Plan Provider Faces Excessive Fee Suit

As in past cases taken up by Jerry Schlichter, lead attorney for some 50,000 potential plaintiffs being represented by Schlichter, Bogard and Denton, a new lawsuit argues employees unnecessarily lost millions after plan officials and provider partners mismanaged their hard-earned retirement dollars.

The complaint, Pledger, et al., v. Reliance Trust Company, et al., was filed in the U.S. District Court for the Northern District of Georgia, Atlanta Division. Putting a somewhat different spin on retirement plan litigation than the 2015 Supreme Court case Tibble vs. Edison, also argued by Schlichter, it suggests Insperity breached its fiduciary duties by causing the plan participants to pay millions of dollars in excessive recordkeeping fees to Insperity’s proprietary subsidiary, Insperity Retirement Services.

Plaintiffs further argue the plan’s discretionary trustee, Reliance Trust, also breached fiduciary duties “concerning its imprudent investment decisions, including the decision to offer its own proprietary investments.”

“These alleged breaches substantially reduced the retirement assets of the plan participants,” Schlichter says. “The excessive investment management and recordkeeping fees, as well as the performance losses from investing in overly expensive funds, cost participants millions of dollars of their retirement savings.

NEXT: Mutual fund choices challenged

Schlichter’s explanation of the alleged mismanagement continues: despite being a professional employer organization which provides human resources and business solutions to small- and medium-sized businesses throughout the United States, the company failed to engage in a proper process for the selection and retention of a plan recordkeeper for its own 401(k). “Insperity, rather than soliciting competitive bids from outside recordkeepers, chose Insperity Retirement Services, a subsidiary of Insperity Inc., allowing Insperity Retirement Services to receive excessive recordkeeping fees,” Schlichter says.

The complaint also alleges that Insperity and Reliance Trust chose mutual funds and collective trusts with high expenses and poor performance, excluding lower-cost share classes of the identical mutual fund investments. Further breaches allegedly occurred when Insperity Holdings, Inc. failed to “adequately monitor its appointee, Reliance Trust. As a consequence of this breach, the plan suffered substantial losses, through excessive fees and underperforming investments.”

Schlichter argues the Insperity 401(k) Plan, as of December 31, 2014, had over $2 billion in total assets, “which places it in the top 0.08% of the over 621,000 401(k) plans offered in the United States.”

This suit and others filed recently argue plans of that size should expect to get the best pricing and service around viewed on a per-participant cost basis—especially when the company offering the 401(k) is itself successful in the business of selling and administering investments. Earlier this year Aegon was sued over the pricing and other aspects of its own retirement plan, for example, and in 2014 Fidelity faced challenges of its own.