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Brokerage Windows’ Future Unclear

Brokerage windows are relatively rare in most 401(k) plans. Out of the 686 plans surveyed by the Plan Sponsor Council of America in 2012, only 17% of them offered the option.

Not So Transparent:

Brokerage windows are supposed to provide plan participants with access to a greater variety of investments. However, they can be problematic because they typically have additional transaction costs the participant must pay. Employers have a fiduciary duty to make sure fees are no more than reasonable, and that investments are prudently selected for the plans. Nevertheless, investments offered through brokerage windows come with higher, retail-level, ongoing fees; more than what would be available by the plan as a whole, given the plan’s size and bargaining power. The Department of Labor plans to issue a request for comment on brokerage windows in April.

 

 

 

About Schlichter, Bogard & Denton, LLP

 

Schlichter, Bogard & Denton, LLP is a unique national law firm that represents individuals, including 401(k) plan investors, whose plans suffer from excessive fees or imprudent investment options. Our attorneys are dedicated to helping employees and retirees secure the retirement benefits they deserve. If you have any questions about the fees and investments in your 401(k) or 403(b) plan, please contact Schlichter, Bogard & Denton, LLP at (314) 621-6115 for a free review of your plan.

 

The choice of a lawyer is an important decision and should not be based solely on advertisements.

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ABB 401(k) Plan Participants See PRISM Plan Changes

On February 27, 2014, participants in ABB, Inc.’s 401(k) Plan were sent a letter [available here] telling them that Plan is in the process of removing all Fidelity-managed investment options and switching the Plan’s recordkeeper from Fidelity to Merrill Lynch. The Plan option changes also involve the removal of the Fidelity Freedom Funds, which will be replaced by the significantly lower-fee Vanguard funds. Other mutual funds are likewise being mapped to less expensive options. For example, participants invested in the Fidelity Low-Priced Stock Fund will see their fees reduced by 91% as they are moved to an index collective trust managed by State Street Global Advisors. The transition is expected to occur in May, 2014.

The PRISM Plan has been the subject of groundbreaking litigation, culminating in a Court Order — after a four-week trial — that “ABB Defendants violated their fiduciary duties to the Plan and its participants when they failed to monitor recordkeeping costs and negotiate for rebates from Fidelity Trust, and selected classes of particular investments to be on the PRISM Plan’s investment platform that had higher expenses when other share classes with lower expenses of those same investments were available, and removed the Vanguard Wellington Fund, and replacing it with the Fidelity Freedom Funds.” Tussey v. ABB, Inc., 2012 U.S.Dist. LEXIS 45240, *115–16 (W.D.Mo. March 31, 2012). The Court found that this addition of Fidelity Freedom Funds by elimination of Wellington and forcing Wellington Funds into Freedom was a breach. Id. at *104. The Court’s Order, and its current appeal, were previously discussed on this blog [here].

The latest plan changes come after the Court’s order requiring that ABB utilize a competitive bidding process, including a request for proposal, to select a new recordkeeper and that “For investments on the Plan’s investment platform, ABB shall choose the share class of investments that has the lowest expense ratio.” Id. at 114.

 

 

About Schlichter, Bogard & Denton, LLP

 

Schlichter, Bogard & Denton, LLP is a unique national law firm that represents individuals, including 401(k) plan investors, whose plans suffer from excessive fees or imprudent investment options. Our attorneys are dedicated to helping employees and retirees secure the retirement benefits they deserve. If you have any questions about the fees and investments in your 401(k) or 403(b) plan, please contact Schlichter, Bogard & Denton, LLP at (314) 621-6115 for a free review of your plan.

 

The choice of a lawyer is an important decision and should not be based solely on advertisements.  The case mentioned does not guarantee and/or predict outcomes in future cases.

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Still More Support for Low-Fee Index Funds

Matthew O’Brien’s recent piece in The Atlantic [available here] provides another insightful commentary on the benefits of passively-managed “index” mutual funds instead of their more expensive actively-managed alternatives. Mr. O’Brien first demonstrates that most actively-managed funds perform worse than the indexes they are trying to beat — and that is particularly so if you include the actively-managed funds that perform so badly they close up shop. This is true whether you measure using short time periods like 1 and 3 year performance, or longer periods like 5, 10 or even 15 years. Given that index funds can cost below 0.10% while the typical actively managed fund charges 1.33% per year, there is no reasonable justification for paying 13 times more for something that will most likely perform worse. O’Brien estimates that over the long-term, that difference in fees could cost an active investor 27% of their retirement nest-egg.

