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All News > Retirement Plan Investment Costs

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Mutual Fund Expense Ratios Have Declined Substantially Over the Past 27 Years
Investment Company Institute [ICI] Link to more items from this source
Mar. 22, 2024

"[T]he average expense ratio for equity mutual funds declined for the fourteenth straight year in 2023, while the average expense ratio for bond mutual funds remained unchanged from its level in 2022.... From 1996 to 2023, average equity mutual fund expense ratios dropped by 60 percent and average bond mutual fund expense ratios dropped by 56 percent.... In 2023, 92 percent of gross sales of long-term mutual funds went to no-load funds without 12b-1 fees, compared with 46 percent in 2000."

Tags: Retirement Plan Investment Costs

No, 401(k) Funds Do Not Cost 2% Per Year
Morningstar Link to more items from this source
[Opinion]
Mar. 21, 2024

"[E]xpense ratios for 401(k) plans are largely determined by the level of plan assets. Bigger means thriftier. Multinationals have Treasury departments staffed with benefits experts who haggle when negotiating with 401(k) providers. In fact, they often circumvent mutual funds altogether, insisting instead on cheaper collective investment trusts. In contrast, small-company sponsors are often ill-informed and possess little bargaining power regardless."

Tags: 401(k) Plans  •  Retirement Plan Investment Costs

401(k) Litigation: Present and Future
planadviser Link to more items from this source
Mar. 19, 2024

"DC litigation remains relatively robust.... Encore Fiduciary reports at least 20 cases per year being filed since 2016, including a peak of 101 cases filed in 2020 ... These cases generally focus on the country's largest plans ... [I]nnovation and evolution naturally continue in the roughly $9 trillion DC space, which, in turn, continues to get attention from the plaintiffs' bar.... [P]lan sponsors and their advisers must remain diligent in managing and monitoring retirement plans fees."

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

Yale University Challenges Participants' Appeal in 403(b) Excessive Fee Suit
American Retirement Association [ARA] Link to more items from this source
Mar. 15, 2024

"[An] issue raised in the appeal was the arguably contradictory jury results that a breach had occurred, but no damages resulted. Also questioned was the jury's assessment that a prudent fiduciary COULD have made the same decisions, whereas the plaintiffs argued that the correct standard was that a prudent fiduciary WOULD have made those decisions." [Vellali v. Yale Univ., No. 16-1345 (D. Conn. Jun. 28, 2023; on appeal to 2d Cir. No. 23-1082, response brief filed Mar. 8, 2024)]

Tags: 403(b) Plans and Annuities  •  Fiduciary Duties  •  Retirement Plan Investment Costs

The Hy-Vee Summary Judgment Record Highlights Unfair Fiduciary Malpractice Lawsuits Against Large Plan Sponsors
Encore Fiduciary Link to more items from this source
[Opinion]
Mar. 12, 2024

"This case reinforces four key points that animate most excess fee cases: [1] We must allow plan fiduciaries to correct the record at the pleading stage when a complaint is based on false fee amounts; [2] We cannot allow complaints to use misleading benchmarks from random plans instead of real context of the entire market of what all large plans pay; [3] It is unfair to allow plaintiff lawyers to regulate fiduciary liability unless they can show a clear lack of any fiduciary process.... and [4] Recordkeeping is not commoditized for all large plans." [Rodriguez v. Hy-vee, Inc., No. 22-0072 (S.D. Iowa Mar. 7, 2024)]

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

Lessons from a Successful ERISA Defense Against Participant Challenge to Target-Date Fund Investments
McGuireWoods Link to more items from this source
Mar. 8, 2024

"[T]he defendants demonstrated that flexPATH recommended its own TDFs only after performing an exhaustive analysis of several alternative investments ... [T]he court rejected plaintiffs' contentions that Wood Group ... needed to document the justifications for engaging flexPATH in committee meeting minutes.... These rulings underscore the importance of not just having prudent processes, but also considering how those processes are documented." [Lauderdale v. NFP Corp., No. 21-0301 (N.D. Calif. Feb. 23, 2024)]

Tags: Fiduciary Duties  •  Retirement Plan Administration  •  Retirement Plan Investment Costs

401(k) Fee Suits Tossed for Pleading Deficiencies: A Positive Trend for Plan Fiduciaries
Faegre Drinker Link to more items from this source
Mar. 1, 2024

"[D]ismissals for failure to include appropriate comparator plans are a positive trend for 401(k) plan fiduciaries in the Seventh Circuit, and has gained steam in the Sixth and Eighth Circuits as well. In these jurisdictions, plaintiffs are on notice that their complaints must provide allegations of meaningful comparator plans of similar size that received similar recordkeeping services to the plan at issue. Complaints lacking this specificity may face an early exit from litigation."

