Insights


403(b) Retirement Plan Fee Litigation: An Update

Fee litigation is a hot topic in the retirement plan space, and for good reason. Since 2016, more than 20 private universities and five healthcare systems have been sued over their retirement plan fees. While each lawsuit makes claims based on the particular facts and circumstances of the plan in question, there are some common themes that have emerged, including:

  • Using proprietary investment options (investments by the same firm that is recordkeeping the plan)
  • Paying excessive fees for recordkeeping services
  • Paying excessive revenue sharing payments
  • Utilizing more expensive share classes, when less expensive options were available
  • Using more than one recordkeeper
  • Offering too many investment options
  • Failing to conduct a recordkeeper search (i.e., request for proposal; RFP)
  • Using asset-based, rather than flat dollar fee allocation

We take a deeper dive into these common themes in our article, Dissecting Retirement Plan Lawsuit Issues. While not all claims are successful, plan sponsors should understand the issues being raised and keep track of the litigation, in order to manage risk. Below, we provide a status update on each of the 403(b) lawsuits.

Conclusion

403(b) plan sponsors, particularly in higher education, healthcare, and non-profit organizations, should continue to follow these lawsuits closely. The common issues in the lawsuits should be carefully considered by plan sponsors in the design of their own programs. Finally, as discussed in our Top of Mind piece on Lessons Learned from Litigators, plan sponsors, in conjunction with their retirement plan counsel, may wish to consider some changes to their operating procedures, in light of potential litigation.


Note: The information contained herein has been obtained from sources that are believed to be reliable. However, Cammack Retirement Group does not independently verify the accuracy of this information and makes no representation as to its accuracy or completeness. This material is intended or written to be used for informational purposes only. Cammack Retirement Group does not provide tax or legal advice. Plan sponsors should consult their attorney for legal matters. Information is as of the date indicated, based on the information available at that time.

Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

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