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Some good news a big victory for folks saving for retirement and 401 -- today.
Prudential and -- have just settled a class action lawsuit over excessive -- The companies will pay 35 million dollars in compensation and that may not seem like a lot of money.
And that it could open the floodgates for similar suits it's also the latest win for workers in this series of lawsuits against the managers of 401K plans.
Joining us now chat parks is CEO of the on line 401K.
You know -- I've read about this case and it's astonishing to me what these companies were doing describe in detail the problems they had in managing these -- OK okay so these three ladies participants of this particular plan probably started reading -- statements -- felt like something wasn't right.
In it for example they said they -- they thought their fees were excessive and unreasonable that's point number one number two.
Was -- they are being limited to which investments they can choose and that they were all sort of proprietary.
Investments of Cigna than them that -- company that -- right -- what is proprietary meaning.
That as they worked funds that were being run and was managed by their own employer so propriety.
That hard I mean it this used to happen all the time he's become -- do this anymore he can't.
Voiced your own investments onto the employees -- its right getting we we remember Enron and company stock that was a big watershed and change there.
So with this these really set I think something's wrong and so they were able to find counsel who agreed with -- now the sad part is it's been six years in the process to get to this point.
And easing even today 35 million dollars is a drop in the bucket yeah -- -- Indian looking at this I did the numbers you know it's the plane itself was a little over two billion dollars five or six years ago so we have to -- larger now 35 million dollars over two billion as -- -- one point 5% so that's the percentage he we're talking about.
And this action lawsuit meaning what this would be you know a year's worth of fees for yet so that's -- that's about one year's worth of fees that didn't.
Claimants in this are now in the settlement was -- are active.
Two may of 1999 so that's coming up on fourteen years of fees that they've been -- like this so of course they're gonna give up one years' worth and and.
Called a day at the very latest.
I guess what I want people to take away from here you that you assume.
All the time that your 401K is being well managed and he and it's fair and that you know -- you're not being sold a bill of goods but that's always the case.
Now unfortunately it's not and you know right I'm gonna go out on a limb here on the black sheep of the industry I don't have many friends in the industry but.
You know charging a percentage of assets like the model does like all in all the companies -- -- do.
I don't think is the right model anymore.
Maybe there was a time for that.
But the the bottom -- examples let's assume that you have been participating in your plan and you've been able to sock away -- 100000 dollars let's sailing younger work and I've just started -- put away 101000 dollars.
The -- this for a fee structure works is you're going to be paying ten times the fees than I am.
And I don't think that your receiving ten times the benefit or ten times the service do you.
That's an interesting point I think there's a lot that's unfair about the system and the way it works and unfortunately so much of it is opaque to the U -- Want individuals don't know that much about -- -- -- and most of us think there are no fees at all but that's not true.
It's not you're right we talked about this on the show and it's it's one of those things where.
It's it's sort of there's there's obviously for -- -- are good they're the only vehicle we have to save tax deferred.
Through our employers and that's think that's a positive the bad is that we've expected the average an individual to become an investment expert savings expert.
And to decipher all of this.
-- going -- I.
I saw you walking she gown you know they I think I came out and said that these are actually declining overall may be this example is unusual.
Do you think this is a trend -- what do you see because you look at these numbers every single day -- That's right and you know so -- -- and it's a relative term right if your average fees were one point 12% and they went down to one point 08% is that really going down.
I mean that's that's how they're measuring it so.
Date -- -- obviously a lot of attention shows like this the Department of Labor with fee disclosure regulations.
And I think this is just the tip of the iceberg -- we're gonna start to see and so you know thankfully.
It's now swing in the favor of these participants who are saying hey you know we've been -- and we want to be -- Well it out.
I know our viewers do not like to see these kinds of lawsuits but at the end of the day these -- have got to go down Chad thanks for coming very well appreciate your time today thank you.
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