401(k) plans are meant to help employers attract and retain top talent. But an increasing number of companies are finding themselves in court because of these very plans.
Recently, there’s been a spike in employee lawsuits over excessive 401(k) fees. The scary part: If you can’t prove that your company did its best to negotiate lower fees from your 401(k) provider, courts are likely to rule against you.
A good example is the case of Edison International. Employees sued Edison, claiming the company did “substantial” harm to them by failing to negotiate lower 401(k) fees.
And a federal judge ruled in favor of Edison’s employees. According to the judge, Edison could have easily brokered a better deal on three of the mutual funds in its plan – but it didn’t even try.
Here’s one way to gauge if your company’s 401(k) fees could be considered excessive: Ask your provider to disclose all of the fees your 401(k) plan includes.
If your total fee level is greater than 2% of the total assets in the plan, then you’ll probably will want to see if you can negotiate lower fees.