“The science is in, and has been for a long time, that actively-managed funds are generally going to perform worse than index funds, and are certain to have significantly higher fees,” says Jerome Schlichter of Schlichter, Bogard & Denton. “Given this information,” Schlichter continued, “your employer should have made a thorough analysis of expected performance if it includes actively managed funds in your 401(k) plan.”

 

 

About Schlichter, Bogard & Denton, LLP

 

Schlichter, Bogard & Denton, LLP is a unique national law firm that represents individuals, including 401(k) plan investors, whose plans suffer from excessive fees or imprudent investment options. Our attorneys are dedicated to helping employees and retirees secure the retirement benefits they deserve. If you have any questions about the fees and investments in your 401(k) or 403(b) plan, please contact Schlichter, Bogard & Denton, LLP at (314) 621-6115 for a free review of your plan.

 

The choice of a lawyer is an important decision and should not be based solely on advertisements.

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Stable Value Funds

Stable Value Funds have been around since the 1970s, offered as a conservative option in 401(k) plans. Most recently, they are being recommended as a safer alternative to deal with rising interest rates and falling bond funds.  Stable value funds are designed to protect principal while offering a guaranteed small yield.

What’s not to love?

This option seems like a sure bet.  However, since they yield so little (2–4%), stable value funds can barely keep up with inflation alone. Unfortunately, stable value fees are rarely disclosed, leading people to think they are free when they are not, and the insurance contracts used to “wrap” these funds are not well understood by employers, investors, or regulators. Much like mutual fund offerings, stable value funds can also carry excessive fees and expense ratios.  Schlichter, Bogard & Denton, a St. Louis based law firm, has filed over a dozen prominent lawsuits seeking to lower fees, improve understanding, and protect retirement savings. Schlichter’s cases, including a current case where they represent employees of Mass Mutual’s Thrift Plan, the 401(k) plan for employees of Mass Mutual, have brought increased awareness of these oft-misunderstood products.

 

 

 

About Schlichter, Bogard & Denton, LLP

 

Schlichter, Bogard & Denton, LLP is a unique national law firm that represents individuals, including 401(k) plan investors, whose plans suffer from excessive fees or imprudent investment options. Our attorneys are dedicated to helping employees and retirees secure the retirement benefits they deserve. If you have any questions about the fees and investments in your 401(k) or 403(b) plan, please contact Schlichter, Bogard & Denton, LLP at (314) 621-6115 for a free review of your plan.

The choice of a lawyer is an important decision and should not be based solely on advertisements. The cases discussed do not predict outcomes in future cases.

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401(k) Fees- A Threat to Retirement

America’s largest 401(k) provider, Fidelity Investments, reported that average balances in 401(k) Plans has reached a record high of $84,300, largely due to a thriving stock market.

According to AARP, 71% of Americans wrongly believe they pay no fees at all.  These plans are not free.  On the contrary, the average total plan cost ranges between .49% and 1.56%, meaning that many workers are paying over $1,000 per year in fees on money they have already put away for retirement.

Schlichter, Bogard and Denton, LLP is working hard to put an end to these outrageous fees that work against your retirement.  Fellow industry leaders, like Mike Alfred, co-founder and CEO of Brightscope, have noted the “humongous” impact the firm has had in bringing down fees across the country. Due in large part to this law firm’s work, fees in 401(k) plans continue to drop, painting a brighter picture for American families.

 

 

About Schlichter, Bogard & Denton, LLP

Schlichter, Bogard & Denton, LLP is a unique national law firm that represents individuals, including 401(k) plan investors, whose plans suffer from excessive fees or imprudent investment options. Our attorneys are dedicated to helping employees and retirees secure the retirement benefits they deserve. If you have any questions about the fees and investments in your 401(k) or 403(b) plan, please contact Schlichter, Bogard & Denton, LLP at (314) 621-6115 for a free review of your plan.

 

The choice of a lawyer is an important decision and should not be based solely on advertisements.

