What do Gucci, CenturyLink and Fujitsu have in common? Read On!
I continually write on fiduciary issues and am very amazed by the number of lawsuits still being initiated and settled. The trend is certainly not slowing down and fiduciaries, beware. Please note that even though the service provider’s name is often in the headlines, it is the plan fiduciaries that are being sued. Additionally, I notice that the size of the plans being sued are getting smaller, meaning no longer are just the mega-plans being targeted.
According to the Investment Company Institute (ICI), 401(k) plans held $5 .1 trillion in plan assets as of June 2017. With these dollars, it`s not difficult for plaintiff attorneys to be motivated to get creative with the types of suits being brought against fiduciaries. Many of the newer fiduciary breach suits against corporations, universities and plan providers involve poor decision-making for both the selection and monitoring of investment options and breaches in administrative decision-making. In addition, the suits go beyond just the use of expensive share classes and are now delving into investment strategy and sub-par performance. As a reminder, 401k) plan fiduciaries are subject to strict duties of prudence, loyalty and avoiding conflicts of interest and acts of self-dealing.
One recent case involves CenturyLink and their decision to utilize six different investment managers for their large cap fund (5 active and 1 passive). The fund was benchmarked to the Russell 1000 Stock Index and the suit alleges underperformance against the index for years. More on the case can be found here:
Birse v. CenturyLink, Inc et al
Another case involves Fujitsu and their decision-making regarding excessive recordkeeping expenses and their custom designed Target Date Funds. As a result of the suit filed on June 30th, 2016, Fujitsu decided to settle for $14 million citing the complexity and expense to litigate these types of cases. More on the case can be found here:
Johnson et al v. Fujitsu Technology and Business of America, Inc. et al
This suit is certainly not in style, as Gucci America Inc. is being charged for several fiduciary breaches. It is being alleged that their service provider, Transamerica Retirement Solutions, had included excessively expensive and proprietary investment options in Gucci`s $96 million 401(k) plan. The suit alleges that participants were assessed unreasonable administration expenses and that the plan retained high cost and poor performing investments. More on the suit can be found here:
Gucci Gulp? Another Excessive Fee Suit Filed
Another important fact to the Gucci 401k) suit is that the plan assets are only $96 million, far less than the plans typically involved in these types of cases. This should serve as a warning to plan fiduciaries that regardless of your plan size, the fiduciary standards are uniform and applicable to ALL plan sponsors.
