Seven major corporations have been sued for allegedly allowing mutual funds firms to charge millions of dollars in excessive 401(k) fees through hidden revenue-sharing agreements, the Los Angeles Times reports.
The fund companies, unnamed, allegedly charged higher fees and shared the revenue-sharing portion with 401(k) administrators that determined which funds should be included in the plan, without letting plan participants know about the deals.
Attorney Jerome Schlichter of Schlichter Bogard & Denton filed the civil lawsuits in federal courts in California, Connecticut, Illinois and Missouri.
“At best, these fee structures are complicated and confusing when disclosed to plan participants,” Schlichter said. “At worst, they are excessive, undisclosed and illegal.”
Combined, the companies named in the suits have more than 400,000 participants in their 401(k) plans. They are Bechtel Group, Caterpillar, Exelon, General Dynamics, International Paper, Lockheed Martin and United Technologies.
But spokespeople for Bechtel, Lockheed and United Technologies defended their plans. Representatives at Exelon and General Dynamics declined comment, and contacts at Caterpillar and International Paper did not return calls.
Six of the lawsuits also charge that the employers have rolled up multiple 401(k) plans that they sponsor into master trusts, and in so doing, have added another administrative layer to obscure fees.
While lawsuits against employers over 401(k) fees are rare, employee benefits experts expect they will increase as more companies do away with pensions.