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Here’s a term you really don’t want used to describe your 401(k): “One of the most expensive plans in America.”

That’s what law firm Nichols Kaster calls the $1.3 billion retirement plan at the center of a proposed class action against Fujitsu Technology and Business of America Inc. In a lawsuit filed in San Jose federal court, the attorneys alleged a cornucopia of fiduciary breaches tied to excessive fees, record keeping and the components of the company’s target-date funds.

The case, and several like it in the past year, may be harbingers of a new cycle of 401(k)-gone-bad litigation, this time targeting ever-smaller plans.

Nichols Kaster compared the Fujitsu plan’s fees with those of about 650 other plans with more than $1 billion in assets. Among 401(k)s with that much money, the average plan has annual costs that amount to 0.33 percent of assets, according to the complaint; it estimates that Fujitsu’s costs were 0.88 and 0.90 percent for 2013 and 2014. That would have led to at least $7 million in excess fees that could have been socked away in employee nest eggs, the complaint stated. Fujitsu America, which provides technology and business support to affiliated companies, has yet to answer the complaint or appear in the case. A company spokesman declined comment.

Lawsuits such as this one are just the beginning, said Marcia Wagner, a principal at the Wagner Law Group who represents plan sponsors and vendors. The case follows a parade of high-profile suits filed by Jerome Schlichter, of the St. Louis law firm Schlichter Bogard & Denton, alleging breaches of fiduciary duty at some of the largest plans in the U.S. The mega-settlements Schlichter has won, along with a U.S. Supreme Court ruling last year that put plan fiduciaries on high(er) alert about the need to continuously monitor plan investments, has led more law firms to develop and expand fiduciary litigation practices.

With more attorneys seeing an opportunity, smaller plans are starting to feel the heat. After launching four 401(k) lawsuits alleging breach of fiduciary duty late last year, Minneapolis-based Nichols Kaster has filed four more in 2016, most recently against Fujitsu and American Century’s $600 million plan. This year has even seen a 401(k) plan with less than $10 million in assets get hit with a lawsuit.

The complaint against Fujitsu alleges that the plan’s participants were made to pay high fees for its choice of imprudent investments — imprudent, in some cases, because the plan failed to use the cheapest share class for many mutual funds. In one instance, it allegedly used a class with an expense ratio that was 43 basis points higher than another it could have used. The complaint also highlighted what it deemed “idiosyncratic” investments in custom target-date funds created by Boston-based investment advisory firm Shepherd Kaplan LLC, which is also a defendant in the lawsuit. The firm, which became the plan’s investment adviser in late 2011, was a “named investment fiduciary” until July 31, 2015. Shepherd Kaplan General Counsel Bruce Goodman said the complaint is without merit.

Target-date funds automatically rebalance portfolio holdings among asset classes as savers get closer to their retirement date. The custom target-date funds allocated “a wildly excessive percentage of assets to speculative asset classes such as natural resources, emerging market stocks, emerging market bonds, and real estate limited partnerships,” the complaint against Fujitsu stated. A number of the funds used by the plan allegedly had track records shorter than three years and were “extremely expensive.” As of Nov. 30, 75 percent of the target-date funds had underperformed their benchmarks, the plaintiff employees claimed.

The complaint also highlights a practice that many 401(k) plan participants may not know exists: “revenue sharing” between the company offering the funds and the plan’s sponsor — the employer. It’s an allowable practice, though it’s become more controversial. In some cases it can see employers benefit from keeping high-cost investments in the plan because they allow for “revenue sharing” to subsidize the plan’s administrative costs. Nichols Kaster alleges that was the motivation of the Fujitsu plan, and that because of this practice, it paid about $3 million in excess record-keeping fees in 2011.

The 401(k) improved its offerings at the start of 2016, the law firm noted. It moved some investment options into the least-costly share classes, and in March again changed the plan’s management and investment lineup, hiring a new adviser as fiduciary and replacing all the “Fujitsu LifeCycle” funds with a new set of customer target-date funds (it also replaced most of the funds in the plan).

“Unfortunately for the plan and its participants,” lawyers for the employees wrote in the complaint, by moving to cheaper share classes Fujitsu “did not refund the millions of dollars in excessive fees that participants needlessly paid due to defendants’ failure to make this change years earlier.”

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