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ERISA , Fiduciary

Excessive Fee Rebound

By Louis Harvey
February 28, 2023

The avalanche of law suits filed against ERISA plan fiduciaries over the last decade may finally be subsiding. The subject went all the way to the Supreme Court that left the matter unresolved.

 

The basis for most of these suits was that all plans of similar asset size should pay comparable fees. While this would seem to be ridiculous on its face to anyone involved in the retirement plan business, institutions have been paying millions of dollars in settlements and judgements.

 

The answer to these lawsuits has always been to illustrate the differences in plans and services that explain the different fees.

 

Differences in plans and services include:

 

  • Average participant balance
  • Proximity to retirement
  • Nature and quality of services
  • Volume of activity

Finally, in the case of Probst v. Eli Lilly, the courts are being asked to recognized the fallacy of the excessive fee assumption and to order the plaintiffs to reimburse the defendants for the cost of defense.

 

This should be the model for handling future excessive fee suits.

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About Author
Louis Harvey

Founder and leader of DALBAR, Lou Harvey is relentless in the search for the forces that are shaping the world of financial services today, tomorrow and for years hence. Using DALBAR' s research capabilities, Lou Harvey seeks insights from inside and outside the industry to understand and anticipate changes in customers’ needs and the ways products are distributed. Under his leadership, DALBAR is now recognized and respected in the financial services community for its credibility, independence and its contributions in raising the level of excellence in the industry. Fiercely committed to delivering value to customers, Lou Harvey has proved through DALBAR that the business principle of putting the customer first does work. In the spring of 2010 Lou Harvey was named President of the Fiduciary Standards Board, an organization dedicated to maintaining fiduciary standards and communicating the inherent value of fiduciary relationships to the public at large. Lou Harvey has held governance positions at a number of institutions including the National Association of Securities Dealers, Federal Reserve Bank, Bentley College and Plymouth Plantation. Lou Harvey was born in Puerto Barrios, Guatemala in 1942. He earned a bachelor’s degree in Physics from the University of the West Indies.

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