This week has brought news of two massive 401(k) plan fee lawsuit settlements. The first was Nationwide agreeing to a $140 million settlement in a revenue fee sharing case. The second was Lockheed agreeing to a massive $1.3 Billion settlement for offering funds in the plan with excessive fees.
These two suits – though related are quite different in nature. In the Nationwide it was the service provider being sued. I think this lawsuit represents the tail end of the bundled service provider lawsuits. Already we have seen many of these suits brought and settled. The Lockheed suit is different in that is goes directly after the plan sponsor (Lockheed) and its practices. There have been a raft of 401(k) fee lawsuits, (just peruse this list articles and stories) many of them have focused on the big bundled service providers.
Were bundled service providers the low hanging fruit? In looking through hundreds of Form 5500’s I think there are still many, many plans paying too much for what they get from their bundled service provider. Most of these plans are too small to attract the attention of Jerome Schlichter – but I hope the news of these huge settlements will cause plan sponsors to consider exactly what they are paying for, how they are paying for it and what they get for their (or most often, the participants’) money.