Mutual Fund ERISA Lawsuits: DOL Gets Involved


. By Heidi Turner

In a quiet move that many people may not have noticed, the US Department of Labor recently weighed in on the 401(k) lawsuit filed against Deere & Co. The move could have wide-ranging implications for other companies and employees involved in mutual fund ERISA lawsuits.

The Deere lawsuit, which also named Fidelity Investments as a defendant, was filed by employees who are involved in the company's 401(k) plan. Plaintiffs alleged that they were charged unreasonable fees and expenses and they were not made aware of a revenue-sharing agreement between Deere and Fidelity. However, last year, a federal judge dismissed the lawsuit. On March 19, 2008, the Labor Department became involved by filing a brief requesting that the judge's ruling be reversed in appeals court.

In dismissing the lawsuit, the judge noted that companies do not have to inform employees of revenue-sharing agreement. However, the Labor Department is arguing that the duties of prudence and loyalty, as outlined in ERISA, could require employers to disclose such information.

The involvement of the Labor Department in this dispute could turn the tide for employees who are considering ERISA lawsuits against their employers. Many believed that the judge's dismissal of the Deere lawsuit showed that employees may not be successful with their ERISA lawsuits. However, the Labor Department is making it clear that plan participants' rights are a priority.

More employees are filing lawsuits against their employers alleging that the fiduciaries of their retirement plans are violating ERISA laws. In another decision that will have wide-ranging implications for ERISA lawsuits, the Supreme Court has ruled that individual participants in 401(k) plans can file a breach of fiduciary duty claim for alleged mismanagement of plans. This claim can be filed even if the breach only affects the value of an individual account. This means that not only can class action lawsuits be filed against fiduciaries, but now individual lawsuits can be filed as well.

Meanwhile, employees who work for financial institutions that offer their own mutual funds to employees are also considering a lawsuit against their employers alleging breach of fiduciary duty. The employees argue that their mutual funds have enough value that they could hire a money manager to negotiate lower fees. Therefore, they are paying too much in fees for their mutual fund accounts.

By allowing plan participants to pay excessive fees, plan fiduciaries are breaching their ERISA duties.

If you work for a financial firm and believe that your money is being improperly invested in the firm's mutual funds, contact a lawyer who can help determine if you are eligible to join a lawsuit.


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