)] fees or product commissions that may not be practical or feasible in all situations)!" (Nerd's Eye View)
J.P. Morgan Faces Second Lawsuit Alleging Self-Dealing in 401(k) Plan
" 'Rather than engage in systematic, arm's length review of available plan investment options, J.P. Morgan sought out investment options that allowed its affiliates and business partners to reap outsized fees,' said the lawsuit ... The lawsuit alleged that half of the 401(k) plan's investment options were affiliated with J.P. Morgan and another 20% were BlackRock Inc. options. BlackRock is not a defendant." (Pensions & Investments)
Plan Sponsors Should Beware the Managed Account Default Option
"Increasingly, sponsors are signing up for managed accounts as the plan's default option ... [and] a growing number of providers offering lower administration fees in exchange for offering the managed account as the qualified default investment alternative. This makes it ever more important that those options are appropriately analyzed, selected and monitored to provide the highest level of service to plan participants. Organizations offering managed accounts face a particular challenge fulfilling their fiduciary duties, because while some employees are actively involved, typically a sizable percentage of employees fail to engage despite picking a self-directed option." (Pensions & Investments)
Index Funds Make It Easy to Reduce 401(k) Fiduciary Liability
"The beauty of index funds from a 401(k) fiduciary perspective is that most are inherently more prudent than comparable actively-managed funds, making prudent fund selection dead simple.... Most index funds are cheaper than comparable actively-managed funds due to their passive investing approach.... Most index funds deliver highly-correlated benchmark returns. This is contrast to actively-managed funds, whose returns can differ dramatically from their benchmark." (Employee Fiduciary)
Sixth Circuit Overturns Tax Court Decision on Abusive DISC Commissions to Roth IRA
"Contrary to the Tax Court, the Sixth Circuit determined that the IRS overstepped its bounds applying a substance over form argument to claim a tax avoidance transaction when Congress created both domestic international sales corporations (DISCs) and Roth IRAs with the purpose of providing taxpayers the opportunity to avoid tax, provided the taxpayers followed the form of structures of the DISC and Roth IRA." [Summa Holdings Inc. v. Commissioner, No. 16-1712 (6th Cir. Feb. 16, 2017)] (RSM US)
New York Life Settles Lawsuit Over Alleged Excessive Fees in Its 401(k) Plans
"New York Life Insurance Co. has settled a class-action lawsuit for $3 million with participants in two company 401(k) plans ... Plan participants said two New York Life 401(k) plans should have searched for S&P 500 index funds that were cheaper than New York Life's MainStay S&P 500 fund. 'From 2010 to 2016, the plans' fiduciaries did not act in the best interests of the plans and their participants,' the lawsuit said." (Pensions & Investments)
New Wave of Retirement Fee Litigation: The University 403(b) Lawsuits
"The participant-plaintiffs ... allege that the universities and other fiduciaries of the plans failed to use the plans' billion-dollar negotiating power and, instead, paid unreasonable and excessive fees for recordkeeping, administrative, and investment services. The plaintiffs also allege that the fiduciaries selected and retained investment options that consistently and historically underperformed their benchmarks and charged excessive investment management fees." (Trucker Huss)
Self-Dealing Suits: The Latest Trend in Fee Litigation (PDF)
"What can Plan Sponsors learn from these latest lawsuits? ... Review your investment offerings and processes to identify shortcomings. Consider the following: Are processes for investment selection and review prudent and recorded? Is the fund lineup properly diversified among asset classes and sizes? Are fees reasonable? Do the funds have strong long-term performance?" (Ekon Benefits)
Finding Hidden 401(k) Fees in Participant Disclosure Notices
"[A] 2015 study of 4,368 retirement plan participants ... found that 89% could not correctly calculate their account fees.... [O]nly 42% knew they were paying fees at all. Most plan participants -- 58% -- were unaware that fees were being 'automatically' deducted from their account.... Indirect fees, which are deducted from fund returns, ... are not disclosed in the annual fee notice. Instead, they are lumped into the fund expense ratios listed in the comparative chart.... [It's] still possible -- though not particularly easy -- to uncover their amount by using the comparative chart as a starting point." (Employee Fiduciary)
Trump's Fiduciary Rule Order Unlikely to Stop Fee Shift
"[Morgan Stanley said] that it plans to move ahead with changes designed to comply with the fiduciary rule, despite uncertainty over whether the regulation will be implemented. Insurers including AIG and Principal Financial stressed after Trump's victory that they would continue to forge ahead as though the rules would be carried out." (Financial Planning)
A New Twist on Fee-Based Cases Against Plan Sponsors
"The complaint alleged the plan sponsor breached its duties as a fiduciary by not taking its plans to market in a consolidated manner in such a way as to leverage the combined assets and participant numbers of both plans to negotiate the lowest possible fee for participants in both plans via the utilization of a single record keeper.... The claims in this suit represent the fact that lawsuits against plan sponsors and fiduciaries are becoming increasingly subjective and less objective." [Morin v. Essentia Health, No. 16-4397 (D. Minn. complaint filed Dec. 29, 2016)] (Pension Consultants, Inc.)
