Compliance November 26, 2018

403(b) Plan Participants Voluntarily Dismiss Lawsuit Against Custodian

The lawsuit accused Matrix Trust Company of violating its fiduciary duties by making unauthorized transfers of participants’ accounts to a bank account maintained by Vantage Benefits Administrators.

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Two 403(b) plan participants have voluntarily dismissed a lawsuit on behalf of themselves and other similarly situated 403(b) plan participants against Matrix Trust Company for making several transfers to an unauthorized account held by recordkeeper Vantage Benefits Administrators.

According to the lawsuit, Matrix, which served as custodian to the plan, executed at least $3 million of unsanctioned transfers from at least five 403(b) plans into a private, Bank of America business account maintained by Vantage or its agents. In a statement at the time the lawsuit was filed, Matrix said, “This lawsuit is completely without merit. Matrix Trust Company did not manage these investment accounts or serve as a trustee or fiduciary for them.”

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A previously filed lawsuit also accused Vantage and Matrix of violating their fiduciary duties by taking 401(k) plan assets.

Just last month, Jeffrey Richie and Wendy Richie, co-owners of Vantage Benefits Administrators, were charged with conspiracy, theft from an employee benefit plan, wire fraud and aggravated identify theft.

According to the indictment, Vantage served as third-party administrator for dozens of retirement funds, including several 401(k)s. With her husband’s knowledge, Ms. Richie—posing as various beneficiaries—allegedly submitted fraudulent distribution requests to the retirement fund custodian, Matrix Trust Co. Instead of depositing the money into beneficiaries’ accounts, however, she transferred it into Vantage’s operating account.

The Richies misappropriated funds from at least 1,000 plan participants in at least 20 employers’ retirement plans, prosecutors say.
Compliance November 26, 2018

Waddell & Reed 401(k) Self-Dealing Lawsuit Is Settled

In addition to a large payment to participants, the firm agreed to have an independent investment adviser assist in making decisions about the plan and its investments for at least three years.
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Waddell & Reed Financial has settled a self-dealing lawsuit by agreeing to have its insurance carrier, RLI Insurance Company, pay $4.875 million into a common fund for the benefit of participants in its Thrift Plan. The funds will be allocated pro rata to participants in proportion to their account balances in the plan during the class period, after deduction of attorneys’ fees and costs, as well as administrative expenses.

Waddell & Reed has also agreed to have an independent investment adviser assist in making decisions about the plan and its investments for at least three years.

The U. S. District Court for the District of Kansas has preliminarily approved the settlement.

The lawsuit, filed in June 2017, alleged that Waddell & Reed, instead of acting for the exclusive benefit of its 401(k) plan and its participants and beneficiaries, acted for the benefit of itself and its affiliates starting June 23, 2011, forcing the plan nearly exclusively into investments managed by Waddell & Reed or an affiliated entity, which charged excessive fees that benefited Waddell & Reed or its affiliated entities and which performed worse than comparable available options. The lawsuit says the defendants could have chosen nonproprietary, less costly, better-performing investment options for the plan.

According to the complaint, “the only criteria (or virtually the only criteria) used by Defendants when determining what investment options to make available to the 401(k) Plan participants was whether the investment product was part of the then-available line-up of Waddell & Reed and Ivy Funds investment products established and managed by the 401(k) Plan’s own Administrator, Waddell & Reed, or its affiliates.”

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