When a company administers a defined-contribution retirement plan, the complaint for this class action says, the potential for violating its fiduciary duties can be high. The complaint alleges that fiduciaries for Massachusetts Financial Services (MFS) Company’s two plans—its Defined Contribution Plan and its MFSavings Retirement Plan—breached their duties under ERISA, executed prohibited transactions, and did not act with prudence or with the good of the plans in mind.
The class for this action includes all participants and beneficiaries of the Massachusetts Financial Services Company Defined Contribution Plan and the Massachusetts Financial Services Company MFSavings Retirement Plan, at any time on or after July 7, 2011. It excludes the defendants in this case, employees with responsibility for the plans’ investment or administrative functions, and members of the defendants’ Board of Directors.
Although ERISA requires that fiduciaries must act “solely in the interest of the participants and beneficiaries,” with “care, skill, prudence, and diligence,” for example, the complaint alleges that MFS have placed their own mutual fund offerings in the plans, without seeing whether the participants would be better served with different plans, thereby maximizing MFS’s profit at the expense of the plan participants.
The complaint also charges that the MFS funds charge higher fees than other plans, citing 2012, when the plan’s total expenses were roughly 91% higher than the median costs for other plans of a similar size. The complaint claims that these high costs are mostly caused by the choice of MFS funds as the primary offerings in the plans, but also cites MFS’s failure to offer the least expensive share class available for the plan, failure to investigate the use of separate accounts and collective trusts as alternatives to mutual funds, and failure to control the expenses of recordkeeping.
Another breach of fiduciary duty the complaint alleges is the failure to remove investments that show poor performance from the plan, again prioritizing MFS’s profits over the interests of the participants. The complaint also cites unreasonable compensation paid for services to the plan and prohibited transactions as further problems.
The complaint alleges that MFS has violated ERISA in its breach of fiduciary duties of loyalty and prudence, its failure to monitor fiduciaries, its prohibited transactions with parties-in-interest, and prohibited transactions with fiduciaries, and it requests restitution of ill-gotten proceeds. It also invokes the legal principle of respondeat superior to claim that MFS is responsible for the actions of those who controlled the funds and therefore for the ERISA violations they committed.