Is your 401(k) account loaded with high, hidden fees? New federal 401(k) plan disclosure rules will soon be implemented to highlight how much fees are eating into employer-sponsored retirement accounts.
But more workers are already going after companies that they allege are taking advantage of those retirement accounts. Ameriprise Financial Inc. employees participating in the company's 401(k) plan filed a suit last month against the company, alleging the financial services firm invested employee retirement money into its own untested funds and charged expensive, uncapped fees.
Several employees filed a suit in a Minnesota district court on Sept. 28, seeking class-action status for all employees participating in Ameriprise's 401(k) plan, established in October 2005. The basis of the suit is the Employee Retirement Income Security Act of 1974 (ERISA), which directs employers to exercise fiduciary duties "solely in the interest of the participants and beneficiaries...defraying reasonable expenses of administering the plan."
Jerome Schlichter, attorney for the Ameriprise employees, said they are accusing Ameriprise of self-dealing and breach of fidiciary duties.
"As a direct result of these prohibited transaction violations, the plan, directly or indirectly, paid millions of dollars in investment management and other fees that were prohibited by ERISA and suffered millions of dollars in losses," the suit states.
Schlicter said the suit potentially applies to tens of thousands of employees if it is granted class-action status.
Ameriprise did not return a request for comment.
Schlicter said Ameriprise chose its own "poor performing funds," which fund rating company Morningstar gave one or two stars out of five at one point.
"Ameriprise put profits in its own mutual funds first before employees," he said. "Some funds did not even have an operating history before they were picked by Ameriprise for their 401(k) plan. No competent investment manager would select an investment that had no operating history yet that's what Ameriprise did of its own funds that it set up for employees. We say that's improper."
While many 401(k) plans charge employees flat administrative fees, such as $25 per participant per year, Schlicter said Ameriprise employees were charged an uncapped record-keeping fee that increased relative to asset value.
Schlichter also represented employees in similar suits filed in 2006 against construction company Bechtel, machinery company Caterpillar and contractor General Dynamics. Caterpillar and General Dynamics settled last year while Bechtel settled this year.
Michelle Michael, Bechtel's corporate communications, told ABC News in an emailed statement: "While we maintain we complied with the Employee Retirement Income Security Act of 1974 (ERISA), we believe the settlement of the long-standing litigation was a desirable outcome for everyone involved."
Caterpillar and General Dynamics Corp. did not return a request for comment.
Some of the hidden fees will come to light starting next summer, when the Labor Department's Employee Benefits Security Administration's rule approved last October are implemented. That rule requires 401(k) providers to disclose fees and expenses to improve transparency to workers.
The final rule will become applicable to covered individual account plans for plan years beginning Nov. 1. For calendar year plans, compliance will be required on Jan. 1. Workers should begin to see greater fee disclosure this summer.