Unhappiness over high fees, inappropriate investment options and other issues have led to a spike in 401(k) lawsuits in recent years, USA Today reports, with a swelling backlog of cases to boot.
Nearly two in three adult workers invest money in 401(k)-style plans, which have replaced traditional pensions as retirement mainstays in the workplace. But unlike pensions, workers in 401(k) plans must make investment decisions on their own (though some companies provide guidance), which can lead to subpar results and dissatisfaction.
What’s recently emerged as the dominant catalyst for litigation, however, is excessive or unreasonable fees paid by employees, including expenses charged by mutual funds, program fees for recordkeeping, shareholder communication and other administrative tasks. It’s caused the number of lawsuits to surge from just two in 2013, according to a Boston College report, to 56 in 2016 and 51 in 2017—a trend which, experts say, continues.
Yet with the increased risk of litigation comes a silver lining: Many 401(k) programs are getting better, especially in terms of lowering fees and weeding out inappropriate choices. Conversely, the trend might also discourage employers from experimenting with potentially rewarding innovations, such as annuities. Read the full story.
