A Mismanaged 401(k) Could Lead to Litigation

In the last year we have seen a number of cases of mismanaged 401(k) plans going to litigation. This article published by the National Association of Plan Advisors last Monday regarding Pioneer Natural Resources USA, Inc highlights the latest domino to fall. The article highlights the issue that caused the suit to be brought, mainly that Pioneer Natural Resources breached their fiduciary duties of prudence and loyalty to the plan and its participants. There were four main issues that were highlighted.

  1. They failed to offer institutional share classes for mutual funds- In simple English, they did not provide the cheapest share class that was available to them. They should have used institutional share classes (especially with their buying power), which would have dramatically reduced participant fees.
  2. They failed to make sure plan fees were reasonable.
  3. They failed at monitoring their existing funds and comparing them with what was available. They kept a poor performing money market account when a much more suitable stable value was available. Which, according to the suit, “resulted in losses to plan participants who maintained excessively high cash balances in money market funds rather than the stable value fund, which offered higher returns and the same risk level”.
  4. Plaintiffs charge that Pioneer defendants “had no annual review or other process in place to fulfill their continuing obligation to monitor and control Plan investment options, or, in the alternative, failed to follow their own processes.”


If you are a plan sponsor, you need to be aware of your duties to the plan participants. Pioneer Natural Resources allegedly breached their fiduciary duties. The key takeaway from this article is that these class action suits are starting to roll in and there will be more to come. If I was a plan sponsor, I would not just be concerned with the current status of the plan but what the future repercussions could be if the plan is out of compliance.

All plans, no matter the size, should be working with a 3(38) fiduciary advisor who understands what the 401(k) process entails. It’s extremely easy to become complacent and let things slip through the cracks. Let’s face it, the 401(k) is not of high importance when it comes to day to day matters for CFOs and HR professionals, but the consequences for not paying attention to the details could one day be dire.


Learn what a 3(38) advisor can do for you and your company’s retirement plan. Contact us now to schedule time to discuss your 401(k) and fiduciary duties: Manny@TwelvePointsWealth.com or 978-318-9500.