Your 401(k) Plan May be Set-up to Make You Lose Out

Saving for your future is what “they” tell you to do. So when your place of employment sets you up in a retirement savings plan, the assumption is that the 401(k) plan is there to benefit you. However, lately, individuals at even the most prestigious companies have been finding out that may not be the case. Insurance and investment companies as well as top notch universities are being accused of misleading their employees into investments as well as charging them excessive fees for their 401(k) and 403(b) plans.

Recently, class action lawsuits have accused New York Life and Franklin Templeton of pushing their own high-cost, poor-performing proprietary funds for their employees’ 401k plan instead of better, lower-cost ones. This self-dealing in employees plans violates the Employee Retirement Income Security Act of 1974. The lawsuits claim that while these proprietary funds generated hefty sums in fees for the companies, the plans themselves have lost millions when compared to more prudent options with significantly lower fees.

Similarly, class action lawsuits against M.I.T, N.Y.U, and Yale have also alleged that these institutions have been charging their employees excessive fees on their retirement savings. Public schools and nonprofit institutions like hospital and universities offer a 403(b) plan similar to a 401(k) in which the institutions allegedly charged excessive fees and failed to offer cheaper investments to replace more expensive, poor-performing ones. The lawsuits argue that if these organizations had just done their jobs and offered its employees lower cost sensible options, employees could have collectively saved tens of millions of dollars.

Despite numerous investment options available today, companies and institutions continue to invest their employees’ hard earned money in mutual funds managed by the organization themselves and its subsidiaries. Many knowingly profit off of their employees by charging excessive fees and self dealing into high cost, poorly performing investments. If you or anyone you know has questions or concerns about how their place of employment is structuring their 401(k) or 403(b) plan, have them call the attorneys at Fitapelli & Schaffer. They can reach us 212-300-0375 for a free phone consultation or visit our website www.fslawfirm.com.