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Congress and the U.S. Department of Labor are taking a hard look at so-called hidden fees in 401k retirement plans � but not as hard as the look taken by plaintiffs’ firms that are suing corporations for allegedly failing to protect their employee’s nest eggs. At least 12 cases have been brought by Jerome J. Schlichter of Schlichter Bogard & Denton in St. Louis, alleging that plan sponsors such as Boeing, International Paper and Caterpillar neither examined nor disclosed to plan participants fees that are split among service providers. The suits are brought under the Employee Retirement Income Security Act of 1974 (ERISA). “People are concerned about their retirements and that means a 401k instead of the traditional pension where they knew what they would receive without worrying about investment return,” Schlichter said. Plaintiffs call the fees “hidden” because the management fee that participants see is often a lump sum that includes the costs of separate services by different providers, making it difficult for participants to compare costs among similar plans. Defense attorneys believe plaintiffs will have a difficult time proving a company’s negligence over excessive 401k fees, even if the company could have paid plan administrators less. “It becomes a battle of experts,” said Nancy G. Ross of McDermott, Will & Emery in Chicago, who is defending Northrop in two class actions. “Just because one expert would have done it differently doesn’t prove the plan administrators did it wrong. Negligence is very hard to prove in the ERISA world.” The two class actions against Northrop allege that the company was negligent in its fiduciary responsibilities as sponsor of the 401k plan. Both suits are stayed pending appeal of a denial of class certification. Grabek v. Northrop, No. CV 06-06213-R and Heidecker v. Northrop, No. 2:07-cv-00153-R-JC (both C.D. Calif.). The Grabek case was brought by Schlichter. Attorneys at Squitieri and Fearon in New York, who represent Heidecker, declined to comment. The issue has prompted Congress to consider legislation mandating what plan sponsors and administrators must disclose about fees. The Department of Labor has issued rules that take effect in 2009 mandating detailed fee disclosures. No profiting alleged Ted Scallet of Groom Law Group in Washington, which is defending Boeing in a 401k fee class action brought by Schlichter, noted that none of the defendants is accused of profiting from the fees, and this reduces the argument to whether the plan sponsors acted reasonably when they selected 401k plan administrators. Spano v. Boeing Co., No. 06-743-JLF (S.D. Ill.). “Even if the fees are excessive, and I am not saying they are, the company sponsoring the plan is not gaining from the alleged violation,” Scallet said. “If there is a good record of the company doing due diligence, it is going to be a tough case for the plaintiff to win.” The U.S. Supreme Court ruled in February that individual participants in employer-sponsored 401k plans can sue their employers for fiduciary negligence under ERISA. LaRue v. DeWolff, Boberg & Associates, No. 06-856.

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