(Bloomberg News) Matthew Hutcheson, who advises companies on their retirement plans, told Congress that managers of the $3.2 trillion in U.S. 401(k) plans should adhere to "the highest ideals of society."
"The fiduciary duty is the highest duty known to the law," Hutcheson, 41, said in testimony before the House Ways and Means Committee in October 2009. As an independent fiduciary, Hutcheson helps manage company retirement plans, picking investments and monitoring their operations. The legal requirement of a fiduciary is to always put the best interests of the client first.
Rodney Thompson, co-owner of Thompson Audiology in Yakima, Washington, said Hutcheson fell short of his own standards. Thompson and his employees had more than $1 million invested in a 401(k) plan called the G Fiduciary Retirement Income Security Plan, and Hutcheson was the fiduciary -- the person minding the assets. The money was supposed to be transferred in June to a new plan that Hutcheson ran.
The funds never arrived and Hutcheson told him they were in an investment that he couldn't sell immediately, Thompson said. Thompson said he pressed Hutcheson for weeks, to no avail. In August, he filed a complaint with the U.S. Department of Labor, which regulates 401(k)s. The agency is investigating Hutcheson, Labor Department spokesman Michael Shimizu said.
"This is money that our employees are counting on," Thompson said in an interview. "He preached transparency, and he's not being transparent at all."
David Novak, a dentist in North Carolina, said his practice is missing $275,000 that it had in the G Fiduciary plan.
"If his lips are moving, he's lying to you," Novak said in an interview. "If he had a gun, it would be robbery."
Through his attorney, Hutcheson denied any wrongdoing.
"All of the allegations are baseless," said Dennis Charney, a lawyer in Eagle, Idaho. "We will address this in court at the right time but do not feel a newspaper is the forum to try pending and future lawsuits."
Named for the section of the tax code that created them, 401(K)s and similar accounts are the mechanism by which 58 million U.S. workers in private industry are able to save money for retirement as companies cut back or eliminate traditional pension plans.
At large employers, the company itself is usually the fiduciary for the 401(k). Hiring an independent fiduciary is becoming more common, especially among smaller companies, as they seek to limit their liability for investments that perform poorly.
"Most companies don't have the knowledge or experience, so it makes sense to hire someone who does this for a living," said Kenneth Raskin, an attorney specializing in compensation and benefits at law firm King & Spalding LLP in New York. "These companies completely rely on and trust these independent fiduciaries."
Hutcheson was visible in the industry. He testified before Congress and held trainings for fiduciaries around the country. Motivational speaker Stephen M.R. Covey, son of Stephen R. Covey, author of "The 7 Habits of Highly Effective People," was featured to speak at one in New York, according to Hutcheson's Website.
Covey didn't return telephone messages.