Adidas Sued Over Excessive Fees for 401(k) Participants

Plaintiffs in the lawsuit argue that passive funds would have resulted in better returns net of fees that the actively managed funds offered in the plan.

Participants in the Adidas Group 401(k) Savings and Retirement Plan have filed a proposed class action lawsuit against Adidas America over the plan’s administrative and investment fees.

According to the complaint, for every year between 2013 and 2017, the administrative fees charged to plan participants were greater than a minimum of approximately 75% of its comparator fees when fees are calculated as cost per participant. And for every year between 2013 and 2017 but two, the administrative fees charged to plan participants were greater than 80% of its comparator fees when fees are calculated as a percent of total assets.

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The complaint includes tabular depictions of the Adidas plan’s fees calculated as cost per 401(k) plan participant/beneficiary and as a percentage of the total plan’s assets when compared to a representative group of plans with a participant count from 5,000 to 9,999 and plans with a total value of plan assets greater than $500 million. It shows the total difference from 2013 to 2017 between Adidas’ fees and the average of its comparators based on total number of participants is $6,242,659. The total difference from 2013 to 2017 between Adidas’ fees and the average of its comparators based on plan asset size is $6,078,234.

The lawsuit contends that the plaintiffs had no knowledge of how the fees charged to and paid by Adidas plan participants compared to market norms.

The participants also allege the Adidas plan’s fees were also excessive when compared with other comparable mutual funds not offered by the plan. A chart in the complaint shows the 3-year return of investments offered by the Adidas plan compared to 3-year returns of comparable investments.

“By selecting and retaining the Plan’s excessive cost investments while failing to adequately investigate the use of superior lower-cost mutual funds from other fund companies that were readily available to the Plan or foregoing those alternatives without any prudent reason for doing so, Adidas caused Plan participants to lose millions of dollars of their retirement savings through excessive fees,” the lawsuit alleges.

The lawsuit suggests that prudent fiduciaries exercising control over administration of a plan and the selection and monitoring of designated investment alternatives will minimize plan expenses by hiring low-cost service providers and by curating a menu of low-cost investment options.

It argues that the funds chosen by Adidas from which plan participants may elect to invest are actively managed, which in significant measure results in the higher administrative fees. The plaintiffs suggest Adidas could have offered passively managed funds as an alternative to plan participants, which would have resulted in significantly lower administrative fees yet generated comparable returns.

They claim that it is understood in the investment community that passively managed investment options should either be used or, at a minimum, thoroughly analyzed and considered in efficient markets such as large capitalization U.S. stocks. The lawsuit contends this is because it is difficult and either unheard of, or extremely unlikely, to find actively managed mutual funds that outperform a passive index, net of fees, particularly on a consistent basis.

“To the extent fund managers show any sustainable ability to beat the market, the outperformance is nearly always dwarfed by mutual fund expenses. Accordingly, investment fees are of paramount importance to prudent investment selection, and a prudent investor will not select higher-cost actively managed funds unless there has been a documented process leading to the realistic conclusion that the fund is likely to be that extremely rare exception, if one even exists, that will outperform its benchmark over time, net of investment expenses,” the complaint states.

The participants allege Adidas’ decision-making, monitoring and soliciting bids from investment funds was deficient in that it resulted in almost no passively managed funds options for plan participants, resulting in inappropriately high administrative plan fees.

SURVEY SAYS: Moving Independence Day Celebration

PLANSPONSOR NewsDash readers weigh in on whether the Independence Day holiday should be moved to a Friday or Monday.

Last week, I asked NewsDash readers, “Would you rather celebrate Independence Day on July 4, no matter on which day of the week it falls, or move the holiday to the Monday or Friday of that week?”

 

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The vast majority (83.7%) of responding readers say Independence Day should be celebrated on July 4, no matter on which day of the week it falls. Trailing by a wide margin, 9.8% of readers chose Friday of that week, 8.7% chose Monday of that week, and 1.1% had no opinion.

 

Comments left by readers explained the majority’s reasoning, as many claimed July 4 is the actual “birth date” of America and should be celebrated as such, just as we celebrate our own birthdays. Others said important historical holidays shouldn’t be set “just for convenience.” Of interest is that Congressional history shows independence was formally declared on July 2, 1776, a date that John Adams said would be “the most memorable epocha in the history of America.” On July 4 of that year, Congress approved the final text of the Declaration, but it wasn’t signed until August 2.

 

Others mentioned they like a break during the week, and one suggested moving it to either Monday or Friday, depending on which weekday it falls. Editor’s Choice goes to the reader who offered a joke: “Do you know why there are no knock-knock jokes about the 4th of July? Because freedom rings!”

 

Thank you to all who participated in the survey!

 

Verbatim

It is a celebration of our nationhood. It should not be relegated to a convenient day. Independence Day was not won by convenience and it should remain a remarkable day.

People in my neighborhood shoot off fireworks for the week before and the week after anyway (even though it’s illegal within the city limits), so it really doesn’t matter what day is the “official” day.

Good grief — is nothing sacred?!?

Considering July 4 wasn’t the day it was written, signed or publicized, there is little actual significance to the day. I’d rather celebrate the first Friday in July!

I will celebrate on the exact date no matter what the government decides to do with the “holiday.” What happened on that date is far more important than your convenience.