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

The Price of New York Life's 401(k) Lawsuit: $19M
InvestmentNews; subscription may be required Link to more items from this source
Feb. 28, 2024

"New York Life has agreed to pay $19 million to end a lawsuit over the company's use of its own investment products in its 401(k) plans. The agreement ... will bring to a close a three-year old case that accused the insurance company of breaching its fiduciary duty to its employees." [Krohnengold v. New York Life Ins. Co., No. 21-1778 (S.D.N.Y. Aug. 10, 2022; proposed settlement agreement filed Feb. 26, 2024)]

Tags: 401(k) Plans  •  Fiduciary Duties  •  Retirement Plan Investment Costs  •  Retirement Plan Investments

California District Court Denies Motion to Dismiss 401(k) Excessive Fee and Underperformance Claims
Proskauer Link to more items from this source
Feb. 28, 2024

"The decision is notable for illustrating how pleading standards in investment performance and excessive fee litigation vary depending on jurisdiction.... In this case, defendants could not overcome the Court's consideration of seemingly unrelated allegations to support holdings that plaintiffs plausibly alleged certain claims, or the Court's refusal to apply a 'meaningful benchmark' standard to plaintiffs' excessive fee claim." [Coppel v. Seaworld Parks & Entertainment, Inc., No. 21-1430 (S.D. Cal. Jan. 31, 2024)]

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs  •  Retirement Plan Investments

NFP Prevails in Fiduciary Suit Brought by Schlichter
American Retirement Association [ARA] Link to more items from this source
Feb. 27, 2024

"Litigation that involved a multiple employer plan (MEP), merging plans, a 3(38) investment advisor, a plan sponsor -- and at one point an advisor (NFP) -- has been resolved in favor of the fiduciary defendants, while reminding us of the value and importance of a prudent process in target-date fund selection." [Lauderdale v. NFP Corp., No. 21-0301 (N.D. Calif. Feb. 23, 2024)]

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs  •  Retirement Plan Investments

Advisor Compensation Requirements Under Proposed Amendments to PTE 2020-02
Faegre Drinker Link to more items from this source
[Guidance Overview]
Feb. 21, 2024

"[To] evaluate reasonableness, advisors should consider whether the compensation reflects the value of services provided to the Retirement Investor as determined by the competitive marketplace.... The proposed amendments to PTE 2020-02 require that the Retirement Investor receive a pre-transaction disclosure about the right to receive information regarding costs, fees and compensation."

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

TIAA Subsidiary Will Pay More Than $2.2 Million to Settle Charges That It Failed to Comply with Reg BI
U.S. Securities and Exchange Commission [SEC] Link to more items from this source
Feb. 19, 2024

"The SEC's order finds that TC Services violated [Regulation Best Interest (Reg BI)] by, among other things, failing to disclose both that substantially equivalent, lower-cost share classes of affiliated funds were available in the brokerage window and the conflicts that created. According to the SEC's order, more than 94 percent of TIAA IRA customers invested only through the core menu. As a result, nearly 6,000 TC Services retail customers paid more than $900,000 combined in expenses that they could have avoided by purchasing substantially equivalent funds through the brokerage window."

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

Second Circuit Upholds Rejection of 401(k) Plan Complaint Against Goldman Sachs
Pensions & Investments Link to more items from this source
Feb. 15, 2024

"Although the plaintiff argued that plan executives didn't establish a formal process for selecting and monitoring investments, the district court disagreed -- and so did the appeals court. The investment committee 'followed a rigorous and deliberative process when selecting and monitoring investments,' the appeals court judges wrote." [Falberg v. The Goldman Sachs Group, Inc., No. 22-2689 (2d Cir. Feb. 14, 2024)]

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

Wisconsin Federal District Court Issues Five Rulings on Motions to Dismiss 401(k) Investment and Fee Cases – Is There a Way to Reconcile Them?
Proskauer Link to more items from this source
Feb. 13, 2024

"That the court readily dismissed the investment performance claims ... may be indicative of a larger trend in which courts appear to be more skeptical of claims that are based on after-the-fact comparisons of a fund's performance relative to that of other funds that may have utilized different investment strategies. With respect to the recordkeeping claims, however, it is difficult to discern why the court more intensely scrutinized the allegedly comparable plans in some cases than in others."

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs  •  Retirement Plan Investments

Quantifying Fiduciary Prudence and the Quality of Investment Advice
The Prudent Investment Adviser Rules Link to more items from this source
[Opinion]
Feb. 12, 2024

"A simple cost/benefit analysis would seem to be a part of a prudent process for plan sponsors to use evaluating the fiduciary prudence of investment products in defined contribution plans (DCPs). However, based on the evidence, very few plans seem to use cost/benefit analyses as part of their fiduciary prudence process. Furthermore, even when plans do use cost/benefit analysis, there are often legitimate questions as to whether such analyses were properly conducted."

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs  •  Retirement Plan Investments

Public Pension Investment Expenses Fall to Four-Year Low
National Conference on Public Employee Retirement Systems [NCPERS] Link to more items from this source
Feb. 12, 2024

"[A]verage investment management expenses fell to 39 basis points, down from 49 basis points the year prior, while administrative expenses remained steady year over year. Investment expenses reached a four-year low, suggesting a return to normalcy from the pandemic."