Fee Litigation Update: Moving Beyond Allegations of Self-Dealing
"[This article reviews] the alleged bases for these lawsuits and, in particular, the theories by which plan participants seek to satisfy the standards for pleading a viable fiduciary breach claim without the benefit of allegations of self-dealing. [The authors suggest] affirmative steps that plan fiduciaries may take to prevent these types of claims from succeeding." (Proskauer Rose LLP)
Aon Hewitt Sued Over Fee Arrangement with Investment Advisor for Caterpillar's 401(k) Plan
"Aon Hewitt devised an arrangement with Financial Engines for investment advice services that resulted in collecting unreasonable and excessive fees at the expense of Caterpillar Inc.'s 401(k) plan participants, according to a lawsuit filed Jan. 27 ... The lawsuit seeks class treatment for thousands of participants. Aon Hewitt and its subsidiaries engaged in a kickback scheme with Financial Engines that resulted in millions of dollars in plan losses in violation of [ERISA], the complaint alleges." (Bloomberg BNA)
JPMorgan Sued for Alleged Self-Dealing in Its 401(k) Plan
"The plaintiff claims JPMorgan, as well as various board and committee members with oversight of the $21 billion retirement plan, breached their fiduciary duties by ... retaining proprietary mutual funds from the bank and affiliate companies for several years, despite the availability of nearly identical, lower-cost and better-performing funds." (InvestmentNews)
Schwab Sued Over Cost of Its 401(k) Investment Options
"The lawsuit, filed Jan. 19 in U.S. District Court in San Francisco, contended that the executives breached their fiduciary duties, saying they 'imprudently and disloyally larded the plan with unnecessary, expensive and poorly performing investment products and services.' " (Pensions & Investments)
Understanding Your Retirement Plan Fee Methodology
"There are two basic retirement plan fee structures: per capita hard dollar fees and fees charged as a percentage of assets. Determining whether to charge per participant hard dollar fees or fees as a percentage of assets is a philosophical decision, with each scenario possessing distinct positive and negative attributes." (Strategic Benefit Services)
How to Make Your 401(k) or 403(b) Plan a Litigation Target
"[1] Adopt an Investment Policy Statement, then never consult it again.... [2] Don't benchmark your fees or do periodic RFPs.... [3] Load your investment menu with proprietary funds.... [4] Try to do everything in house.... [5] Enter into a revenue sharing arrangement, then fail to monitor payments.... [6] Use multiple recordkeepers and providers.... [7] Set it and forget it, because nobody is complaining.... [8] Don't hold regular committee meetings." (Cohen & Buckmann, P.C.)
