The Wall Street Journal reported in an article yesterday: “U.S. Investigates Funds Over 401(k)s“:
Federal regulators at the Labor Department have begun auditing some large investment companies and interviewing company officials as part of a probe into whether fee arrangements and market-timing practices hurt participants of employee-benefit plans. Regulators are focusing mostly on “a couple of handfuls” of the largest financial institutions that deal with the employer-sponsored plans, according to Assistant Labor Secretary Ann Combs.
According to the article, the DOL declined to name the companies under scrutiny, but said they could include investment providers, banks, broker-dealers and third-party administrators. The article notes that even though the DOL does not have authority over mutual funds, it does enforce ERISA which regulates retirement programs such as 401(k) plans in which participants invest through mutual funds. The article quotes Combs as saying that “complexity of the possible abuses and the size of the institutions involved mean that some audits may not be completed by the fiscal year ending in September.” However, once the audits are completed, the article states that “the agency can file civil actions against fiduciaries that oversee a retirement plan or its assets, and take steps to recover any misappropriated funds.”