Tags: Retirement Plan Investment Costs  •  State and Local Government Plans

The New Fiduciary Rule, Part 17: Permissible Compensation under PTE 84-24
FredReish.com Link to more items from this source
[Guidance Overview]
Feb. 1, 2024

"While the general rule in ERISA and the Code is that compensation cannot be more than a reasonable amount, the PTE has additional limitations."

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

District Court Judge Pushes Back on Attorneys' Fee in 401(k) Excessive Fee Settlement
American Retirement Association [ARA] Link to more items from this source
Jan. 29, 2024

"[The judge] noted that, based on the total fees racked up to date -- $142,232 -- approving the [$900,000 attorney fee] requested would be a figure more than six times the amount supported by the lodestar amount ... He also pushed back on why the plaintiffs were also seeking $36,000 in expenses, on top of nearly $40,000 in settlement administration expenses and $15,000 for independent fiduciary fees." [Reichert v. Juniper Networks, No. 21-6213 (N.D. Cal. motion for attorneys' fees filed Nov. 17, 2023; motion for final approval of proposed settlement filed Jan. 4, 2024)]

Tags: Retirement Plan Investment Costs

ERISA Litigation Faces New Frontiers in 2024 (PDF)
Groom Law Group, via Law360 Link to more items from this source
Jan. 24, 2024

"In 2023, just over 100 new class actions were filed under [ERISA] -- the lowest number filed since 2018 ... Plaintiffs firms continue to explore new theories. In 2023, they filed new lawsuits challenging the use of plan forfeitures, sought named plaintiffs for new lawsuits challenging health plan fees, and filed a record number of actuarial equivalence lawsuits."

Tags: Fiduciary Duties  •  Health Plan Costs  •  Retirement Plan Investment Costs

The New Fiduciary Rule, Part 16: Permissible Compensation under PTE 2020-02
FredReish.com Link to more items from this source
[Guidance Overview]
Jan. 23, 2024

"This article focuses on limitations on compensation under PTE 2020-02. However, compensation of advisors and their firms is often an element of the costs of the services and products, and thus can also be part of the consideration of costs. While the general rule in ERISA and the Code is that compensation cannot be more than a reasonable amount, the PTE has additional limitations."

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

Second Circuit Decision Offers New Hope for Defending Prohibited Transaction Claims
Willis Towers Watson Link to more items from this source
Jan. 22, 2024

"This decision was in contradiction to decisions from some other circuits which treat prohibited transaction exemptions as an affirmative fact-intensive defenses whose applicability can’t be determined at the motion to dismiss stage. (including last year’s Ninth Circuit’s decision in the AT&T excessive fee class action)." [Cunningham v. Cornell Univ., No. 21-0088 (2d Cir. Nov. 14, 2023)]

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

Economic Analysis of the DOL's Proposed Retirement Security Rule (PDF)
Oxford Economics, for The Financial Services Institute Link to more items from this source
Jan. 22, 2024

38 pages. "Based on the survey responses, [Oxford estimates] that the upfront cost for the proposed 2023 Fiduciary rule will be approximately $238 million, over six times the DOL's estimate of upfront costs ($37 million). [The] estimate of the ongoing annual cost of the rules, $2.5 billion, is almost 11 times the DOL's estimate ($216 million).... [T]he DOL's evidence of potential benefits ... at best ... are speculative, with magnitudes that are unclear."

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

The New Fiduciary Rule, Part 15: Reasonable Costs and Reasonable Compensation
FredReish.com Link to more items from this source
[Guidance Overview]
Jan. 17, 2024

"A practical definition is that reasonableness is what an informed investor, operating in a competitive marketplace and with knowledge of the material facts, would agree to. Importantly, reasonableness is not a percent or an amount. Instead, it is a range."

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

Fee Transparency and Cost Management
PlanPILOT Link to more items from this source
Jan. 11, 2024

"This article aims to shed light on the critical aspects of fee transparency so plan sponsors can best help the plan but also relay relevant details to participants.... [The article includes] actionable strategies for reducing costs, such as embracing technology and automation, effectively managing small account balances, and leveraging recordkeeper technology to enhance participant engagement."

Tags: Retirement Plan Administration  •  Retirement Plan Design  •  Retirement Plan Investment Costs

Understanding and Evaluating Retirement Plan Fees, Part 1
CAPTRUST Link to more items from this source
Jan. 11, 2024

"With retirement plan fees serving as the centerpiece for many different fiduciary breach lawsuits, understanding fee dynamics has become a critical responsibility for plan sponsors and fiduciaries. This article ... explore[s] the different types of retirement plan fees by taking an in-depth look at investment costs, provider fees, and fee allocation methodologies."

Tags: Fiduciary Duties  •  Retirement Plan Investment Costs

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