At McBride PC, we focus on performance of a pension or 401(k) plan, rather than fees. We are far more concerned that a plan offers its participants what was promised; that characteristics and risks are understood; and that funds are available when needed on retirement.
In recent years, 401(k) litigation has primarily focused on fees charged by plan administrators. This has been an important development for ERISA, but has rarely produced significant benefits to account values.
Fifteen years of 401(k) litigation has pushed ERISA plans away from mutual funds and toward “collective investment trusts” as a way to lower administrative fees, since collective investment trusts are largely unregulated (with lower administrative fees), while mutual funds are highly regulated (with marginally higher administrative fees).
But the consequence has been to drive pension money into dark investing corners of collective investment trusts that are not understood by an average plan participant–and involve a far greater degree of risk than a mutual fund. So, fifteen years of 401(k) litigation has lowered plan fees–but has increased plan risk.
But collective investment trusts have lower reporting requirements under federal law. The net result is that a pension plan may be loaded with risky alternative investments that generate high profits for investment managers–without your knowledge.
So now, plan sponsors often hide risky alternative investments inside a collective investment trust. These alternative investments generate far more profit for investment managers and trustees than do mutual funds–but put pension account money had a much higher risk, without disclosing that risk to participants.
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Our primary work is to protect pension and benefit rights for employees — to focus on plan performance that protects pension funds for the benefit of plan participants and beneficiaries.
