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Precious Metals IRA

 

Class Action: Sue Your Retirement Provider for a Better 401(K) Plan

Today's comment is by Larry Grossman, a long-time member of our Council of Experts,

leading expert on retirement plan management, and Managing Director of Sovereign

International.
 
Dear A-Letter Reader,
 

A few months ago, I wrote here in the A-Letter about the coming wave of lawsuits in the

world of retirement planning. As predicted, you can now sue your plan administrator if

you don’t have the investment flexibility you deserve.
 

Let me explain. Recently a case went all the way to the Supreme Court to decide if you

could or couldn’t sue plan administrators for account mismanagement. And on February

20th, the Supreme Court told individual 401(k) account holders Yes, you can sue

plan administrators.” This is a huge breakthrough.

 

It means that roughly 50 million participants in 401(k) plans can sue not only for

excessive fees but also for mismanagement. In other words, you can sue for better

investment options. Or at least, that’s how I believe lawyers will take it.

In my 20+ years experience in the financial world, I’ve found that if you give lawyers the

slightest inch, they’ll stretch it to a mile. So how will your average attorney define

“mismanagement?” You can bet they’ll take it to mean investment options. And that

means they could be litigating indefinitely.
 

Why More Lawsuits Could Actually Be a Good Thing –

If They Get You a Better Retirement Plan
 

And you know what? I’m going to standup and take a very controversial position. I’ll say

being able to sue for a better retirement plan is a GOOD thing. In fact, if there are any

attorneys out there who need an expert witness when you sue a 401(k) plan

administrator, you can call me.
 

Why do I say that? For years, I’ve been ranting about 401(k) plans. I’ve been writing

and speaking about how these plans are ridiculously inflexible. I’ve said how your

average 401(k) plan has hidden fees, kickbacks and who knows what else.

My complaints have mostly fallen on deaf ears. During that time, I have received

countless emails and phone calls from individuals who are desperate for some help

with their plans.
 

Now, you finally have a way to fight back against these inflexible plans – and honestly,

you probably won’t have to go to court to do it. But more on that in a moment…


You Could Argue Any of These = “Mismanagement”
 

Most 401(k) plans really don’t help you plan for the future. The majority of these plans

only allow you to invest in an absolutely horrible arcane list of mutual funds. These

plans give you virtually no assistance or direction in how to manage your retirement

fund.
 

It’s no wonder Americans aren’t saving enough for retirement! They’re working with

horrible investments with bad performance and no assistance. What kind of a system is

that?
 

I have been contacted by a number of future retirees who sent me a copy of their plan

documents. Several of these plan documents actually said the participant could open

up a self-directed account and manage his or her own investments.

But when these participants contacted their plan administrators to take advantage of

this option, they were either flat out told “NO” or the plan administrator told them “you

can only open up such an account with our hand-picked advisor” (gee no back-end deal

there I’m sure). That could be considered mismanagement.
 

I’ve read some plans that only allow you to invest in large-cap funds. What happens

when large-cap growth is out of favor? Not to mention the dollar is sitting at 30-yearlows.

If you’re ONLY allowed to invest in dollar-backed funds or large caps, couldn’t you

consider that “mismanagement?”
 

Honestly, it’s up for debate. But with the new Supreme Court ruling, I’m guessing I

could make a pretty good argument for this being plan mismanagement. In fact, I

predict the right lawyer (and expert witness) could have a field day over these poor

investment choices in court. I predict that you’ll soon see more lawsuits doing just that –

calling these poor investment choices “mismanagement.”
 

You Don’t Necessarily Have to Go to

Court for a Better 401(k)
 

Honestly, just the threat of a possible lawsuit could inspire some companies to provide

better investment choices. In fact, I predict a number of plan providers will leave the

market now that the liability just went up by a factor of 50 million.

But I wouldn’t wait for that to happen. Instead:
 

1. If you own your own company or you can exert influence over the choices your

company 401(k) has, I strongly urge you to get some serious advice as to what you

should really offer your employees
 

2. If you are a participant: Politely, demand better investments and self-directed

accounts
 

3. Ask your plan administrator to find a fiduciary or other investment advisor you can

use to strengthen your retirement plan
 
Now that Pandora’s Box is Opened…
 

To all plan administrators: The Supreme Court has just opened Pandora’s Box and I

would suggest you get serious about updating your plan. You must:
 

1. Become transparent

2. Get your fees down

3. Find an outside retirement advisor

4. Modernize your investments

5. Offer self-directed accounts
 

Don’t you want the best for your employees? You have the opportunity to give your

employees back the American Retirement Dream. You can help your workers prepare

for retirement by offering them the best retirement plan available by giving them

investment choices from all over the world.
 

LARRY GROSSMAN, CFP®, CIMA®

Retirement Expert & Managing Director of

Sovereign International

 
P.S. This is really just the tip of the iceberg. There are plenty of investment choices you

can make from around the world – in some of the few remaining strong markets. You

can read about the top-performing currencies, commodities, bonds, funds and ETFs –

including many that are perfect for your retirement plan – in The Sovereign Society’s

monthly newsletter, The Sovereign Individual.

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