Reasonable Fees: Who's Responsible? (PDF)
"All of the exemptions require that the advisor -- and often the Financial Institution -- not receive unreasonable compensation. For plans, this creates a dual obligation to make sure that compensation is reasonable. The plan sponsor retains the ERISA obligation ... and the advisor and financial institution have a new obligation under the various exemptions." (Drinker Biddle, for Fiduciary Benchmarks)
Multiple Recordkeepers at Heart of Excessive Fee Suit
"The case contains many of the elements that have become wearingly familiar ... But it also is distinct because of the history of the two retirement plans ... including a 403(b) plan that has some important distinctions from a typical 401(k).... Plaintiffs argue the size of a defined contribution plan, both by number of participants with balances and total assets, should directly determine the pricing it can obtain for administrative services and investment management. 'By combining administratively, the plans have had the ability to operate in the market as a 20,000-participant plan with $1 billion in assets,' plaintiffs suggest." [Morin v. Essentia Health, No. 16-4397 (D. Minn. complaint filed Dec. 29, 2016)] (PLANSPONSOR)
Size Matters: Do Your Fiduciaries Negotiate for Lower 401(k) Plan Fees?
"Fiduciaries of very large plans who wouldn't think of not haggling with a dealer over the price of a new car or a hotly negotiating a business deal have sometimes neglected to leverage their plan's size to negotiate lower 401(k) fees. The result is a sharply increased risk of being sued.... One of the biggest mistakes fiduciaries can make is starting off by simply accepting the service provider's form service agreements. Not only the fees, but other provisions of these agreements are negotiable." (Cohen & Buckmann, P.C.)
Texas Pension Fund Takes Bold Step on Fees
"The $133.2 billion Austin-based defined benefit plan is the first to adopt a new fee structure developed by its hedge fund consultant, Albourne Partners Ltd. The objective of the fee formula is to ensure that the investor consistently retains 70% of the gross alpha returns of the hedge funds in its portfolio." (Pensions & Investments)
Delta Air Lines Latest Plan Sponsor Hit with 401(k) Class Action
"The lawsuit, filed Dec. 20 in federal court in Delaware, attacks Delta's decision before 2011 to offer at least 200 investment options in its retirement plan. These options were 'duplicative' and allegedly 'added nothing but confusion to the set of options available to participants,' the lawsuit said. The plan wasted tens of millions of dollars through the 'payment of unreasonable, excessive and unnecessary fees, as well as the persistent underperformance of these ill-chosen investments,' the participants alleged." (Bloomberg BNA)
Funding Will Be Key to Self-Sufficient State Auto-IRA Programs (PDF)
"[A]uto-IRA programs can break even and pay back initial losses in about 9 years as long as: [1] initial fees are allowed to be higher in the short-run -- around 100 basis points -- before dropping down to their long-term equilibrium; [2] the default contribution rate is meaningful; and [3] per-account costs are relatively low." (Center for Retirement Research at Boston College)
Hotel Giant Starwood Hit With 401(k) Fee Class Action
"The lawsuit ... seeks class treatment for more than 40,000 participants. Starwood, one of the world's largest hotel companies with upscale brands such as Westin and Sheraton, failed to ensure that fees charged to participants were reasonable, according to the lawsuit." (Bloomberg BNA)
Tibble v. Edison Still Being Fought in Federal Courts
"On remand from the Supreme Court, the 9th U.S. Circuit Court of Appeals once again heard 'en banc' arguments in Tibble v. Edison, deciding this time that it would vacate the lower district court's judgment in favor of the defense.... [T]he court of appeals had previously affirmed the district court's holding that the plan beneficiaries' claims regarding the selection of mutual funds in 1999 were time-barred under the six-year limit of 29 U.S.C. Section 1113(1). However, the Supreme Court vacated the court of appeals' decision, observing that federal law imposes on fiduciaries an ongoing duty to monitor investments even absent a change in circumstances." [Tibble v. Edison, No. 10-56406 (9th Cir. Dec. 16, 2016)] (planadviser)
Mutual Fund Share Class Evaluation: A Focus on 'Net' Costs
"The share class with the lowest expense ratio may have a high minimum initial investment to enable economies of scale. Expense ratios change; as assets grow in a share class, expense ratios tend to decline.... Revenue sharing agreements between recordkeepers and fund managers may change or be renegotiated at any time. Share classes, expense ratios, and minimum asset requirements should be reviewed on a regular basis to identify potential savings opportunities." (Cammack Retirement Group)
