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ERISA and Breach of Fiduciary Duty: What is 401(k) Mismanagement?

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ERISA and Breach of Fiduciary Duty: What is 401(k) Mismanagement?

25 Feb, 2020
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If you have a 401(k) plan, you’ve probably had questions at one time or another about how the funds are managed. Make no mistake, mismanagement of a 401(k) is a serious problem, and lawsuits related to this issue are on the rise. Understanding what qualifies as mismanagement is important, and the law governing these plans is complex.  The Law Offices of Michael Bartolic, LLC, is experienced in handling these types of cases, and here we draw on that experience to offer helpful information about 401(k) mismanagement and breach of fiduciary duty claims. Please keep in mind that every case is different, and the best way to receive detailed advice regarding your situation is by scheduling a consultation with a knowledgeable attorney.

As explained by the Internal Revenue Service (IRS), a 401(k) plan is a tax-qualified retirement account through which eligible employees can set aside a portion of their paychecks. With very limited exceptions, 401(k) plans are regulated by the employee Retirement Income Security Act (ERISA). 

Under ERISA regulations, 401(k) administrators owe fiduciary duties to plan participants and their beneficiaries. If they mismanage the plan in breach of their fiduciary responsibilities, they may be liable for resulting losses. Here, we explain the most important things that individuals need to know about 401(k) mismanagement.

ERISA: Understanding the Responsibilities of a 401(k) Fiduciary

Broadly defined, 401(k) mismanagement is the improper handling or use of investment funds by a plan administrator. That being said, an individual does not necessarily have a claim against a 401(k) administrator simply because they believe that the administrator is doing a bad job or because their retirement account has suffered losses. In order to hold a plan administrator responsible for damages, you must be able to prove that they violated their fiduciary duties under ERISA. Specifically, ERISA defines the responsibilities of a 401(k) fiduciary as follows: 

  • Act solely in the best participants and beneficiaries;
  • Perform with reasonable prudence and competence;
  • Comply with the foundational documents of the plan; and
  • Avoid charging unjustifiably fees and/or expenses.  

Do I Have a Retirement Plan Claim for 401(k) Mismanagement?

If you believe that you suffered financial damages as a result of a 401(k) administrator’s breach of their fiduciary duties, you should consult with an experienced retirement plan claims attorney. It is possible that you have a viable claim for negligent management of your 401(k) plan. As these are complicated cases, it is recommended that you seek professional support as early in the process as possible. Remember, neither 401(k) losses or 401(k) underperformance is sufficient to bring a successful mismanagement claim. Establishing liability requires proving that a plan administrator violating their responsibilities under ERISA. A lawyer will be able to review your case and explain your options. 

Speak to a Chicago ERISA Litigation Attorney Today

At The Law Offices of Michael Bartolic, LLC, our Chicago ERISA lawyers have the skills, knowledge, and experience needed to successfully handle breach of fiduciary duty litigation. If you’ve suffered financial losses as a result of 401(k) mismanagement, we are here to help. To arrange a free, strictly confidential consultation, please contact our law firm today. With an office in downtown Chicago, we serve clients throughout much of the Chicagoland area. 

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