Scrutiny of the fees that 401(k) plan participants pay for their retirement accounts is only likely to increase after a California court ruling in July. Edison International, the $12.4 billion utility, was found to have violated its duty under ERISA when it used retail shares of mutual funds, instead of cheaper institutional shares, for three of the investments in its defined-contribution plan. The lawsuit, Tibble v. Edison International, was one of a number of cases in recent years alleging that 401(k) plans entailed excessive fees or fees that were not properly disclosed. A spokesman for Edison would not comment on whether the company plans to appeal.

In his decision, Judge Stephen Wilson of U.S. District Court for the Central District of California said that there was no evidence the company considered the different share classes available. If they had, "they would have realized that the institutional share classes offered the exact same investment at a lower cost to the Plan participants," he wrote.

Wilson rejected Edison's defense that it received advice from Hewitt Financial Services. He also rejected its argument that its plan did not meet the investment minimum required to use institutional shares, citing evidence at the trial that investment managers commonly waive such minimums for plans the size of Edison's.

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Susan Kelly

Susan Kelly is a business journalist who has written for Treasury & Risk, FierceCFO, Global Finance, Financial Week, Bridge News and The Bond Buyer.