Entities that handle retirement plans have a fiduciary duty to the plan and its participants. However, the complaint for this class action alleges that West Corporation and the Retirement Committee of the West Corporation Employee 401(k) Retirement plan did not fulfill the duties of a fiduciary because they permitted fees for the plan to be too high.
The class for this action is all participants and beneficiaries of the West Corporation Employee 401(k) Retirement Plan from June 1, 2013 through the date of judgement in this case.
The Employee Retirement Income Security Act (ERISA) governs most large employee retirement plans in the US. An entity is considered a fiduciary of such a plan, the law says, “to the extent that [it] exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets.”
Fiduciaries have the duties of loyalty and prudence. The complaint quotes an earlier case that requires fiduciaries to keep “an eye single to the interests of the [ERISA] participants and beneficiaries.”
This means that when companies and those who manage their retirement plans make decisions, they should have the interests of the participants and beneficiaries at heart and not their own or those of other parties.
However, the complaint claims that West Corporation and those handling its defined-contribution retirement plan violated this principle. The complaint says, “For every year 2013 through 2017 (financial information for 2018 is not yet available), the fees charged to Plan participants for administrative services is [sic] greater than 90 percent of its comparator fees, without regard to whether fees are calculated as cost per participant or percent of total assets.”
How high are they? “The fees are up to 29 times higher than the fees of comparable funds.”
Such fees reduce the value of the shares owned by the plan participants.
The plan falls into the range of large plans, with between 5,000 and 9,999 participants and participant assets of $250 million to $500,000. Eleven other plans of comparable size submitted information to the government in 2107.
The complaint shows tables that compare the West plan’s costs on a per-participant and percentage-of-assets basis with these other companies. It concludes, “The total difference from 2013 to 2017 between West’s fees and the average of its comparators based on a total number of participants is $6,386,552.” The total based on asset size, it says, is $6,831,848.
The complaint also shows tables of the plan’s investment options, their cost in basis points, the cost of comparable investments, and the percentage of difference. The percentages range from negative 2% in one instance (the only lower-cost instance) to 2800%, with most being in double digits.
The complaint says, “Prudent fiduciaries … will minimize plan expenses by hiring low-cost service providers and by curating a menu of low-cost investment options.”
The complaint brings suit for breach of fiduciary duties.