The U.S. Supreme Court has declined to hear an appeal that would have revived a lawsuit against a major 401(k) insurance record keeper alleging excessive fees in annuity contracts. The Court refused to hear the appeal without comment.
An adverse ruling in the case would have cast a pall over 401(k) plans and reduce the number of plans available to tens of millions of employees.
A perfect storm may be brewing for small market insurance record keepers. With increased fee disclosure regulations, heightened awareness by plan sponsors about potentially high fees thanks to increased media coverage, deflationary — and sometimes predatory — pricing, and ubiquitous RFP/RFI tools that allow even the most nearsighted advisor to market-test fees, average small market 401(k) plan fees would be dramatically reduced if they went to market.
However, this does not mean that the fees are unreasonable or that insurance companies have done anything to expose themselves to liability — as was alleged in the case the Court declined to hear. Read more here.
