A Double Standard
Owing to an accident of history, mutual fund directors are held to a lower standard of fiduciary duty than are plan sponsors for 401(k) plans.
If a 401(k) plan carries a pricier version of a fund when a cheaper share class is available, the company that sponsors the plan could lose a class-action lawsuit. Such happened to Edison International this May, when the Supreme Court unanimously ruled (now that's a phrase that you rarely see) that the company was liable for not monitoring that it could have replaced its retail shares with cheaper institutional shares. Commenting on the Supreme Court's signal, retirement-industry lawyer Marcia Wagner stated, "[Plan sponsors must have] a damned good reason to pay higher fees if they don't have to--a really, really, really good reason."
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John Rekenthaler does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.