It’s July 4 – you can’t really change the date but it wouldn’t hurt to always give two days. 1 – the holiday and 2 the day after. We get 2 days if it falls on a Tuesday or Thursday – to make it a 4 day weekend. It’s nice not to have to worry about staying up late to watch fireworks and then having to get up early the next day.

It should be celebrated no matter which day. It is about honoring our freedom and not when it is convenient.

If it falls on a Monday or Friday, leave as is. If it falls on a Tuesday, have Mon/Tues off. Falls on Wed, have Wed-Fri off. Falls on Thursday, have Thur/Fri off.

Many people are already ignorant about much of the founding on our country. We should not take away one hint about when the declaration of independence was adopted.

It’s July 4, Independence Day. Not July something or other! I am amazed this is even on anyone’s radar!

Even on a Wednesday, it’s great to get a mid-week day off!

It’s kind of like a birthday. We don’t get to change the day we were born.

July 4

I gather this is the survey question because some “genius” has stated an opinion that yet another piece of our nation’s history has to be placed on the trash heap. Enough.

Moving it to be just another long weekend just doesn’t seem right. The holiday is about more than time off of work and cookouts.

A birthday is a birthday. It’s not determined by convenience.

Holidays were not created in order to have three day weekends.

It’s the 4th of July. The 4th. Case closed.

For Heaven’s sake, observing a holiday should not be about having a 3 day weekend off from work, but remembering what the event was and how that event impacted us.

No way should we change it. This day marks the birth of our country. It is the most important non-religious holiday we celebrate.

Come on! Moving it would dilute the significance of the date – July 4th. Would we consider moving Christmas in a similar fashion from December 25th? Happy Birthday America!

It’s a special holiday, and you should not move it.

Similar to Memorial Day or Labor Day, Independence Day Celebration should always fall on a Friday.

Dates of significance should be celebrated on the date that they fall on, otherwise they may lose some of their significance. What if Mexico moved the date to remember the Battle of Puebla each year? Cinco de Mayo; Cuatro de Mayo; Tres de Mayo?

Just like Veteran’s Day & Christmas, some holidays are important enough that then need a date, not a day. Make the day more special rather than a convenience of making a long weekend.

Independence Day is too meaningful to make it just another 3rd Monday of the month holiday.

Do you know why there are no knock-knock jokes about the 4th of July? Because freedom rings!

I know not everyone had the luxury of getting the Friday after the 4th off, but it was a great way to have a 4 day weekend! If we always celebrated on a Friday or the weekend, we wouldn’t get this sometimes surprisingly little perks and extra days off! 🙂

So many people take extra days off around this holiday, it really doesn’t matter what the official holiday is. But, it does seem more patriotic to celebrate on the specific day.

Maybe everyone should celebrate their ‘birthday’ on a Monday? When will convenience stop being the norm?

This is one of those holidays like Christmas that should be celebrated on the actual day. Even though the 4th fell on a Thursday this year, there were celebrations in our area the weekend before in addition to the days preceding July 4th. The celebration has already stretched out beyond the actual day of.

American Independence Day is July 4.

Business sign this week asked “Do they have 4th of July in England.”

We should ALWAYS celebrate on July 4th – the day is NOT about long weekends and a day off of work. It’s about celebrating the birth of our country and its independence

Moving Independence Day to Monday or Friday of the week would be like moving Christmas or New Year’s Day to Saturday or Sunday. Leave it alone!!

I actually like holidays that move through the week, as it changes the character of the holiday from year to year, it seems to me. Tuesday or Thursday holidays are the best, as it encourages people – or their employers – to take or offer the Monday or Friday and create a long weekend. Wednesday holidays are lower key – we need them from time-to-time, too. About once every five years – it works out nicely!

Although it would be nice to ensure a long weekend, unlike the other holidays that fall on the same day of the month (i.e. last Monday), Independence Day celebrates our independence as a country. As such, we should celebrate it on the actual date.

Friday is best so you don’t have to drag yourself in to work the next day…

July 4th is my most favorite holiday. To keep its significance and patriotism intact, I prefer it should to be celebrated and kept on July 4th.

If it’s on the 4th, I know what day it is every year 🙂

4th of July is a specific date (duh). It would be like changing your birthday each year just so it falls on a weekend.

When we are commemorating a specific event/date in history, it should be celebrated on that date. July 4 marks the founding of our nation — don’t trivialize it by moving it to another day for our scheduling convenience.

Some traditions are best left as is.

It’s the 4th of July duh

Maybe it’s me getting older, but fireworks are getting out of control. They scare animals, veterans and numerous others and should be limited or possibly restricted entirely.

Christmas and 4th of July have to stay on their actual dates!

This is a pretty dumb survey. How do you celebrate the 4th on say the 7th?

Same with Christmas–move it to Monday!

Well, let’s see what the text says … In Congress, July 4, 1776. The unanimous Declaration of the thirteen united States of America, When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

I’ve no doubt that there’s an idiot politician out there somewhere (OK, let’s be honest, there are a LOT of idiot politicians out there) who thinks creating a Monday holiday out of this is a good idea. John Adams himself thought that July 2 (the date on which the vote on independence was actually taken) would be the date that history would commemorate. But these days there’s so little of our actual history taught in schools, or celebrated as a nation. The events of the fourth of July should be celebrated on July 4, even if you want to call it “Independence Day.”

 

 

NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Institutional Shareholder Services (ISS) or its affiliates.

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