The recent complaint against One Brooklyn Health System Inc. hits like a cold gust in a dusty frontier town, sudden, sharp, and full of consequences. The plan is accused of mismanaging its 403(b) by offering expensive \u201cretail\u201d share classes of mutual funds when cheaper, institutional classes were freely available.<\/p>\n
From 2014 onward, participants were placed into a target-date fund whose expense ratio ranged between 0.86 % and 1.03 %. Meanwhile, a nearly identical institutional version was out there with fees as low as 0.05 %\u20130.67 %. Over the years, that discrepancy alone, especially in a plan that covers thousands of participants, allegedly cost retirees millions.<\/p>\n
What\u2019s jaw-dropping isn\u2019t just the mistake. It\u2019s the fact that the cheaper option was obvious. The institutional funds were disclosed, clearly available \u2014 but ignored. That\u2019s not oversight. That\u2019s negligence.<\/p>\n
Sponsors, take note. This isn\u2019t academic theory. It\u2019s a warning shot. If you run a 401(k), 403(b) or similar plan and you don\u2019t routinely \u2014 and ruthlessly \u2014 evaluate share-class costs, fund-lineup fees, and provider revenue-sharing agreements, you\u2019re sitting on a landmine waiting to blow.<\/p>\n
Prudence isn\u2019t optional. Under Employee Retirement Income Security Act (ERISA), fiduciaries are legally required to act in participants\u2019 best interests \u2014 which means choosing the lowest-cost equivalent when available, documenting the decision-making process, and reviewing that decision regularly.<\/p>\n
Let the One Brooklyn case be the kind of lesson no plan sponsor wants to learn the hard way.<\/p>\n
\u00b7 Review every fund and every share class on your menu.<\/p>\n
\u00b7 Compare institutional vs retail share classes \u2014 don\u2019t assume your recordkeeper automatically picked the cheapest.<\/p>\n
\u00b7 Document the rationale for any costlier investment or vendor, and be ready to justify it if challenged.<\/p>\n
\u00b7 Monitor revenue-sharing and conflicts of interest \u2014 because those are the hidden bullets in any 403(b) or 401(k) negotiation.<\/p>\n
If you treat your plan like a sloppy afterthought, participants will pay \u2014 often with their retirement income. If you treat it like what it truly is \u2014 a promise of security and dignity \u2014 you act with discipline, transparency, and respect.<\/p>\n
That\u2019s what being a fiduciary really means.<\/p>\n
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