Heads-Up: Attorneys On The Prowl For 401(k) Plaintiffs

An attorney in St. Louis, Mo, Mr. Jerome Schlichter, is advertising to participants in certain employer 401(k) plans to hire him in a class action against their employers.  This particular attorney is well known in the 401(k) industry for suing and winning awards against a number of household name firms.

In addition most suits settle.  His recent settlements include a $62 million case involving Lockheed Martin, and a $57 million case against Boeing.  The list continues with Bechtel Corp., International Paper Co., Caterpillar Inc. General Dynamics Corp., Kraft Foods Global Inc., Novant Health Inc., Cigna Corp., Prudential Retirement Insurance and Annuity, and Ameriprise Financial.  This last two are ironic in that these are financial service companies who sell 401(k) plans.  The fact that their own employees sued them for the company plan may not bode well for their clients’ plan’s either.

The accusation in the suits are simple: employees at the company who were responsible for management of the plan (legally referred to as Plan Fiduciaries) violated their responsibility under the Employee Retirement Income Security Act (ERISA) by not making sure the fees that the plans were paying were reasonable – that’s the key word.  Plan Fiduciaries must identify all plans fees, understand who is being paid what, and then adopt and consistently document a process to determine that the fees are, in fact, reasonable.

Note to Alexandria Capital clients who are reading this: you are fulfilling this obligation annually.

Mr. Schlichter’s firm has won awards or obtained settlements of over $300 million for 401(k) participants.  His advertisements for new clients are to employees in Merck, Delta and, interestingly, The Evangelical Lutheran Church in America.  This last organization is a 403(b), not a 401(k), indicating that non-profits are next.

If you are thinking to yourself that you have nothing to fear because the lawsuits are against very large plans and your plan is very small by comparison, you may have somewhat of a point.  Fiduciaries at large plans have deep pocket and attract attorneys. But smaller plans are sued as well, and awards are won against the C-Suite officers and HR Directors. The number of lawsuits are accelerating, hitting a record in the fourth quarter of 2015.

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