The 401(k) plan participants claimed that the mismanagement of their company’s 401(k) offering caused them to “invest in subpar investment vehicles and pay additional unnecessary operating expenses and fees with no value to the participants, resulting in a loss of compounded returns.”
Specifically, the plaintiffs alleged that they were offered higher-cost share classes when identical lower-cost class shares were available; the plan offered poorly performing actively managed funds instead of passively managed funds with identical investment goals and significantly lower fees; there was no competitive bidding process for service providers such as record keepers; and funds were chosen that were not appropriate for the plan.
“Plainly, the defendants had insufficient processes in place to ensure that the plan participants were provided with prudent investment options and that they paid only reasonable fees,” the investors claimed in their suit.
On Monday, Morgan Stanley pointed out that the complaint states the company, its board, the investment committee, the plan manager, and the company’s directors and officers have “sole authority to amend or terminate, in whole or part, the plan or the trust, and have discretionary authority to control the operation, management, and administration of the plan.”
