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401(k) & Retirement Plans

Retirement Plan Self-Dealing

Many employees have a substantial portion of their life savings locked up in their company’s 401(k) plan or other retirement plan. Unfortunately, some employers view these life savings as an opportunity to line their own pockets rather than to ensure the financial security of their employees. By using products or services associated with the company, employers can generate additional revenue from the retirement plan. In order to protect retirement assets, federal law prohibits self-dealing and other conflicts of interest in the management of employer-sponsored retirement plans.

If you believe your retirement assets are at risk as a result of self-dealing, our team of ERISA/401(k) attorneys may be able to help.

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Retirement Plan Self-Dealing Details

Under the Employee Retirement Income Securities Act (ERISA) of 1974, it is illegal for employers sponsoring retirement plans to engage in certain kinds of self-dealing. Instead, ERISA requires employers to act solely in the interest of plan participants.

Self-dealing is most prevalent in, but not limited to, the 401(k) plans of financial services firms. Such firms may offer their own products and services within their own plans. By offering such proprietary products and services, employers are generating revenues from their employee’ retirement accounts.

Self-dealing can also occur in plans outside of the financial services industry. If employers are offered payment by a third party in exchange for utilizing the third party’s products or services, the employer may be acting in its own self-interest at the expense of plan participants.

Examples of Potential Self-Dealing

There are a number of signs of potential self-dealing in retirement plans. If you believe any of these are present in your plan, your employer may not be managing your retirement plan in your best interests.

  • Offering affiliated or "proprietary" investment options in a retirement plan.
  • Engaging the company or affiliated companies to perform services to the plan, such as investment consulting, recordkeeping, or other administrative services.
  • Engaging a third-party company to perform services to the plan in exchange for discounted services or other benefits to the employer.

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