BenefitsPro (10/1/13) reports that International Paper has agreed to settle an ERISA lawsuit filed in 2006 for $30 million. Plaintiffs in the lawsuit, which was brought on behalf of current and former retirement plan participants, alleged they paid $58 million in recordkeeping and administrative fees. They further alleged that they were forced to purchase company stock to receive a matching contribution, and that they were not allowed to withdraw money from the Company Stock Fund until they were age 55. From that point on, they were allegedly only able to withdraw 20 percent per year.
In court documents, plaintiffs allege that “the fees and expenses paid by the Plans, and thus borne by the Plans’ participants, were and are unreasonable and excessive; not incurred solely for the benefit of the Plans and their participants; and undisclosed to participants.” Furthermore, they claim that fee payments are so complex, “it becomes difficult, and sometimes impossible, for plan participants to discern the amount of Hard Dollar payments [direct disbursements from the plan to service providers] the plan is making to plan service providers; to whom those payments are made; and the services provided in exchange for those payments.”
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In some cases, fiduciaries have also been accused of allowing high, hidden fees to be charged to a plan. These can be dangerous to a plan because they can hide potential conflicts of interest, such as fee sharing arrangements. Failure to provide accurate information to plan participants about all fees charged to an ERISA plan could be a breach of fiduciary duty, the basis for many an ERISA lawsuit.
Plan fiduciaries have a duty to act in the best interests of plan participants, not in the best interests of the company.
The International Paper lawsuit was case number 3:06-cv-00703-DRH-CJP, filed in the US District Court, Southern District of Illinois.