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

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.

Financial Engines also was involved in another recent 401(k) case alleging excessive fees. That complaint was brought against Fidelity Investment. Fidelity was accused of participating with Financial Engines in a pay-to-play scam that allowed the latter to give part of the fee it got for providing advice back to Fidelity as a “kick-back.” The managed-account provider is not a defendant in the Fidelity case or the Voya lawsuit.

In other 401(k) lawsuit news, Emerald Coast Eye Institute and its owner Samuel Poppell have been sued for actions they took in the Florida-based business’s 401(k) plan. The plan has lost about 53% of its value in just a few years because of what plaintiffs claim was a bad investment in a “patent troll.”

The plaintiffs, who are ex-employees and plan participants—some say they were fired for exercising their ERISA rights by questioning the way that Poppell managed the plan—contend that Poppell, who was investment manger, investment adviser, trustee, and custodian of the 401(k) plan, directed most of the plan’s assets into one plan holding and did not remove the assets even as the plan holding’s value significantly dropped. That plan holding was patent troll VirnetX (FHC),

As a patent troll, VirnetX acquires patents and then tries to sue for alleged infringement. Plaintiffs believe this business model was at risk of “extreme volatility.” The security’s share has dropped 90% since 6/12, and by the end of ’14 the 401(k) plan holding had plunged in value from about $1.3M at the end of ’12 to $480K.

The plaintiffs believe that defendants either purposely concentrated the assets of the ECEI plan in the risky investments or were negligent and didn’t do a proper enough job of understanding the risks involved in these investments.

At the SSEK Partners Group, our securities lawyers represent high net worth individual investors and institutional investors, including, corporations, banks, partnerships, large trusts, financial firms, municipalities, school districts, retirement plans, private foundations, and charitable organizations. We are here to work with investors in recovering their losses sustained from financial fraud, negligence, or other wrongdoing. Call or email us today.

Fidelity Targeted in Fee Over Advice and SDBA Offerings, Plan Adviser, May 25, 2016