There are at least 35 lawsuits against plan providers using in-house mutual funds in their own 401(k) plans.
Now that doesn’t mean that all 35 cases will go against these mutual fund companies, but it does show the danger of these mutual fund companies using their own funds in the 401(k) plans for their employees. Getting sued and winning for any plan sponsor is still a loss when you factor in the cost of defending the litigation and the time.
As a plan sponsor, you should be concerned and look at your mutual fund option just determine that the selection of the mutual funds were done prudently and not done solely because they pay revenue sharing or because they are owned by the very same company who happens to be the plan’s third party administrator.