 

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Schlichter, Bogard & Denton Granted Final Approval of $35 Million Settlement for Cigna Employees and Retirees Over Disputes in the Handling of the Cigna 401(k) Plan

Schlichter, Bogard & Denton, a St. Louis law firm, achieved final approval of its $35 million settlement on behalf of Cigna employees and retirees with Cigna Corporation and Prudential Retirement Insurance and Annuity Company (PRIAC) of Nolte, et al. v. Cigna Corp., et al. Case No. 07-02046 in the U.S. Federal Court for the Central District of Illinois. The case involves disputes over the handling of the Cigna 401(k) plan, the prudence and level of fees of certain plan investment options, and the sale of Cigna’s retirement business to PRIAC.

The settlement is the largest ever for a case of its kind on behalf of 401(k) plan investors.

Payments to class members — who were previously notified of the settlement — are expected to begin before the end of the year. Jerome Schlichter of Schlichter, Bogard & Denton, attorneys for the Cigna 401(k) employees and retirees, stated “This has been a long battle for almost seven years. In addition to the money, all Cigna employees and retirees in the 401(k) plan will benefit for many years in the future with a greatly improved 401(k) plan, enabling them to build a meaningful retirement for the future.” The case began February 26, 2007, when the plaintiffs filed their initial complaint.

The employees and retirees alleged, among other things, that the fiduciaries responsible for overseeing the plan breached their legal duties by allowing the plan to pay excessive investment management and other fees while allegedly benefiting Cigna and that Cigna improperly benefitted from the sale of Cigna’s retirement business.

As part of the settlement, Cigna has agreed to a variety of initiatives designed to enhance its review of alternatives for the Plan and Plan Participants’ retirement savings. Additionally, Cigna has agreed to continue not to include in the Plan’s investment lineup any investment options managed by it or its affiliates, and has agreed to continue to exclude retail class mutual funds from the Plan’s lineup. Cigna will engage independent consultants to evaluate and make recommendations regarding certain aspects of the Plan’s administration.

The Cigna case was one of a number of cases filed by Schlichter, Bogard & Denton,  which launched the field of 401(k) fiduciary breach litigation for excessive fees. After years of litigation, Schlichter, Bogard, & Denton recently won a $50 million judgment from ABB and Fidelity in a case on behalf of ABB employees and retirees in ABB’s 401(k) plan, after the first full trial of a 401(k) excessive fee claim in the country. Tussey v. ABB, Inc., Case No. 06-4305 (W.D. Mo.) The firm has also settled other cases on behalf of participants in the 401(k) plans of Caterpillar, General Dynamics, Kraft Foods, International Paper and Bechtel totaling over $120 million. Martin v. Caterpillar, Inc., Case No. 07-1009 (C.D.Ill.); Will v. General Dynamics Corp., Case No. 06-698 (S.D.Ill.); Kanawi v. Bechtel Corp., Case No. 06-5566 (N.D.Ca.); George v. Kraft Foods Global, Inc., Case Nos. 07-1713 & 08-3799 (N.D.Ill.); Beesley v. International Paper, 06-703 (S.D.Ill.).

 

 

About Schlichter, Bogard & Denton, LLP

 

Schlichter, Bogard & Denton, LLP is a  national law firm that represents individuals, including 401(k) plan investors, whose plans suffer from excessive fees or imprudent investment options. Its attorneys are dedicated to helping employees and retirees secure the retirement benefits they deserve. Anyone who has questions about the fees and investments in a 401(k) or 403(b) plan can contact Schlichter, Bogard & Denton, LLP toll-free at (800) 873-5297.

 

The choice of a lawyer is an important decision and should not be based solely on advertisements. The case mentioned does not guarantee and/or predict outcomes in future cases.

 

 

 

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Schlichter, Bogard & Denton 401(k) Excessive Fee Claim Against International Paper Granted Preliminary Approval

Schlichter, Bogard & Denton 401(k) Excessive Fee Claim Against  International Paper Granted Preliminary Approval

On October 10, 2013, St. Louis law firm Schlichter, Board & Denton obtained preliminary approval of a $30 million settlement with International Paper Company regarding its 401(k) fee class action in Pat Beesley, et al., v. International Paper Company, et al., Case No. 06-703, in the U.S. Federal Court for the Southern District of Illinois.

The case, which has been pending since September of 2006, involves allegations that the fiduciaries responsible for overseeing International Paper’s hourly and salaried workers’ 401(k) Plans breached their duties resulting in excessive fees, treating the 401(k) Plans differently from the company’s pension plan, and by imprudently selecting funds in the plans.

