Mutual of America, an insurance company that also provides services in the small-plan marketplace, has found itself in the crosshairs of an ERISA lawsuit alleging a breach of its duties of loyalty and prudence to plan participants. The plaintiffs charge that they were subject to excessive fees as a result of the company’s adoption of its own proprietary closed-architecture recordkeeping platform. The system, they allege, caused participants to pay annual administrative fees roughly 10 times what they would have if the plan had researched and engaged a third-party recordkeeper to perform comparable (or even better) services.
While the complaint held that the use of a proprietary recordkeeping platform was not imprudent in and of itself, it alleged that undue limits were placed on the plan’s investment lineup and led to unreasonable administrative fees for its proprietary funds. Of the 50 investments in Mutual of America’s plan menu, almost 30 were proprietary. According to court records, the plan had around 1,800 to 2,000 participants and approximately $274 million to $436 million in total assets.
Mutual of America is also accused of having “failed to use a prudent and loyal process for selecting, monitoring and removing from the investment lineup expensive, proprietary Mutual of America funds that underperformed their benchmarks.” Moreover, the complaint states the company gave “an improper and unjustified preference” to these funds, favoring them over better, lower cost options.
As this case illustrates, excessive fee lawsuits can even impact companies within the retirement plan industry itself. And this means advisors need to be on top of their fee game at all times. Retirement plan advisors can offer clients a high level of service by providing an annual benchmark to help maintain reasonable fees in between the customary three-to-five year live-bid benchmark interval.
PlanFees offers 401(k) advisors more choice when it comes to benchmarking tools. Prism Total Fees Benchmarking can deliver a rapid fee checkup of investment, recordkeeping, administrative and advisory fees in just two minutes. Prism365 Advisor Fee & Services Benchmarking analyzes advisor fees for 15 core services across five key performance areas. And RFP Express provides proposals from top retirement plan providers within 24 hours — and some instantly — when you need more detailed information, and you need it fast.
You can rely on PlanFees’ accurate and verified data to deliver revealing insights for your clients and enable more frequent benchmarking, which can be to a plan’s benefit in an increasingly litigious climate. With excessive fee cases making headlines month after month, you need as many arrows in your quiver as possible to provide a higher degree of fiduciary oversight.
Talk to us if you’re concerned about the increasing risks associated with excessive 401(k) fees. Benchmark better with PlanFees.
Source: https://www.planadviser.com/insurer-target-erisa-lawsuit/
