What The Supreme Court's 401(k) Ruling Means To You

Read the full story here:
http://www.forbes.com/sites/nextavenue/2015/05/20/what-the-supreme-courts-401k-ruling-means-to-you/

Yesterday, the Supreme Court unanimously ruled in favor of employees in a lawsuit over their 401(k) plan’s fees (Tibble v. Edison International). You’ll want to know about it because the decision will be a wake-up call to employers, forcing them to do a better job so workers with 401(k)s will get a fair deal.

First, a little background. By law, employers must do what’s in the best interest of employees when structuring their retirement plans (the legal term for this is the “fiduciary duty”).In this case, employees at Edison International (a California utility company) sued the firm, arguing that it failed to meet the legal obligation because its 401(k) offered high-cost shares of funds, instead of lower-cost options. Employees had to invest in so-called retail funds (ones typically sold to the general public), whose expenses are higher than what are called institutional-class funds (ones typically sold to employers and pension funds).

(MORE: 7 Fatal Flaws in 401(k) Plans)

The 9th Circuit Court of Appeals dismissed the suit, saying the six-year statute of limitations had expired. But the Supreme Court just reversed the decision, essentially saying that employers had a continuing duty to reevaluate the investment options they provide. In his opinion, Justice Stephen Breyer said plan administrators must continue “to monitor trust investments and remove imprudent ones.”One effect of the ruling is that it’ll now be easier to sue an employer over an expensive 401(k) plan, turning up the legal pressure a notch.

Last edited by Common Sense (5/24/2015 7:45 am)