A recent U.S. district court decision is the latest ruling over plan fees and may give a legal foothold to participants seeking restitution for investment decisions they deem imprudent.
Judge Susan Richard Nelson of the U.S. District Court for the District of Minnesota ruled against Ameriprise Financial Inc. in a case concerning allegations that the financial services provider selected its affiliated funds for employees’ 401(k) retirement investments at the expense of participants’ returns.
Ameriprise sought dismissal of the suit by current and former plan participants, who are trying to launch a class action. In Krueger v. Ameriprise Financial Inc., (No. 11-cv-02781, Nov. 20, 2012), Judge Nelson affirmed almost all the plaintiffs’ counts of alleged breaches of ERISA fiduciary duties.
Facts of the Case
After Ameriprise spun off from American Express Cos. in 2005, employees moved to the new Ameriprise defined contribution plan were given a number of investment options for their retirement contributions, including several funds managed by Ameriprise’s unit, Ameriprise Trust Co.
Plaintiffs in the case allege that the Ameriprise plan invested “hundreds of millions of dollars in mutual funds managed by Ameriprise subsidiar[y] RiverSource . . . as well as, commingled trusts managed by ATC” despite “many investment options available in the market.” Plaintiffs also claim that these affiliated investment options — which they claim repeatedly performed poorly versus market benchmarks — were “chosen because they were managed by, paid fees to, and generated profits for Ameriprise, its subsidiaries, and [2007 plan trustee] Wachovia.”
In ruling for the plaintiffs, the judge reminded that ERISA’s duty of loyalty requires fiduciaries such as Ameriprise to act with an eye solely to the interests of participants. She said plaintiffs plausibly argued that Ameriprise did not do this when discharging its duties to participants and beneficiaries of the plan.
“Perhaps the most fundamental duty of a [fiduciary] is that he must display … complete loyalty to the interests of the beneficiary and must exclude all selfish interest and all consideration of the interests of third persons.”
Finding out More
To learn more about plan sponsors’ fiduciary duties and investment responsibilities, see ¶210 in The 401(k) Handbook. To read the full story on Thompson’s HR Compliance Expert, go to this link.
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