Labor and Employment

Who's Looking Out for Your Retirement Funds?

According to the comforting commercials, they are on our side, we are in good hands, and they are solid as a rock. We can rest easy and be sure that our future is secure, can't we? Or is there more to the story? In one case, a group of people have charged one of the country's biggest retirement plan operators with avoiding their responsibilities. Who's right?

The Connecticut Class Action Lawsuit

In 2001, Lou Haddock, a trustee of a 401(k) retirement plan advised by Nationwide, filed a suit in Connecticut federal court against Nationwide. Haddock's suit is known as a class action suit, meaning that he’s bringing suit on behalf of himself and others in a similar position.

Haddock's complaint about Nationwide is that it accepted payments from mutual funds in exchange for being included in the investment options for its retirement for its customers’ accounts. Doing that, Haddock says, means that Nationwide is just looking out for itself, and not “On Your Side," as its slogan suggests.

Haddock says Nationwide owes its retirement plan participants a fiduciary duty - looking out only for the best interests of its participants. But the company says it doesn't have any such duty.

Last November, the judge decided Nationwide may be a fiduciary to the plan participants. But this was only a preliminary decision, meaning the judge might alter the decision as the lawsuit continues.

Who's in Charge of a Retirement Plan?

One financial news writer went right to the source and asked a Nationwide spokesperson who's really looking out for the interests of the accountholders. Nationwide says its customers hold the cards. They also said it's perfectly fine charging mutual funds for the privilege of being an investment choice.

They argue this is commonplace in the industry, and helps them offer better deals to retirement plan participants. Some people disagree though, and say the practice means you won't have low-cost funds to choose from because they won't pay the fees Nationwide requires to be included in their plans.

This is YOUR Financial Future

Regardless how the Connecticut lawsuit against Nationwide turns out, if you have a retirement account through a current or former employer, you should ask your employer for information about how the retirement plan is managed.

As part of yearly plan maintenance, a Summary Plan Description (SPD) must be available for employees to review. It’s usually easy to read, but your plan administrator or advisor can help you out with any questions.

You might also consult your plan provider’s investment department or retirement plan specialist for advice. There are usually financial advisors available to help determine how to invest your contributions based on your age, length of time until retirement and tolerance for risk. There might even be online tools available.

Urge your employer to seek objective, impartial advice on investment options for your 401(k) plan. Keep yourself informed of changes to your retirement plan and investigate your choices on a regular basis.

Questions For Your Attorney

  • I have a retirement account through Nationwide. Have I been affected by this class action lawsuit? Should I join the lawsuit?
  • Do I have a claim if my employer provided retirement fund loses all its money?
  • Are my retirement protected by something like the FDIC?
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