Supreme Court Passes Law that Allows Employers to be Sued for High Fees in Retirement Plans
Following a lawsuit against public utility holding company, Edison International, the Supreme Court has issued a notice to all employers that if their retirement plans offer mutual funds with unnecessarily high fees, they can be sued. Several Edison International employees complained that the mutual funds offered with their retirement plans were high priced retail-class, not lower priced institutional-class. Despite federal retirement law that states retirement funds should be offered and conducted exclusively for employee benefit, the lawsuit was dismissed the first time around due to a statute of limitations. However, it was brought back to court under trust law, with the court saying that Edison’s duty was to monitor funds it offered, and to make sure they were beneficial to its employees. “Under trust law, a trustee has a continuing duty to monitor trust investments and remove imprudent ones,” said Justice Stephen G. Breyer. “This continuing duty exists separate and apart from the trustee’s duty to exercise prudence in selecting investments at the outset.” The statute of limitation does not apply in this case, because the company had a duty to protect the assets of its employees, and had failed to do anything to solve the problem.
City National Corp. has also recently come under fire for creating a payment scheme that drained retirement plan assets by overcharging employees for administration costs, and failing to reimburse them after the practice had been stopped. Over 11 years, City National made a $4 million profit from administrative fees for retirement funds. By law, companies that offer benefit programs to employees are not allowed to make a profit off them, and any hours worked for the retirement benefit plans should be carefully documented. City National did not document any hours employees spent overseeing the plans, and therefore allowed itself to collect substantial overhead.
This decision by the Supreme Court is predicted to usher in a number of class action lawsuits against companies who offer funds with high fees. If you or a loved one are suffering due to unnecessarily high fees with mutual funds on your retirement plans, the lawyers at Hodes Milman Liebeck are here to help you. Contact us today online at hmlm.com or call 866-730-1976 for a complimentary case evaluation.