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California Retirement Plans Breach of Fiduciary Duty Investigation

Paper with Heading "401(k) Statement"

Do you live in California and work for a company with more than 500 employees? Do you participate in its 401(k) or other retirement plan? If so, you might want to look at how that retirement plan is run.

Retirement plans for such large companies are governed by the Employee Retirement Income Security Act (ERISA), and they must meet certain requirements. However, not all of them do—and that may eventually affect how much money you have to retire on.

The people who control the plan or make decisions about it are fiduciaries. They have a duty to manage the plan solely in the interest of the participants. They are not supposed to consider the company’s interests or their personal profits. If they breach that fiduciary duty, you may be able to sue to recover money lost to your account.

Fiduciaries have a number of responsibilities. They choose a range of investment options, covering a variety of risk levels and economic sectors. They should choose investments that do not have high sales costs or yearly fees, and they should replace options that consistently underperform.

Lawsuits from recent years show a sampling of ways fiduciaries might breach their duties.

General Electric was sued because most of its investment options were GE-related mutual funds. The complaint claimed that the plan accounted for 70-90% of the assets in the funds that they consistently underperformed. Having these funds in the retirement plan benefitted the GE-related companies who offered them but not the plan participants.

Frontier Communications was accused of overconcentrating the investments it offered. When Frontier acquired a Verizon subsidiary, it obtained about $150 million in Verizon stock. Later, it acquired even more and offered a Verizon common stock fund as an investment option. The complaint claimed that the company should have sold off more of the stock. It also had a large amount of AT&T stock, so that around 15% of the plan’s assets were in the telecommunications sector. The complaint claimed that the plan investments were not diverse enough.

McBride and Son was sued when it sold off a large amount of company stock from its retirement plan at what the complaint alleges was less than its true value. The sales benefitted company insiders, the complaint claims, allowing them to take control of a portion of the company. 

Fidelity was accused in a lawsuit of taking kickbacks from the mutual funds in its retirement plan. In order to make enough money to pay the kickbacks, the complaint alleged, the funds had to charge higher fees or show lower profits, which cut into the participants’ gains.

Does your company’s retirement plan have similar problems? 

If you live in California, work for a company with more than 500 employees, participate in its retirement plan, and believe the plan’s fiduciaries are not fulfilling their duties, we’d like to hear from you. Fill out the form on this page and let us know of any negligence, poor choices, or self-interest in the handling of the plan.

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