Crucial court case may spur 401(k) lawsuits

Advisers need to keep an eye on a particular court case regarding 401(k) fees, because if the U.S. Court of Appeals rules in favor of participants, an outpouring of additional lawsuits could occur in short order, according to a lawyer who specializes in retirement issues. Marcia S. Wagner, president of The Wagner Law Group in Boston, spoke Monday at the Western Springs, Ill.-based Center for Due Diligence’s 2008 Advisor Conference in Scottsdale, Ariz. She cited the case Hecker v. Deere, in which employees sued Moline, Ill.-based Deere & Co. over fee disclosures of indirect costs such as revenue sharing. Courts had ruled that a company was not required to disclose revenue sharing. However, Ms. Wagner said that if the court, which is expected to make a decision shortly, rules in favor of participants, this will affect how advisers work with all 401(k) plans. Additionally, this will likely mean a slew of suits against employers and advisers. Ms. Wagner said the number of lawsuits filed could be similar to what happened when hundreds of suits were filed against the asbestos industry. “Almost all 401(k) lawsuits are on hold until this one comes out,” she said. “If they rule for the plaintiff, then 401(k) plans may become the next asbestos cases, and you’ll see tons of new lawsuits.”