Lawsuits against 401(k) plans going bad are on the rise, and they aren't just filed against big retirement plans any more. These lawsuits are centered on the bad investments, high costs and "revenue sharing," according to a report on Bloomberg.
Law firm Nichols Kaster calls the 401(k) "one of the most expensive plans in America" in its proposed class action suit against Fujitsu Technology and Business of America Inc. over a $1.3 billion retirement plan.
One Of The Newest Cases
In a lawsuit filed last week in a San Jose federal court, the attorneys alleged a large amount of fiduciary breaches connected to "excessive fees, record keeping, and the components of the company's target-date funds."
Bloomberg said the law firm compared Fujitsu plan fees with roughly 650 other plans of comparable asset size. "Among 401(k)'s with that much money, the average plan has annual costs that amount to 0.33 percent of assets, according to the complaint; it estimates that Fujitsu's costs were 0.88 and 0.90 percent for 2013 and 2014," Bloomberg read.
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The law firm said this "would have led to at least $7 million in excess fees that could have been socked away in employee nest eggs, the complaint stated."
Furthermore, the report said, "Fujitsu America, which provides technology and business support to affiliated companies, has yet to answer the complaint or make an appearance in the case, and a company spokesman declined to comment."
'Just The Beginning'
Bloomberg, citing Wagner Law Group, said lawsuits like this one "are just the beginning" and come on the back of high-profile suits filed and won by Jerome Schlichter, of the St. Louis law firm Schlichter Bogard & Denton.
"It started with Schlichter doing cases against very large corporations in America," Wagner told Bloomberg. "And now it's going to start to be a free-for-all."
"With more attorneys seeing an opportunity, smaller plans are starting to feel the heat. After launching four 401(k) lawsuits alleging breach of fiduciary duty late last year, Minneapolis-based Nichols Kaster has filed four more in 2016, most recently against Fujitsu and American Century's $600 million plan," Bloomberg said.
Meanwhile, the report said 2016 has already seen a 401(k) plan be hit with a lawsuit, despite holding less than $10 million in assets, "a development that garnered the attention of many players in the small plan universe."
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