The perennial political piñata that is Wells Fargo finds itself in the litigation line of fire once again, as a proposed class action suit was filed against the use of certain investments in its employee 401(k) plan.
“The lawsuit, filed Nov. 17 in a Minnesota federal court, accuses the banking giant of filling its 401(k) plan with expensive and poorly performing investment funds that earned fees for Wells Fargo,” according to Bloomberg BNA. “The company is also accused of failing to use its ‘enormous size’ as the third-largest 401(k) plan in the country—with nearly $40 billion in assets at one point—to negotiate for lower fees.”
The news service notes that the claims echo “those in a 2016 lawsuit that Wells Fargo defeated when a federal judge determined that the company couldn’t be liable under the Employee Retirement Income Security Act for “failing to choose the cheapest fund” for its 401(k) plan.
“This newer lawsuit against Wells Fargo also attacks the company’s decision to keep a money market fund in its 401(k) plan when a “cheaper and better performing stable value fund” was already in the plan.”
High fees, proprietary funds and overall fiduciary failure are of course a major focus if industry, legal and regulatory attention, especially in light of the ongoing drama and “will it, won’t it” questions surrounding the DOL’s implementation of it’s Conflict of Interest Rule (known colloquially as the fiduciary rule). Gucci and DST are just two recent cases to be filed alleging a fiduciary breach.
Additionally, a number of the nation’s most well-known and respected colleges and universities have been the subject of legal action over the 403b plans offered to their employees. University of Pennsylvania, Duke University, John Hopkins, Vanderbilt, Massachusetts Institute of Technology, New York University, Yale and Columbia, were all subjects of such suits.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.