You have worked for decades, relying on contributions to a 401(k) plan for retirement. But like most of us, you are not aware that you may be losing money through illegal activities of your employer and/or plan administrator such as overcharging fees and inappropriate investment choices. As the saying goes “we are too busy working to make money.” Now do something about it! Evaluate your 401(k) plan. If the costs are over 1% or you are in high risk investments or over invested in one sector or company (especially your employer), chances are you have lost a significant portion of your money over time. For example, if costs are illegally excessive in the amount of $1,000 per year, you lose the compounded investment potential of that money, so over 20 years the loss may be in the tens of thousands.
Despite market ups and downs, however, Wall Street operators always seem to take their cut in good times and bad. This is no accident. Most 401(k) plan assets are invested in mutual funds. These funds charge investors an “expense ratio” (and sometimes a “sales load” or simply a “kickback”), which is not clearly disclosed and often are paid to your employer or administrator, not to you. Such funds “incur a host of “invisible” costs that are less transparent to investors.” See “Shedding Light on ‘Invisible’ Costs: Trading Costs and Mutual Fund Performance,” Financial Analysts Journal, (Edelen, Evans, Kadlek; Jan.-Feb. 2013).
The United States Department of Labor’s website warns employees and retirees that “fees and expenses paid by your plan may substantially reduce the growth in your account which will reduce your retirement income” and “that higher investment management fees do not necessarily mean better performance.” See “A Look At 401(k) Plan Fees.” In other words, most employees and retirees with 401(k) accounts do not know what happened to their hard-earned money and instead “trust” in their employer and plan administrator to do the “right thing” but whose business plan is to make more money off your money than you do!
We can help. Employers and other plan fiduciaries have a legal duty to act in YOUR best interest, not theirs. The law may allow you or a class of people to recover monetary damages and/or a court order reversing unlawful, undisclosed, and/or excessive 401(k) plan fees and costs from your current or former employer as well as certain 401(k) plan custodians, but only if you act quickly.
If you have questions about “mystery fees” or “inappropriate investments” in your 401(k), please call (415) 788-9000 to schedule a complementary consultation with Minami Tamaki LLP Consumer and Employment Rights Group Partner Brad Yamauchi or get in touch with us online.
This post was written by George Rafal, a paralegal in the CERG practice.