In Tibble vs Edison International, a long-running case that ended up at the supreme court, The Human Resources VP was found guilty. The case involved improper selection of funds – by using retail funds instead of the available institutional funds, which costs the plaintiffs $7,000,000. Additionally, they used the retail fees to offset management fees charged by their record keeper.
It is important to understand how these seemingly small decisions can have enormous repercussions. Recent fee-oriented suits by employees at Nordstrom, BlueCross Blue Shield, Lockheed Martin, and a number of educational facilities show that these suits are not going away. Further, audits are increasing, as the Department of Labor has found that 70% of plans are not in full compliance.
According to a 2012 article in Financial Advisor Magazine, “An estimated 70% of retirement plans audited by the Department of Labor (DOL) in 2009 and 2010 were fined, received penalties or had to make reimbursements for errors–all of which ending up costing plan fiduciaries about $450,000 per plan, according to the department.”