Take That Target Off My Back: A Guide to Avoiding 401(k) Litigation
"Documentation should demonstrate the process undertaken in reviewing fees, including an analysis of fees charged, the services received and the benchmarking of those fees. Selection of the correct share class of a particular mutual fund is important, as different share classes have different expense ratios. This review process should be regular and ongoing." (Greensfelder)
ERISA Liability from 401(k) Plan Revenue Sharing
"City National ... [argued] that its administrative fees were reasonable, because they were lower than those of one outside vendor from which it solicited a quote. The court rejected this argument, stating that ERISA's fiduciary duties are the 'highest known to the law' and that a 'prudent fiduciary would have done more.' ... [E]mployers should periodically monitor revenue sharing fees to satisfy themselves that they remain reasonable, or alternatively, consider periodically shopping 401(k) plan administration or record keeping services to compare costs." (Weil Gotshal & Manges LLP)
401(k) Plan Fee Litigation Update
"[T]wo notable cases may indicate an extension of fee based claims into the small/mid-size 401(k) plan market: Checksmart ($25M) and LeMettry's Collision ($9M). Whether an expansion of fee-based claims to the small/mid-size plan market can be characterized as a trend is still to be determined.... [T]he larger plans can leverage their size to negotiate better fee deals. On the other hand, the potential recovery from a smaller asset pool (and the corresponding attorney fee award) is considerably smaller so it is possible that these small plan cases may simply be outliers." (Miles & Stockbridge)
Wells Fargo Employees Sue Over Funds in Retirement Plans
"In the complaint, [the plaintiff] said the difference reflected the layering of an extra set of fees to run the funds, on top of fees to manage the underlying indexed funds. Despite this, assets allegedly grew in part because Wells Fargo made its target date funds a default investment option, and provided an 'easy' and 'quick' enrollment feature. This 'generated substantial revenues for Wells Fargo' and provided 'critical seed money that kept the funds afloat by boosting market share,' the complaint said." (Fortune)
[Opinion] CalSTRS Sets Standard on Fee Disclosure?
"CalSTRS is leading the way once again with this initiative to be completely transparent by disclosing all the fees it pays out to external managers and track total expenses more closely.... In an ideal world, we should be able to read the annual report of any public pension to understand how much was paid out in management fees, how much in performance fees (carried interest), how much for internal salaries, how much to vendors, brokers, consultants, accountants, lawyers, etc. and exactly who received what amount." (Pension Pulse)
Edward Jones Hit with Second ERISA Lawsuit Over 401(k) Fees
"Edward Jones selected investments for its employees' retirement plan with higher administrative fees than available alternatives and included a money-market fund that consistently had negative returns for every year it was in the plan, the complaint alleged. It also selected and maintained an unreasonable number of high-risk investment options to the detriment of participants, the complaint said." [Schultz v. Edward D. Jones & Co. L.P., No. 16-1762 (E.D. Mo. complaint filed Nov. 11, 2016)] (Bloomberg BNA)
Fee Allocation: Which Methodology is Best for Your Plan?
"Once it has been determined that the fees in the plan are reasonable, the next issue plan sponsors must tackle is how to allocate those fees. In most cases, the participants ... share the majority, if not all, of the plan fees. An issue over which plan sponsors are showing greater concern is whether these participant fees should be calculated based on a percentage of assets (and allocated pro rata) or whether all participants should be assessed the same flat dollar fee (i.e., per capita)." (Cammack Retirement Group)
[Guidance Overview] DOL Issues Guidance on Fiduciary Rule's New Best Interest Contract Exemption
"The Guidance clarifies that new conditions on all pre-existing PTEs must be met by April 10, 2017. For the two new PTEs -- the Best Interest Contract (BIC) and Principal Transactions Exemption -- the DOL has provided a 'transition period' for compliance. Financial institutions and advisers relying on either of these PTEs must meet partial requirements by April 10, 2017. To rely upon one of these exemptions on April 10, 2017, impartial conduct standards must be met." (Jackson Lewis P.C.)

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