Here we go again. Another jumbo 401(k) plan, another lawsuit, another round of alleged fiduciary misconduct that reads like a broken record for those of us who\u2019ve been watching this space since before fee disclosure was a thing.<\/p>\n
This time, the target is the Stifel Financial Profit Sharing 401(k) Plan, with over $1.3 billion in assets\u2014a big, juicy plan that allegedly fell short of its fiduciary responsibilities in a very familiar way: not acting like a prudent fiduciary when it came to fees and fund selection. The plaintiffs\u2014five participants suing on behalf of themselves and similarly situated plan participants\u2014claim the fiduciaries blew it. And not in a minor way, but in a way that cost plan participants millions of dollars over several years.<\/p>\n
The central allegation? That Stifel\u2019s fiduciaries failed to leverage their buying power as a billion-dollar plan. That they didn\u2019t push for reasonable fees for recordkeeping and administrative (RKA) services. That they didn\u2019t do the due diligence that ERISA demands\u2014ongoing, objective review of the plan\u2019s investment options to ensure they were performing and prudent.<\/p>\n
If this sounds like d\u00e9j\u00e0 vu, that\u2019s because it is.<\/p>\n
Bargaining Power Means Nothing If You Don\u2019t Use It<\/p>\n
A $1.3 billion plan has negotiating clout, period. You should be able to command rock-bottom recordkeeping fees and premium service levels. But according to the suit, from 2019 through 2023, Stifel allegedly allowed unreasonable expenses to be charged to participants for RKA services. The fiduciaries, the suit claims, didn\u2019t try to cut costs or explore lower-cost options until it was too late.<\/p>\n
And that\u2019s a fundamental breakdown of fiduciary responsibility. You\u2019re not spending your own money when you\u2019re a fiduciary. You\u2019re spending the plan\u2019s money. The participants\u2019 money. That means you better act like you\u2019re walking around with someone else\u2019s checkbook\u2014because you are.<\/p>\n
Prudential, Empower, and the GIF That Keeps on Giving (to Them)<\/p>\n
Then there\u2019s the next layer: the investment menu. The lawsuit calls out the plan\u2019s relationship with Prudential (now Empower), which allegedly included a stable value fund\u2014a guaranteed income fund (GIF)\u2014that didn\u2019t live up to the \u201cbest available\u201d standard.<\/p>\n
Let\u2019s be honest, stable value is where a lot of plan sponsors and advisors stop asking questions. They figure: \u201cHey, it\u2019s stable, it\u2019s safe, what\u2019s to worry about?\u201d Well, plenty\u2014especially if you\u2019re not paying attention to crediting rates, the underlying investment structure, and whether your participants are getting fleeced on the spread.<\/p>\n
According to the complaint, the Empower GIF had low crediting rates, high embedded spreads (the difference between what Empower earned and what participants received), and a structure<\/p>\n
that left participants exposed to single-entity credit risk, illiquidity, and zero transparency. Translation: Empower allegedly got rich while participants got shortchanged.<\/p>\n
If true, that\u2019s not just imprudent, it\u2019s a disgrace. Selecting an investment based on ease or legacy relationships instead of participant outcomes is a surefire way to find yourself on the wrong end of an ERISA complaint. And here we are.<\/p>\n
This Isn\u2019t Just About One Plan\u2014It\u2019s a Pattern<\/p>\n
I\u2019m not here to say whether the allegations are true or not\u2014lawsuits are one side of the story, and that\u2019s always worth repeating. But if you\u2019ve followed the pattern of fiduciary litigation over the last decade, the playbook is very familiar. Big plan. Big fees. Big service providers. And fiduciaries who either didn\u2019t know better or didn\u2019t care to ask better questions.<\/p>\n
This isn\u2019t about bad guys in the shadows, it\u2019s about good intentions gone unchecked. It\u2019s about fiduciaries not taking their duties seriously, or being overwhelmed, under-advised, or worse, asleep at the wheel. You can\u2019t plead ignorance under ERISA. Fiduciary responsibility is an active duty, it\u2019s not \u201cset it and forget it.\u201d It\u2019s not \u201ctrust but don\u2019t verify.\u201d It\u2019s work. Real work. And too many plan sponsors and committees don\u2019t want to do it.<\/p>\n
What Plan Sponsors Should Take From This<\/p>\n
Whether you\u2019re running a $1.3 billion plan or a $3 million startup 401(k), the fundamentals don\u2019t change:<\/p>\n
\u00b7 Review fees regularly. Don\u2019t wait for a lawsuit to realize you\u2019re overpaying for basic services.<\/p>\n
\u00b7 Benchmark. Everything. Investments, recordkeeping, TPA services. You don\u2019t know if you\u2019re paying too much until you compare.<\/p>\n
\u00b7 Understand your funds. Especially stable value or GIC options. Just because the label says \u201cguaranteed\u201d doesn\u2019t mean it\u2019s good.<\/p>\n
\u00b7 Ask hard questions. If your providers can\u2019t explain their fees, structures, or services, find someone who can.<\/p>\n
Final Thought: Lawsuits Are Lessons\u2014If You\u2019re Willing to Learn<\/p>\n
This isn\u2019t the first time a mega-plan has been sued for allegedly falling asleep at the fiduciary switch, and it won\u2019t be the last. But every one of these cases is a warning. Whether or not Stifel\u2019s fiduciaries are ultimately found liable, the message is clear: fiduciary complacency costs money, reputations, and often your job.<\/p>\n
So, stay tuned. We\u2019ll see where this one goes. But if you\u2019re a fiduciary reading this, don\u2019t just stay tuned, get proactive.<\/p>\n
Because in the ERISA world, \u201cI didn\u2019t know\u201d has never been a valid defense.<\/p>\n
<\/span><\/p>","protected":false},"excerpt":{"rendered":" Here we go again. Another jumbo 401(k) plan, another lawsuit, another round of alleged fiduciary misconduct that reads like a broken record for those of us who\u2019ve been watching this space since before fee disclosure was a thing. This time, … Continue reading