401k Lawsuits: Ameriprise Sued By Own Employees
You have a company that has been in business since 1894, and they are being sued by their own employees. Ameriprise Financial has a 401k lawsuit against them because employees claim they lost about $20 million since they were invested in funds managed by Ameriprise subsidiaries that had excessive fees in addition to poor performance.
The suit, which was filed on September 28, is seeking class action certification. The potential class includes more than 10,000 members, the lawsuit claims. The named defendants include Ameriprise and the firm’s 401k investment committee as well as the compensation and benefits committee of the board of directors. The workers are claiming that Ameriprise and its committees, as the plan overseers, violated their fiduciary duty to the retirement plan. The plaintiffs are also accusing the company of fraud, unjust enrichment, and prohibited transactions. The suit focuses on hundred of million in 401k assets that were invested in mutual funds run by RiverSource Investments, which then became Columbia Management Advisers, an Ameriprise subsidiary. Between 2005 and March 2007, an average of $500 million in plan assets went annually into RiverSource and Ameriprise Trust Co., the trustee and record keeper of the plan. The 401k plan in question was launched in 2005, and the suit seeks to represent all employees affected by the plan since that time. The basis for the suit is that the mutual funds in question have fees that are “significantly higher than the median fees for comparable funds”. Also, various funds in the plan had poor or nonexistent performance history. The plaintiffs stated, “Defendants chose more expensive funds with inferior performance histories in order to generate revenue for RiverSource and Ameriprise Trust Co., and ultimately to benefit Ameriprise.”
This is a huge wake-up call for plan sponsors, business owners and fiduciaries who continue to ignore upcoming DOL regulations that will finally disclose excessive, hidden fees contained in 401k plans that are shrinking retirement plan balances unbeknownst to hard working plan participants. The potential for a 401k lawsuit against you and your company for breach of fiduciary responsibilities is real. As more and more employees and plan participants are informed about the fees their 401k accounts are being charged, rest assured there will be more lawsuits. It only takes one person to file a class action suit. The plaintiffs are seeking restitution, expelling of all revenues and the award of actual money losses. Such a hit could be devastating to a company’s business. Look at it this way, even a company that manages $650 billion in assets and is a top 10 provider of mutual funds, insurance, annuities, etc, got caught with their hand in the till.
Even if this 401k lawsuit is found to have no merit, the time, money, and effort that will be spent should be enough to get you to at least begin examining your existing plan and making any necessary changes to provide the best possible plan for your employees. At a minimum, shop your plan around, take part in a competitive bidding process or at least have an independent, unbiased analysis of the fees in your 401k. It’s important to keep in mind that even a fiduciary’s lack of action could be deemed a breach of their responsibilities. If plan participants have lost a sizable portion of their account balances to fees, and as a plan sponsor, trustee or business owner, you’ve not explored other options, you could be at risk.
About Charles Massimo
Recognized as industry expert and guest speaker at national industry conferences, Charles Massimo is a published author and media subject expert on topics ranging from wealth/asset management to investment and financial planning for high net worth families.