A pair of Allianz Asset Management of America 401(k) Savings and Retirement Plan participants have claimed in federal court that plan fiduciaries engaged in self-dealing, according to the complaint, Chad Rocke and Christopher Collins v. Allianz Asset Management of America et al.

The plaintiffs’ attorneys allege two counts of fiduciary breach—of loyalty and prudence—against the company, the plan committees and numerous individuals, and—failure to monitor fiduciaries.

“Although using proprietary options is not a per se breach of the duty of prudence or loyalty, a fiduciary’s process for selecting and monitoring proprietary investments is subject to the same duties of loyalty and prudence that apply to the selection and monitoring of other investments,” the complaint states. “Based on the defendants’ decision to maintain an all-proprietary lineup in lieu of any less expensive and otherwise superior nonproprietary alternatives, it is reasonable to infer that the defendants’ process for selecting and monitoring the Allianz Funds was imprudent and disloyal.”

Workers contributing to the savings and retirement plan during this time were only offered investments managed by either Allianz Global Investors or Pacific Investment Management Company LLC—except the self-directed brokerage account—both of which are subsidiaries of Allianz, according to the complaint. For example, at year-end 2021, the plan’s menu consisted of three proprietary collective investment trusts and 36 proprietary mutual fund investments, the plaintiffs allege.

The retirement plan fiduciaries are alleged to have maintained an all-proprietary fund lineup that included expensive, underperforming investments, for the benefit of the defendants and at the expense of plan participants from 2018 to the present, the complaint states.

The plaintiffs’ attorneys allege the defendants’ use of proprietary funds also caused participants to incur excessive fees, because the AllianzGI and PIMCO proprietary mutual funds are actively managed funds. As such, the active funds charged an annual operating expense, paid to AllianzGI or PIMCO and deducted from the rate of return of the fund, according to the complaint.

“In part because of the high fees associated with the AllianzGI and PIMCO proprietary investment products, these investments tended to underperform, costing the plan tens of millions of dollars in lost benefits that participants would have had in their accounts had the plan’s investments been managed in a prudent and impartial manner,” the complaint states. “A prudent fiduciary offering proprietary high-fee options like the AllianzGI and PIMCO Funds would continuously monitor whether the higher total plan cost as a result of using an exclusively all-proprietary lineup was justified by a reasonable expectation of increased returns.”

From 2018 through the end of 3021, the last year for which data is publicly available, the Allianz 401(k) plan had between 4,156 and 4,710 participants and comprised approximately $1.1 billion to $1.9 in total retirement assets, according to the complaint. The plaintiffs’ attorneys requested that a class action be certified by the U.S. District Court for the Central District of California and be applied to all participants of the Allianz Asset Management of America 401(k) Savings and Retirement Plan, who were invested in the AllianzGI or PIMCO Funds at any time on or after December 27, 2017, excluding individuals with any responsibility for the plan’s administrative functions or investments.

The named defendants in the lawsuit include Allianz Asset Management of America, the administrative plan committee of the 401(k) Savings and Retirement Plan, the retirement plan committee of the Allianz Asset Management of America 401(k) Savings and Retirement Plan and 30 unnamed individuals.

The plaintiffs are represented by the Keller Law Group, based in Los Angeles and Nichols Kaster, based in Minneapolis.

Allianz Asset Management of America is based in Newport Beach, California, and a division of global financial services company Allianz SE, headquartered in Munich.

A spokesperson for Allianz in Munich declined comment on the litigation.