Mutual Fund ERISA: Some Companies Charging High Fees

New York, NYEmployees who work for financial companies that offer their own mutual funds may be able to file a lawsuit against their employer, alleging their money was improperly invested in their company's own mutual funds.

At issue is how much money was invested in the mutual funds and whether the investors could have negotiated with a money manager for lower fees than are charged by mutual funds. According to an expert, mutual funds should not have more than $30 million invested because of the high fees that are charged. Plans with more than $30 million have enough money to negotiate with money managers for lower fees. If companies have invested their employee's plan in their own mutual funds with more than $30 million in the plan, they are making money off fees that are higher than the plan should be paying.

Those who take on the responsibility of being an ERISA fiduciary have the responsibility to put the needs of the investor ahead of the needs of the company. Furthermore, they are obligated to monitor mutual funds continually to ensure that the mutual funds remain a suitable investment for plan participants. They must also ensure that the fees their retirement-savings plans are paying are not excessive.

Plaintiffs received good news last month, when the Supreme Court upheld the right of participants in 401(k) plans to sue individually if their accounts are mismanaged. This paves the way for individual lawsuits against plan administrators if those administrators have breached their fiduciary duties.

Many employees who invest in 401(k) and other retirement plans keep their investments for a long time. This means that lower fees can save plan participants a lot of money over the life of the plan. According to CNN Money, a 35-year-old employee who participates in a "high-cost plan" for 30 years would retire approximately 25% less than he would have made under a "low-cost plan." That works out to $244,000 less that he has to live off after he retires.

To protect yourself, you need to know how much money is in your employer's mutual fund plan and how much you are being charged for plan administration fees. If you work for an employer that offers its own mutual funds, a lawyer can help to determine if your plan has more money invested in mutual funds than is appropriate.