No Fiduciary Status For 401(k) Plan Service Provider

John Hancock Life Insurance Company is the most recent 401(k) plan service provider to prevail in a case by the plaintiffs’ bar asserting ERISA fiduciary breach claims based on allegations that it charged excessive 401(k) plan fees and received excessive revenue sharing payments. Santomenno v. John Hancock Life Ins. Co., No. 2:10-cv-01655 (WJM), 2013 WL 3864395 (D.N.J. July 24, 2013). A federal district court in New Jersey concluded that JHLIC was not acting as a fiduciary in connection with the service provider fees it charged to various 401(k) plans because a service provider “owes no fiduciary duty with respect to the negotiation of its fee compensation.” The fees were negotiated at arms’ length and fully disclosed. The court similarly concluded that JHLIC was not a fiduciary with respect to the revenue sharing payments because service providers “do not become fiduciaries merely by receiving shared revenue,” especially when such payments are, as in this case, fully disclosed. Lastly, the court concluded that JHLIC was not a fiduciary by virtue of having offered a menu of investment options from which plan trustees could select and make available for investment by plan participants.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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