Sometimes the law isn’t fair.

But sometimes, it seems unfair because you don’t know the rules.

In the recent case of Santomenno v. John Hancock, poor understanding led plan sponsors to agree to terms that led to excessive fees charged by the service provider to the plan. Either the plan sponsors were unaware of what they signed up for, or the service provider duped them. On September 26, 2014, the Third Circuit Court of Appeals affirmed the District Court’s decision to grant John Hancock’s motion to dismiss, ruling that John Hancock was not a fiduciary – therefore, it was not required to watch out for imprudent or disloyal activities such as excessive fees.

Though the plan sponsors argued that John Hancock exercised fiduciary control over the retirement plans, the court found that it did not. John Hancock was granted considerable power over the plan, but it was not considered a fiduciary in the eyes of the law. Fiduciary status is very difficult to prove without written assumption of the role. Especially, as in this case, the accused can present written documentation that states: “we are not a fiduciary.” Of the three criteria necessary to prove fiduciary status, the plaintiffs could only present arguments for two – neither of which the court considered compelling. Without fiduciary status, John Hancock can still have authority to select certain funds or operate in a certain way and not have the responsibility of an ERISA-defined Fiduciary.

Paying excessive retirement plan fees can increase a fiduciary’s liability. Outside of a fiduciary role, however, no one is required to present a fair fee to the plan. So, if the service provider is granted the authority to change around investments that end up paying itself more than a reasonable amount, it isn’t required to refund any amount and act in the plan’s best interest. Excessive fees happened in this case because the plan sponsor irresponsibly allowed the service provider too much autonomy over the plan and too little liability to balance it out.

Before you give a service provider the authority to manipulate your fee structure, make sure that you perform your due diligence. Poor oversight can lead to excessive fees that you, as a plan sponsor, are responsible for. If you’re unsure about these decisions, find an expert who can negotiate, or at least shed some light on your arrangements. Castle Rock Investment Company does assume written fiduciary responsibility. We strive to provide responsible and well-researched guidance, so that you can operate your retirement plan with simplicity and ease.


Katherine Brown, Castle Rock’s Research Associate, holds a Master of Arts in Global Finance, Trade and Economic Integration from the University of Denver and can be reached at

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