Skip to main content

Here's How Badly JPMorgan Screwed Over Employees Who Have 401(k)s

Alternatively, here's how sweet of a deal JPMorgan's fund managers were getting.
  • Author:
  • Updated:
Jamie Dimon, chairman and CEO of JPMorgan Chase(Getty Images)

Jamie Dimon, chairman and CEO of JPMorgan Chase(Getty Images)

Back in January we reported on allegations that JPMorgan Chase & Co. had shafted its employees by parking their 401(k) investments in relatively high-fee funds managed in-house or by close business partner BlackRock. By choosing its own mutual funds and failing to organize participants' $21 billion in assets as a collective trust – a move that significantly lowers fees for institutional investors – a class-action suit claimed that the bank had profited at the expense of its own employees' nest eggs.

On Thursday, a different employee piggy-backed with a nearly identical suit, accusing JPMorgan of “engaging in self-dealing and acting to benefit themselves to the detriment of Plan participants by making half of all Plan investment options JPMorgan-affiliated funds, favoring a close business partner, BlackRock.”

Like the previous suit, this one posits that all of the sudden, as federal scrutiny loomed, the bank abruptly managed to find lower-fee options for its in-house funds. That was only after coming under investigation and paying settlements in late 2015 for engaging in self-dealing in wealth management investments without informing clients. From the more recent suit:

“That expenses for the JPMorgan- and BlackRock-affiliated funds were significantly reduced only after the SEC and other government agencies began their investigation into JPM Bank’s improper preference for JPMorgan-affiliated funds and third-party funds in which JPMorgan is self-interested, while funds not affiliated with the JPMorgan or BlackRock did not see similar fee changes, indicates that defendants were engaged in the same self-dealing with respect to the Plan as was revealed by the SEC Order.”

JPMorgan denies the central allegations here, but something odd definitely happened in JPMorgan 401(k)s in late 2015. For one thing, JPMorgan flat-out obliterated its own Small Cap Core Fund by shifting employee retirement assets to a significantly cheaper index fund. And fees fell across the board, as this telling chart from the recent lawsuit indicates:

Fee reductions in JPMorgan employee 401(k)s. Red denotes reduction of 50-100%; yellow, 25-49%. Colors not in original lawsuit.

Fee reductions in JPMorgan employee 401(k)s. Red denotes fee reduction of 50-100%; yellow, 25-49%. Colors not in original lawsuit.

Why hadn't JPMorgan found the cheapest possible investments before the feds were snooping around? That is the question.

(The suit is Orellana v. JPMorgan Chase & Co. et al.)


(Getty Images)

If JPMorgan Shafted Its 401(k) Participants, At Least It Helped Out Its Mutual Fund Managers

A class-action lawsuit says JPMorgan chose pricey in-house funds over cheaper rivals for employee 401(k)s.

(Getty Images)

Jamie Dimon Tells France Its Working Conditions Aren't Miserable Enough For JPMorgan

Those pesky labor laws are keeping Dimon from relocating jobs to Paris post-Brexit.

Mary Erdoes

JPMorgan's Mary Erdoes: Humans Actually Good

The inexorable march toward a cold, inhuman world of automation might just bypass JPMorgan Wealth Management.


JPMorgan Pays $35 Million To Make Good Technology Go Away

The real punishment, however, is having to be friends with BlackBerry now.

Jamie Dimon, chairman and CEO of JPMorgan Chase(Getty Images)

JPMorgan Disinvites 100 More People From 270 Park Demolition Party

The new asset management offices will feel even more spacious.

(Getty Images)

Beefing With Indonesia Just Another Tuesday For JPMorgan Analyst

When issuing ratings on Indonesia, remember: “Creating positive psychology” is your “very high responsibility”