Controversial 401(k) Fee Lawsuit Gets New Life

Almost a year after a court dismissed a complaint against Wal-Mart over its 401(k) plan fees, an appeals court has brought the case back into play—an indication that judges may be siding with individual investors over excessive mutual fund fees in retirement plans.

On November 25, the 8th U.S. Circuit Court of Appeals reversed an October 2008 decision by a U.S. District Court for the Western District of Missouri to dismiss the complaint filed in Braden v. Wal-Mart Stores Inc. The plaintiffs alleged that fees associated with the plans’ 10 mutual funds resulted in losses of tens of millions of dollars in retirement savings.

The complaint also alleges that Wal-Mart’s fiduciaries didn’t meet their duty by choosing retail funds for the plan funds instead of their less expensive institutional counterparts.

The court’s decision to send this case back to the lower court is significant, particularly given the size of Wal-Mart’s 401(k) plan, which has about $10 billion in assets, experts said. The court’s decision also gives hope to plaintiffs in other 401(k) fee cases, said Greg Ash, head of the ERISA litigation group at Spencer Fane Britt & Browne.

The Missouri circuit court’s decision comes a couple of weeks after Caterpillar Inc. announced it had reached a tentative $16.5 million settlement in a case over the fees it charged its 401(k) plan participants.

“Ultimately the message is that it’s important to pay attention to fees not to the exclusion of all other factors,” Ash said. “This demonstrates that fees are a very big issue.”

Filed by Jessica Toonkel Marquez of InvestmentNews, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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