CIGNA Latest Target of 401(k) Fee Suit

March 5, 2007 ( - The St. Louis law firm that made national news by filing a batch of lawsuits over "excessive" retirement plan fees has now turned its legal sights to the CIGNA Corporation and its 401(k) plan.

By Fred Schneyer | March 07, 2007
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Attorneys Daniel Conlisk and Heather Lea of the Schlichter, Bogard & Denton firm filed a 58-page fiduciary breach suit against CIGNA, plan administrator John Arko and the Corporation Benefit Plan Committee. The suit was filed on behalf of plaintiffs Kim Nolte, Sherry Lewis and Theresa Mitchell, employed by CIGNA HealthCare of Illinois in Bourbonnais, Illinois, under the Employee Retirement Income Security Act (ERISA).

The suit includes a request to be certified as a class action on behalf of other CIGNA 401(k) participants. The suit said attorneys aren't sure of the number of people currently in the class but noted that there were 44,322 participants at the end of 2005 with 401(k) balances.

The litany of legal sins CIGNA and its officials were accused of committing, according to the lawsuit, included:

  • charging unreasonable fees and expenses to the plan that were not incurred solely for participants' benefit;
  • entering into agreements with third parties that forced the plan to pay unreasonable fees and expenses;
  • failing to monitor the fees and expenses paid by the plan;
  • failing to understand the various methods by which vendors in the 401(k), financial and retirement industry collect payments and other revenues from 401(k) plans;
  • failing properly to disclose to participants the plan's fees and expenses. 

The plaintiffs claimed the defendants have not informed plan participants of the actual dollar amount of investment management fees deducted from their 401(k) accounts. Instead, investment management fees are subtracted from plan participants' accounts before the returns of participants' investment option/funds are reported, so that the fees do not appear on participants' statements, the suit charged.

Nonetheless, the plan has incurred "substantial" recordkeeping, administrative and other costs and defendants have charged such costs against plan participants accounts though hidden revenue sharing payments, the suit claimed.

The suit charges that the defendants are liable to the plan and the plaintiffs for losses suffered as a result of the alleged fiduciary breaches and should be charged for any transactions for which they cannot account or which were not proper uses of plan assets.