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Breach of fiduciary duty 401(k) lawsuit moves forward

A lawsuit against Starwood Hotels is moving forward in a California federal court. In a ruling on May 1, a judge moved forward the claim that Starwood's record-keeping and administrative fees were so excessive as to breach the company's fiduciary duty to 401(k) plan participants.

The judge noted in his opinion that the plaintiffs in the case have not yet specifically alleged exactly how Starwood's fiduciary duty was breached. However, the facts that they have so far brought forward were sufficient in order for the case to continue.

The plaintiffs claimed that Starwood's failure to exclude the BlackRock LifePath 2050 Index Fund was also a breach of fiduciary duty, because the fund charged excessive fees. However, Fischer found this claim to fall outside the three-year statute of limitations, as plaintiffs had received adequate notice of the fees prior to the limitations period.

Three other breach of fiduciary duty complaints, for failing to offer a stable value fund, follow the investment instructions of participants or provide full disclosure around revenue sharing, are currently in abeyance. Starwood has also claimed these claims are outside the statute of limitations, but the plaintiffs have until June 1 to file an amended complaint.

Companies that manage investment portfolios for their employees, have a fiduciary responsibility to their plan participants. This means that a 401(k) program is expected to exercise a high level of care to benefit those who are invested in the program. Issues like excessive fees for 401(k) programs may not merely be an occasion to complain about corporate benefits. They may represent a real business litigation challenge. A lawyer can help fund managers understand how best to handle a dispute or a poorly-run 401(k) program to avoid costly and lengthy litigation.

Source: Plan Sponsor, " "Starwood Hotels 401(k) Excessive Fee Suit Moves Forward", Rebecca Moore, May 4, 2017

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