A class action filing charges not only that a plan sponsor violated its fiduciary duty by not choosing lower-priced share classes of mutual funds, but that they cost participants millions by not pursuing collective funds and/or separate account options.
The lawsuit, filed late last month in the Southern District of Indiana by the St. Louis-based law firm of Schlichter, Bogard & Denton, alleges that fiduciaries of the $5.1 billion Anthem, Inc. 401(k) plan failed to leverage the plan’s size and economic clout to take advantage of lower-fee investment options. This included lower-cost shares of the Vanguard funds that already dominated the plan’s menu — funds that the suit says were “readily available” to plans of this size.
While the suit notes that Anthem had made moves to change out those share classes for lower-cost shares, it claims that had the amounts invested in these higher-cost share classes instead been invested in the lower cost options from Dec. 29, 2009 through July 22, 2013, the plan’s participants “would not have lost over $18 million of their retirement savings through unnecessary expenses.” They also challenged Anthem's failure to investigate and offer non-mutual fund investments, including collective trusts and separately managed accounts prior to 2013.
Also at issue was Anthem’s decision to offer the Vanguard Prime Money Market Fund, described as “microscopically” low-yielding in the suit, rather than a stable value fund providing higher returns. The suit alleges that if the amounts invested in the Prime Money Market Fund had instead earned the returns recorded by the Hueler Index from Dec. 29, 2009 to Sept. 30, 2015, “plan participants would not have lost over $65 million in their retirement savings.”
Also at issue in the suit are the record keeping fees paid to Vanguard, which the plaintiffs contend varied between $42 and $94 per participant annually. According to the suit, the “outside limit” of a reasonable record keeping fee would have been $30 per participant.
Looks like 2016 has gotten off to a quick start for excess fee litigation.
