The recent complaint against One Brooklyn Health System Inc. hits like a cold gust in a dusty frontier town, sudden, sharp, and full of consequences. The plan is accused of mismanaging its 403(b) by offering expensive “retail” share classes of mutual funds when cheaper, institutional classes were freely available.
From 2014 onward, participants were placed into a target-date fund whose expense ratio ranged between 0.86 % and 1.03 %. Meanwhile, a nearly identical institutional version was out there with fees as low as 0.05 %–0.67 %. Over the years, that discrepancy alone, especially in a plan that covers thousands of participants, allegedly cost retirees millions.
What’s jaw-dropping isn’t just the mistake. It’s the fact that the cheaper option was obvious. The institutional funds were disclosed, clearly available — but ignored. That’s not oversight. That’s negligence.
Sponsors, take note. This isn’t academic theory. It’s a warning shot. If you run a 401(k), 403(b) or similar plan and you don’t routinely — and ruthlessly — evaluate share-class costs, fund-lineup fees, and provider revenue-sharing agreements, you’re sitting on a landmine waiting to blow.
Prudence isn’t optional. Under Employee Retirement Income Security Act (ERISA), fiduciaries are legally required to act in participants’ best interests — which means choosing the lowest-cost equivalent when available, documenting the decision-making process, and reviewing that decision regularly.
Let the One Brooklyn case be the kind of lesson no plan sponsor wants to learn the hard way.
· Review every fund and every share class on your menu.
· Compare institutional vs retail share classes — don’t assume your recordkeeper automatically picked the cheapest.
· Document the rationale for any costlier investment or vendor, and be ready to justify it if challenged.
· Monitor revenue-sharing and conflicts of interest — because those are the hidden bullets in any 403(b) or 401(k) negotiation.
If you treat your plan like a sloppy afterthought, participants will pay — often with their retirement income. If you treat it like what it truly is — a promise of security and dignity — you act with discipline, transparency, and respect.
That’s what being a fiduciary really means.
