How small is too small to be sued as a 401K sponsor?

We frequently meet with plan sponsors who assume that because they don’t have a big plan with millions upon millions in assets, that they are somehow protected from being sued.  While there is very little in it for litigators and that is the common reasoning behind why a small plan won’t be sued, that is not an absolute guarantee.

This plan sponsor had a 1.1 million dollar plan with Nationwide, Nationwide 401k lawsuit .  Excessive fees are excessive whether your plan has a million dollars or 500 million.  Your participants are still trying to reach the same goal which is retirement with dignity.  The issue with small plans is there are fewer assets to spread fixed costs across.  This naturally makes the fees higher in most cases then larger plans which have economies of scale.  ERISA doesn’t state how fees must be invoiced but it does state that they should be reasonable.

Following a prudent process to determine how your plan fees and services stack up is key.  The word fiduciary is the buzz word of the past few years.  Just about every investment advisor worth a nickel serves as either an ERISA 3(21) or ERISA 3(38) fiduciary.  What is more important however is to gauge the experience of your advisor in the retirement plan space.  How much of their business is derived from retirement plans?  How many retirement plan clients do they have?  How were they trained in retirement plans?

These are the  key questions plan sponsors should be asking to determine their ability to assist your plan.  They should be able to provide customized benchmarking and relevant experience to help improve your plan and advise your committee.  #401k #fiduciary