Recent class-action surge ups the ante for 401(k) advice

Retirement plan advisers should make sure they have their bases covered to prevent litigation for fiduciary breaches

All eyes may be on the Labor Department’s fiduciary rule, but don’t forget the courts.

Eleven major class-action lawsuits were filed in federal courts around the country against 401(k) sponsors or providers of retirement products in the fourth quarter of 2015. All involve alleged fiduciary breach claims of, among other things, excessive fees benefiting service providers in violation of the Employee Retirement Income and Security Act of 1974 (ERISA).

Most of the defendants are industry brand names, including Allianz, BB&T, Deutsche Bank, Fidelity, Insperity, New York Life, Prudential, Putnam and TIAA-CREF. All of the suits seek class-action status and millions of dollars in damages.

While Congress, the DOL and the Securities and Exchange Commission define the boundaries for fiduciary advice and shape its contours, it’s the court system where the rubber meets the road and factual issues are sorted out. The courts play a critical role in articulating what the fiduciary standard means in practical terms. In a crucial recent case in point, the U.S. Supreme Court affirmed an ongoing fiduciary duty to monitor investment options in Tibble v. Edison.

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