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JPMorgan and Schwab Are Sued in 401(K) Lawsuits

Participants in JPMorgan Chase & Co.’s (JPM) $21B 401(K) plan are suing the bank. The plaintiffs, who have filed a proposed class-action securities case, claim that the firm caused employees to pay excessive fees of millions of dollars.
According to the complaint, JPMorgan and a number of committee and board members were in breach of their fiduciary duties when they purportedly kept proprietary mutual funds that came from affiliate companies and the bank in the retirement plan for several years even though these options were almost identical to less expensive funds that were not only available but also were performing better.
The plaintiffs contend that during the class period at issue—from ’10-’15—about half of the investment choices in the retirement plan consisted of proprietary funds. They are accusing JPMorgan of keeping up business deals that were lucrative for the firm with BlackRock Institutional Trust Co. , which allowed BlackRock to inundate the 401(k) plan with its funds.

JPMorgan is accused of not properly reviewing investment choices to make sure that cost and performance were prudent, not offering collective trust funds or separate accounts as alternatives to mutual funds, and not adequately monitoring the fiduciaries that were tasked with managing the assets in the plan. The firm denies the allegations.
In another unrelated 401(k) case, Charles Schwab (SCHW) is also dealing with a class action lawsuit brought by participants in its retirement plan. According to the plaintiffs, the financial company stocked up its SchwabPlan Retirement Savings and Investment Plan with costly investment funds, including Schwab funds that didn’t perform well and services that paid fees to Charles Schwab. The investors believe that this hurt their retirement savings.
Their complaint notes that there were less costly alternatives to the Schwab funds that could have been offered to the employees. They are accusing the firm’s executives of breaching their fiduciary duties.
The plaintiffs specifically went after the financial company’s self-directed brokerage program, which lets investors choose their investment options. Their lawsuit called the program, with its “byzantine complexity and confusing scheduling fees” an “inadvisable” system for participants unless an investor was of the “most sophisticated” variety. Schwab responded to the complaint, arguing that the 401(K) lawsuit is meritless.
In the past year, a number of financial services companies, including Edward Jones, Franklin Templeton, Morgan Stanley (MS), and American Century Investments have been the subject of class action securities cases in which they were accused of self-dealing in their 401(K) plans.
The SSEK Partners Group is a securities fraud law firm.
JPMorgan sued for self-dealing in its 401(k) plan, InvestmentNews, January 26, 2017
Charles Schwab Hit With 401k Lawsuit, With A Twist, 401K Specialist, January 24, 2017

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