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Lawsuits target fee disclosure, monitoring

Posted On: Apr. 29, 2007 12:00 AM CST

A slew of lawsuits accusing major plan sponsors of inadequately monitoring and disclosing 401(k) plan fees and permitting excessive fees have been filed and more are expected, observers say.

A prominent law firm active in the area, Schlichter, Bogard & Denton in St. Louis, has already filed 13 lawsuits, said attorney Jerome Schlichter.

"They're all pending and we're in the process of pursuing them to trial," Mr. Schlichter said. He said he does not expect any regulatory or legislative action to have an impact on the litigation.

Robyn Credico, a senior consultant with Watson Wyatt Worldwide in Arlington, Va., said the good aspect of the litigation is that it is "making many plan sponsors look at the fees when they hadn't in the past, and identifying the reasonableness of the fees."

However, she added, "The lawsuits aren't necessarily focusing on all the right things, because they kind of ignore" the quality of the funds and of the record-keeping.

Gregory L. Ash, a benefits attorney with Spencer Fane Britt & Browne in Overland Park, Kan., said, "I think the potential impact (of the litigation) is greater for small to medium-sized employers and their plans than with the really large plans that have been targeted."

Large employers "have already got the kind of in-house and external expertise that they need to kind of be on top of these issues," Mr. Ash said. "There hasn't been as much attention" paid to these issues at the small and midsize firms and they may have potential exposure, he said.

Firms named as defendants in the Schlichter, Bogard lawsuits are: Norwalk, Conn.-based ABB Inc.; San Francisco-based Bechtel Corp.; Chicago-based Boeing Co.; Peoria, Ill.-based Caterpillar Inc.; Philadelphia-based CIGNA Corp.; Moline, Ill.-based Deere & Co.; Chicago-based Exelon Corp.; Falls Church, Va.-based General Dynamics Corp.; Memphis, Tenn.-based International Paper Co.; Northfield, Ill.-based Kraft Foods Inc.; Bethesda, Md.-based Lockheed Martin Corp.; Los Angeles-based Northrop Grumman Corp. and Hartford, Conn.-based United Technologies Corp.

Boston-based Fidelity Investments, a service provider, also was named as a defendant in the Deere suit, Mr. Schlichter said.