401(K) lawsuit

Edward Jones is Sued Over 401(K) Excessive Fees—Again

Published on: November 21, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Another group of plaintiffs is suing Edward Jones, accusing the firm of charging excessive fees and self-dealing in its 401(K) Plan. In the complaint, the brokerage firm and a number of its employees, including managing partner James Weddle and financial adviser Brett Bayston, are accused of breach of fiduciary duty related to their decision to choose costlier mutual funds when there were less expensive, equivalent funds available. Edwards Jones and its employees are also accused of choosing an “unreasonable” amount of risky investment choices and engaging in self-dealing.

The purported self-dealing allegedly occurred through its distribution deals with a number of fund companies, including Franklin Templeton Investments, American Funds, BlackRock (BLK), and Goldman Sachs (GS). The plaintiffs claim that the fund companies paid Edward Jones revenue-sharing fees for access to its “captive market,” which included 401(K) participants, and “shelf space” in its brokerage business that targeted retail investors. As part of the distribution relationship, Edward Jones offered the fund companies’ investment options in its Edward D. Jones & Co. Profit Sharing and 401(K) Plan.

The plaintiffs believe that these distribution relationships affected the decisions made by the fiduciaries and ended up costing participants millions of dollars in excessive fees. An Edward Jones spokesperson says that the allegations are false and that the broker-dealer would mount a “vigorous defense.”

401K Record Keeper is sued Over Financial Engine’s Alleged Pay-to-Play Scam

Published on: November 11, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Xerox HR Solutions is now the defendant in an alleged pay-to-play scam involving Financial Engines, Inc., which offers investment advisory services through subsidiary Financial Engines Advisors. According to the proposed class action securities case, the pay-to-play scam “conspiracy” involving the two companies compelled participants of Ford Motor Co.’s retirement plans to pay unreasonable and excessive fees. The plaintiffs are three participants in the Ford plan. The 401K-related lawsuit is Chendes et al v. Xerox HR Solutions.

According to the complaint, Xerox allegedly was paid a “kickback” by Financial Engines in exchange for including the investment adviser/managed-account provider on its record-keeping platform. The plaintiffs believe that this deal between the two companies “wrongfully” inflated the price that Financial Engines charged for its professional investment advisory services. They noted that even without the excessive fees, Xerox was already getting paid a record-keeping fee.

Plaintiffs said that of the $5.8M that participants paid Xerox HR for Financial Engines Services in the pay-to-play scam in 2015, 31% of that—$1.8M—was paid to Xerox. The plaintiffs are alleging that similar payments also occurred in 2012. They contend that the fees in question were not for any “substantial services” that either company provided to plan participants.

Voya Sued in 401(K) Lawsuit, is Accused of Partaking of Investment Advice Fee Charge

Published on: September 14, 2016 | by Shepherd Smith Edwards & Kantas, LLP

Voya Financial Inc. (VOYA) is the defendant in a 401(k) lawsuit alleging excessive fees. According to a Nestle 401(k) Savings Plan participant, Voya and managed-account provider Financial Engines came up with an arrangement that allowed Voya to collect excessive fees for service related to investment advice, but without disclosing that this was part of their deal. In Patrico v. Voya Financial, Inc. et al., the plaintiff is claiming breach of fiduciary duty under ERISA.

The proposed class action lawsuit contends that Voya offered participants an advice program via the Voya Retirement Advisers but subcontracted to have Financial Engines give the advice. The plaintiff contends that even though Voya didn’t provide “material services” related to the advice that participants were given through the program, the company collected a fee to which it purportedly had no right. Voya allegedly keeps a “substantial” part of the fee, while giving some of the fee to Financial Engines.

Voya denies any wrongdoing.

Morgan Stanley and Edward Jones Are Sued in Separate 401(K) Lawsuits

Published on: August 22, 2016 | by Shepherd Smith Edwards & Kantas, LLP

An ex-participant in Morgan Stanley’s (MS) 401(k) plan is suing the financial firm. The plaintiff is alleging self-dealing and excessive retirement plan fees. Robert Patterson contends that the firm enriched itself at cost to employees. The case is Patterson v. Morgan Stanley et al. He is alleging breaching of fiduciary duty under ERISA. Patterson believes that plan participants sustained millions of dollars in losses in retirement funds from 1/11 through 4/14 because of the alleged breaches.

He is seeking class action status for case over the losses sustained and he wants the firm to pay $150M. The Morgan Stanley 401(k) Plan includes several Morgan Stanley mutual funds. According to the complaint these funds suffered “high relative fees” and/or “poor relative performance.” Although there were a number of non-proprietary investments included in the retirement plan, Patterson claims that they also performed poorly.

Meantime, Edwards Jones is also now a defendant in a 401(k) lawsuit. The plaintiff is a plan participant who claims that the firm caused employees to pay excessively high fees for record keeping and investment management services that purportedly resulted in the loss of millions of dollars in retirement savings. The proposed class-action lawsuit is McDonald v. Edward D. Jones & Co. L.P. et al.

401(K) Plan Lawsuit Accuses Anthem of Charging Excessive Fund Feeds

Published on: January 6, 2016 | by Shepherd Smith Edwards & Kantas, LLP

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.”