The parties announced the settlement earlier this month.

In addition to the payment of $30 Million, the settlement also provides that International Paper will undergo 4 years of monitoring of its 401(k) Plans, will put out for bids its recordkeeping, and take other steps to improve the 401(k) Plans for employees and retirees.

Jerome Schlichter of Schlichter, Bogard & Denton, attorney for the employees and retirees in the 401(k) Plans, stated: “The Court’s decision to preliminarily approve the settlement is the first step in benefitting the International Paper employees and retirees both with the money they will receive and the top notch 401(k) plan they will have going forward.”

Mr. Schlichter and the Schlichter, Bogard & Denton firm have been at the forefront of the 401(k) litigation that has contributed to lower fees and improved fee disclosure for workers and retirees across the country.  In addition to the settlement with International Paper, the firm recently settled a case on behalf of Cigna employees and retirees for $35 million, which is the largest settlement in an excessive fee case in history.  Nolte v. Cigna, Case No. 07-2046 (C.D.Ill.).   The firm has also achieved settlements on behalf of employees and retirees of Caterpillar, General Dynamics, Bechtel, and Kraft Foods. Martin v. Caterpillar, Case No. 07-1009 (C.D.Ill.); Will v. General Dynamics, Case No. 06-698 (S.D.Ill.); Kanawi v. Bechtel, Case No. 06-5566 (N.D.Ca.); George v. Kraft Foods, Case Nos. 07-1713 & 08-3799 (N.D.Ill.). In addition, Mr. Schlichter and his firm obtained a judgment against ABB and Fidelity of over $50 Million in the only full trial of an excessive fee 401(k) Plan lawsuit in U.S. history. Tussey v. ABB, Case No. 06-4305 (W.D.Mo.).

The settlement must be approved by an independent fiduciary before being finally approved by Chief Judge David R. Herndon.

About Schlichter, Bogard & Denton, LLP

Schlichter, Bogard & Denton, LLP is a unique national law firm that represents individuals, including 401(k) plan investors, whose plans suffer from excessive fees or imprudent investment options. Our attorneys are dedicated to helping employees and retirees secure the retirement benefits they deserve. If you have any questions about the fees and investments in your 401(k) or 403(b) plan, please contact Schlichter, Bogard & Denton, LLP at (314) 621-6115 for a free review of your plan.

The choice of a lawyer is an important decision and should not be based solely on advertisements. The cases discussed do not predict outcomes in future cases. Past results afford no guarantee of future results and every case is different and must be judged on its own merits.

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Another Victory for Schlichter, Bogard & Denton, LLP – Federal District Court Grants Class Action Status to Boeing 401(k) Plan Participants

On September 19, 2013, Chief Judge David R. Herndon of the United States District Court for the Southern District of Illinois granted class certification to participants in the Boeing 401(k) Plan, regarding claims that Boeing personnel responsible for managing the plan breached their fiduciary duties under the Employee Retirement Income Security Act (“ERISA”), by: (1) causing the Plan to pay unreasonable and excessive administrative fees to its recordkeeper, CitiStreet; (2) squandering the Plan’s massive bargaining power by including certain retail mutual funds in the Plan which charged excessive fees and paid revenue sharing “kickbacks” to CitiStreet, instead of superior, low-cost institutional investments that were available to the Plan; (3) including an undiversified and imprudent Technology Fund in the Plan; (4) selecting an imprudent Small Cap Fund, which Boeing included in the Plan in order to further its corporate relationship with the fund manager, State Street, by allowing it to collect grossly excessive fees from the fund; and (5) imprudently holding high levels of low-yielding cash and allowing State Street to collect multiple layers of fees for “managing” the Boeing Company Stock Fund.  Spano v. Boeing, Case No. 06-743 (S.D.Ill.).

According to the firm’s founding partner, who is handling the case, Jerome Schlichter,“the ruling is a victory for 401(k) investors concerned about having a meaningful retirement plan.” Mr. Schlichter also stated, “The case will now proceed for all the employees and retirees plan participants who allegedly suffered harm from Boeing’s behavior.”

