Government, Retirement, Taxes 

H&R Block’s Express IRA Lawsuit

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On Wednesday, New York Attorney General Eliot Spitzer filed a lawsuit against H&R Block claiming that the fees and low interest rates of H&R Block’s Express IRA hurt more than it helps. According to Spitzer, 85% of the more than half million users will be losing money, not earning it. These Express IRA’s have a $15 setup fee, a $15 “reconstitution fee” (discontinued), and a $25 termination fee (lowered from $75) with the only investment option being a money market account that earned about 1% (at the time, now the rate has increased to 3%).

What should you do if you signed up for an H&R Block Express IRA?

First of all, wait to see what this lawsuit brings. If you have an Express IRA, you might get some money if H&R Block settles or loses the lawsuit. What you don’t want to do is close the account because it’s still an IRA, you will get hit with a 10% withdrawal penalty and the income tax you owe on it. If you really want to get out of the Express IRA, roll it over to another qualified retirement plan.

I put part of the onus on H&R Block for not educating their front line personnel on who this IRA makes economic sense to. I doubt H&R Block, as a whole, intended to be nickel and diming folks on fees in the hopes they wouldn’t notice (that’s what watchdog groups do, they catch these very things) that they were losing money. They are instilling a very important lesson of saving for many folks who don’t think “save” when they get their next dollar. That being said, they messed up and they steered people in the wrong direction and that should have some financial ramifications.

Before you think I’m getting all apologetic for big companies, I’m very big on accountability and being responsible for your own decisions. All those people were told what the fees were and what the going market return on the money market was. They could have gone home, done the math, and realized it was the wrong decision. If they weren’t financially savvy enough for that, then they pay for it with money out of their own pocket.

via MarketWatch.

{ 5 comments, please add your thoughts now! }

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5 Responses to “H&R Block’s Express IRA Lawsuit”

  1. They got me two years ago. I went to file my taxes and I got a very large amount of money. H&R Block had sent me two coupons. One was for the tax services and another was to open an express IRA account. I didn’t have any retirement savings at my employment, so I opened it. I didn’t really read the fine print (which I usually do).

    I knew something was wrong when I opened my statement at the year mark and I had less money. Now how does that happen? I tried to find an explanation as to why I had less money, but I couldn’t find it. Ultimately, I don’t regret it because I lost my job shortly after that and that IRA is the only money I have saved. I refuse to touch it. It isn’t much, but it will be a little something to start a savings with.

    I’m glad to read that they may suffer the consequences for misleading customers. I hope I at least get some interest out of it!

  2. Wayne says:

    Anybody who feels that a money market fund is appropriate for retirement saving is doomed to be greeting shoppers at Wal-Mart in their golden years.

  3. Phil says:

    One odd thing about the case is that H&R could have made _more_ money off of people if they had put them either in a Treasury bond fund and charged them a larger percentage or (the wicked option), but them in a high-fee actively managed stock fund. H&R made such small amounts of money off of these accounts (about $10 million a year) that it doesn’t seem they would even bother having them. The two examples they give in the article are of one-time contributions of $300, which no other reputable company I know of would even allow. It just seems like such a bad product for both parties that it would be a deliberate attempt to scam people.



    • Eva Stewart says:

      I finally got in touch with them……..the last statement I received was in 2008. I used that phone number on that statement……..the phone # is 888-687-4722. Give them your social security number and they should be able to locate your account.

      The funny thing is that I asked for a statement which I DID receive, but both numbers listed on that printout to call for “help” on the IRA aren’t working numbers (888-472-6722). I also asked for instructions on how to roll over other existing IRA’s ………if I choose to go with H&R. I asked to verify that I would be sent these instructions/forms, and the Customer Support person, Tiara, promised I would get one. I didn’t. She also had my email account wrong, and argued with me that they couldn’t send me any paperwork to rollover my other IRA’s. She also didn’t correct my phone number or email address they had on record from years ago. There was absolutely no way for me to contact them if I hadn’t found my 2008 statement, and the apparently couldn’t/didn’t want to contact me since 2008.

      Very poor service. I’m not sure after all this that I want to trust my $$ to them. One good thing, though, when my other IRA’s were losing $$, the H&R Easy IRA held its own. Didn’t gain but about 1%, but the others were losing hand over fist.

      That being said, I just don’t trust a company that doesn’t send out yearly statements (although the address the had was correct), doesn’t list the correct telephone number on their statements, and doesn’t update customer contact info. Perhaps they were hoping that I’d just be unable to contact them ?? Dunno.

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