- Is Your Nest Egg Being Handled with Care?
- The Employee Retirement Income Security Act of 1974 (ERISA)
- Examples of Unfair Practices and Procedures that may Violate ERISA
- Are Employers Using Former Employees’ Funds to Benefit the Plan or Themselves?
- If You Have Questions About Retirement Accounts, Give Our Firm a Call
Is Your Nest Egg Being Handled with Care?
Saving for retirement is no easy task.
As workers, we contribute our part of pay to an individual retirement account, which is invested and – hopefully – grows overtime. These retirement plans are often called 401(k) or 403(b) accounts. When we retire, we anticipate our contributions, and the growth from our investments, will pay for our retirement. The amount we have for retirement depends on our investments’ performance.
The Employee Retirement Income Security Act of 1974 (ERISA)
When workers contribute to employer-sponsored retirement plans, they put their savings in the hands of a retirement plan manager. A law, the Employee Retirement Income Security Act of 1974 (ERISA), ensures that retirement plan managers run retirement plans in the members’ best interests, and provides remedies for those whose fiduciaries failed to live up to those standards.
Unfortunately, many retirement plan managers have overcharged on recordkeeping/administrative fees, failed to weed out bad investment options, or even stocked the plan’s investment “menu” with their own in-house funds that charge investors unjustifiably high fees, so that the plan manager profits unfairly at retirement plan members’ expense. All of these practices violate ERISA and can shrink your retirement savings.
Examples of Unfair Practices and Procedures that may Violate ERISA
Below are some of the more common unfair retirement practices plan participants have experienced.
The Market Went Up, But My Retirement Fund Is Stuck!
Some retirement plans have been accused of keeping bad investments mixed in with their menu of investment options, even though those investments underperform expectations and/or charge high fees. If your retirement fund isn’t keeping pace with the economy, you may have stumbled into one of these underperforming investment options without even knowing it!
Why Are These Fees Cutting into My Retirement?
Retirement plans often charge “recordkeeping” or “administrative” fees and plan managers are frequently accused of failing to shop around and find recordkeeping services at a good, market rate. Those high fees can eat away at your profits every year, compounding over time, and making a real difference in the size of your nest egg at retirement.
Do I Still Need to Worry if My Retirement Plan Is Serviced by a Big-Name Company?
Maybe. For example, in Becker et al. v. Wells Fargo et al., No. 20-cv-02016 (D. Minn.), participants in the Wells Fargo employee retirement plan claimed that its fiduciaries were violating ERISA.
Specifically, the plaintiffs alleged that the plan managers selected Wells Fargo-affiliated funds that underperformed and charged higher fees than their competitors. This scheme, the plaintiffs claimed, benefited Wells Fargo at the expense of the plan participants. In the end, Wells Fargo agreed to a settlement worth approximately $61 million.
Are Employers Using Former Employees’ Funds to Benefit the Plan or Themselves?
Another way that employees claim employers are violating ERISA is by taking “forfeited” employer contributions and improperly putting them towards the employer’s obligations under the plan. In other words, when employees leave before employer contributions to their retirement vest, those forfeited contributions are used to pay down the employer’s costs (e.g., making matching contributions) rather than towards administration costs that are borne by the plan participants.
If You Have Questions About Retirement Accounts, Give Our Firm a Call
Navigating this system alone can seem daunting, but it doesn’t have to be. If you would like to have a free consultation with an attorney at MSE about investigating your retirement plan, please contact us.