Lois Katziff contacted Pension Action Center Director Ellen Bruce, after being referred to the Center by the Massachusetts Secretary of State's office. Ms. Katziff thought it unfair that her 401(k) plan charged her a fee when the plan changed service providers. She was right!
Lois had worked for Beverly Enterprises, Inc. since 1989 and contributed to the most conservative fund offered in the Beverly Enterprises 401(k) plan - The Stable Value Fund. The fund was designed to preserve principal. In the spring of 2006 the Senior Vice President for Human Resources notified employees that Beverly Enterprises was switching its 401(k) service provider from Diversified Investment Advisors to Fidelity Investments.
During the summer Beverly Enterprises began the transfer process, which included a guide for plan participants. The guide was the first notice that investors received that The Stable Value Fund would be liquidated and that they would be charged a "Market Value Adjustment." Plan fiduciaries provided no information in the guide about what they did to evaluate whether the alleged benefits of the change to Fidelity could be achieved with Diversified Investors; how the move would result in reduced expenses; or what they had done to minimize the cost to investors of the "Market Value Adjustment."
After investigating Lois's initial claim, Ellen Bruce connected Lois to Ron Kravitz of Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor LLP, who filed the plan participants' complaint in U. S. District Court in Massachusetts. Lois and her co-workers, who became lead plaintiffs, believed that the fiduciaries responsible for the Beverly Enterprises 401(k) plan did not explore ways to mitigate the losses and thus breached their fiduciary responsibilities.
The class action began as a claim for $2.3 million and ultimately settled for $6.25 million. The settlement also required that the fiduciaries for the plan obtain training to ensure that they can fulfill their fiduciary responsibilities.
Often employees don't know the fees they are being charged. To correct this problem, the Department of Labor has issued rules that require service providers to disclose fees to plan sponsors and that plan sponsors provide notices to plan participants of the fees they will be charged. The first notices to participants will be issued starting May 31, 2012.
"Understanding Retirement Plan Fees and Expenses," published by the Department of Labor's Employee Benefits Security Administration, comprehensively discusses plan fees for plan participants