RPA | Fiduciaries for a Small 401(k) Plan Sued for Breaches

Sheldon M. Geller, JD, CPA

Claims alleging breaches of fiduciary duties have historically targeted large 401(k) plans with significant levels of assets. Recently, however, a claim was filed against a small 401(k) plan with $9.2 million in assets and 114 active participants, alleging that plan fiduciaries breached their duties by permitting excessive fees to be charged for plan investments and recordkeeping services (Damberg et al v. LaMettry's Collision, Inc., filed May 18, 2016). The complaint names as defendants the president and chief financial officer of an auto body shop, stating that they did not engage in a prudent process to evaluate service providers and assess reasonableness of fees. This failure, the complaint further states, resulted in plan participants overpaying hundreds of thousands of dollars. Although the plaintiffs have recently withdrawn this action, the employer was still required to address the claim and defend plan-related decisions, and the plan's detailed cost structure was made known to potential litigants.