Participants in Anthem Inc.’s 401(K) plan are accusing the plan’s fiduciaries of breaching their fiduciary duties under the Employee Retirement Income Security Act of 1974. They claim that the fiduciaries churned excessive administrative and investment management fees in Vanguard mutual funds. Vanguard Group is the fund’s record-keeper.
According to plaintiffs, the plan fiduciaries chose mutual fund share classes that were “high-priced” instead of equivalent ones that didn’t cost as much and were also available to the plan. As of 12/14, Anthem’s 401(k) plan offered 11 Vanguard mutual funds, including Institutional and Admiral share classes: Vanguard target-date collective investment trust funds, a fund offered by Touchstone Investments, funds by Artisan Partners, and an Anthem common stock fund. The lawsuit claims that each fund in the plan charged fees excessive to what Anthem could have gotten elsewhere with funds that were comparable.
The Anthem 401(k) fund participants also contend that Vanguard was paid excessive fees for record-keeping related services from ’10-’13, which was when the plan paid about $80-$94/participant for record keeping through revenue-sharing and hard-dollar fees. It wasn’t until 9/13 that the cost was reduced to a flat yearly fee of $42/participant.
The plaintiffs argued that a reasonable fee’s “outside limit” for this particular plan should have been no higher than $30. The class-action securities case also claims that instead of including a stable value fund in the plan, there was a money market fund that generated returns that were “microscopic.”
It was just several weeks ago that Insperity 401(K) Plan’s fiduciaries were accused of compelling participants to pay excessive fees to record-keeper Insperity Retirement Services. The plaintiffs’ class-action securities lawsuit contends that Insperity Inc. and plan discretionary trustee Reliance Trust Co. breached these duties under ERISA.
They are accused of offering funds that performed poorly while costing a lot. The funds included Reliance-offered collective investment trusts and proprietary mutual funds. The plaintiffs said that Insperity did not properly monitor the trustee, which was also one of its duties.
Their lawyer contends that the two companies prioritized their self-interest by paying the excessive fees for record-keeping to its in-house record-keeper. He said that Reliance and Insperity could have chosen funds with fees that weren’t as high but failed to do so in order to profit.
The SSEK Partners Group is an institutional investor fraud law firm.
Anthem 401(k) plan participants sue company over higher fees, Business Insurance, January 6, 2016
Workers allege 401(k) fees too high at Insperity, Houston Chronicle, January 6, 2016