WSJ Headline: Participants Can Sue
Welcome to the new world of 401(k) liability:
- Participants can sue for individual losses
- Enable liability safe harbors
- The door is now open for individual suits, make sure your responsibilities demonstrate a documented decision process
Click here to read the WSJ article
Why is it a landmark decision? It is the first time an individual employee has been able to file suit for damages to their individual account, instead of the plan as a whole.
How does this affect you? The formerly esoteric liability that has been discussed with you by your benefits attorney for the past number of years is now tangible. Reasonable fees and effectiveness of participant investing are now open game for individual participants to file suit.
If you are a fiduciary for your company’s retirement plan, you can no longer rest assured that if the plan as a whole is in good order your fiduciary duty is in good shape. It is vital to review your participants’ ability to effectively manage their account. The outlook isn’t good, as numerous studies show that participants are not good investment managers, highlighted most recently by a study by Charles Schwab that demonstrated a 3% performance gap between participants that were getting help (investment advice, managed account, etc.) versus those that were not. Dalbar’s QAIB report has consistently shown similar results, though over longer periods of time. Learn more