The Boeing case was one of a number of cases filed by Schlichter, Bogard & Denton, which launched the field of 401(k) fiduciary breach litigation for excessive fees. After years of litigation, Schlichter, Bogard, & Denton recently won a $50 million judgment from ABB and Fidelity in a case on behalf of ABB employees and retirees in ABB’s 401(k) plan, after the first full trial of a 401(k) excessive fee claim in the country. Tussey v. ABB, Inc., Case No. 06-4305 (W.D. Mo.) The firm has also settled cases on behalf of participants in the 401(k) plans of Cigna, Caterpillar, General Dynamics, Kraft Foods, and Bechtel totaling over $90 million. Nolte v. Cigna Corp., Case No. 07-2046 (C.D.Ill.); Martin v. Caterpillar, Inc., Case No. 07-1009 (C.D.Ill.); Will v. General Dynamics Corp., Case No. 06-698 (S.D.Ill.); Kanawi v. Bechtel Corp., Case No. 06-5566 (N.D.Ca.); George v. Kraft Foods Global, Inc., Case Nos. 07-1713 & 08-3799 (N.D.Ill.). The recent $35 million Cigna 401(k) plan settlement is the largest ever for 401(k) plan investors.

About Schlichter, Bogard & Denton, LLP

Schlichter, Bogard & Denton, LLP is a unique  national law firm that represents individuals, including 401(k) plan investors, whose plans suffer from excessive fees or imprudent investment options. Its attorneys are dedicated to helping employees and retirees secure the retirement benefits they deserve. Anyone who has questions about the fees and investments in a 401(k) or 403(b) plan can contact Schlichter, Bogard & Denton, LLP toll-free at (800) 873-5297.

 

 

The choice of a lawyer is an important decision and should not be based solely on advertisements. The case mentioned does not guarantee and/or predict outcomes in future cases.

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Schlichter, Bogard & Denton Announce Their Investigation of CDL Training Industry, including Driver’s Solution, C1 Truck Driver Training, LLC, and Pyramid Financial Solutions, LLC

Long-haul truck driving in not for everyone. In fact, turnover in the industry waivers around 100% and the New York Times reports that 40% of new drivers do not make it 90 days. However, many potential drivers are lured into the industry through company-paid programs requiring them to work 12-months or longer for a single carrier.

Driver’s Solutions advertises company-paid CDL training. However, future drivers are asked to sign loan agreements, which come due as soon as a driver leaves his or her assigned carrier unless a 12-month employment requirement is met. Driver’s Solutions and its affiliated companies, including Pyramid Financial Solutions, have sued hundreds of former students seeking payment of these loans.

The law firm Schlichter, Bogard & Denton, a nationally-recognized leader in financial abuse litigation, is currently investigating Driver’s Solutions and other truck driving company sponsored driving schools. If you signed on for company sponsored CDL training and are interested in a free consultation with a lawyer, you can contact our attorneys at 1-800-621-7151.

 

Legal Disclaimer: the choice of a lawyer is an important decision and should not be based solely on advertisements

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Plan Sponsor Council of America Releases 403(b) Plan Survey

The Plan Sponsor Council of America, an association of 1,200 companies who offer retirement plans, released its 2013 403(b) plan survey recently. The survey was sponsored by Principal Financial Group and reports on the 2012 plan-year experience of 573 not-for-profit organizations.

The survey underscores that many employers continue to struggle with their fiduciary duties to monitor fees and investment options within their 403(b) plans. For example, only 52.8 percent of survey respondents have an investment policy statement guiding their determinations of what options would be prudent for the plan and, surprisingly, another 24.1 percent of plans are not sure whether they even have an investment policy statement. 48.2 percent of plans monitor the investment options annually and only 69.5 percent evaluate plan-paid fees each year. Only 50.2 percent of plans had a CPA audit in 2012.

Highlights of the survey can be found online at http://www.psca.org/2013-403-b-plan-survey-highlights. A full copy of the survey can also be found on that site.

The law firm of Schlichter, Bogard & Denton has a proven track record as the leading law firm representing employees concerned about the fees and expenses — both hidden and disclosed — in their retirement plans. If you believe your plan includes funds with excessive fees or options that are inappropriate for your plan, and are interested in working with a nationally-recognized leader in retirement plans to improve your plan, please call or email Schlichter, Bogard & Denton today for a free consultation.

 

Legal Disclaimer: The choice of a lawyer is an important decision and should not be based solely on advertisements.