401(k) suits filed against Mercedes, Takeda, American Trust

Two participants in the Mercedes-Benz U.S. retirement plan recently filed a class-action suit against the carmaker, alleging that its 401(k) plan’s sticker price didn’t match its features.

Between 2015 and 2019, the nearly $1 billion 401(k)’s record-keeping and investment advisory fees were at least three times higher than those of peers that had negotiated more favorable terms, according to the complaint.

Participants in the proposed class paid an annual average of $368 for record keeping during those years, while a more reasonable rate would have been closer to $50, the lawsuit alleges. The adviser to the plan was also paid roughly three times as much as the plaintiffs contend it should have been, for example, receiving more than $319,000 from the plan for investment advice in 2016, according to the complaint filed last Friday.

The plaintiffs allege several claims of breaches of fiduciary duties.

The lawsuit was filed in U.S. District Court for the Northern District of Alabama. Representing the plaintiffs and proposed class are law firms Chimicles Schwartz Kriner & Donaldson-Smith, Franklin D. Azar & Associates and Beasley Allen Crow Methvin Portis & Miles.

A representative from Mercedes-Benz’s parent firm Daimler did not respond to a request for comment.

TAKEDA PHARMAECUTICALS SUED

On Tuesday, Takeda Pharmaceuticals became the latest 401(k) plan sponsor sued over its inclusion of a Northern Trust target-date series.

Like several recently filed 401(k) lawsuits against Allstate and Northern Trust, the plaintiffs in the new case allege that the pharmaceutical company fell short of its fiduciary duty by opting in 2010 for the then-new collective investment trust series and retaining it within the plan until 2019. The Northern Trust Focus Funds considerably underperformed target-date products available from competitors such as Vanguard, Fidelity and T. Rowe Price, according to the new lawsuit.

The case, filed in U.S. District Court for the District of Massachusetts, was brought by prominent 401(k) litigator Schlichter Board & Denton, as well as the Naumes Law Group.

“In 2019, and only after substantial losses … the Focus Funds were removed from the plan,” the complaint read. “By failing to act as a prudent and diligent investment professional, defendants caused plan participants to lose substantial retirement assets.”

Had the same plan assets been invested in competitors’ products, participants collectively would not have lost between $22 million and $36 million, the law firms wrote.

As of the end of 2019, the plan represented more than $4.1 billion in assets among about 17,500 participants, according to data from the Department of Labor.

Takeda Pharmaceuticals could not comment on ongoing litigation, a company spokesperson said in an email.

[More: Two new 401(k) lawsuits and one big settlement]

TRUSTEE ALLOWED FRAUDULENT DISTRIBUTION: PLAINTIFF ALLEGES

Retirement plan trustee American Trust was sued earlier this month over an unauthorized withdrawal of more than $124,000 from a participant’s 401(k) account.

An unknown third party requested the distribution on Feb. 14, 2020, though the plaintiff, Raymond Mandli, claims that the trustee did not inform him quickly about the transaction. The retirement plan is sponsored by the plaintiff’s firm, Mandli Communications.

“Despite marketing and branding itself as a fiduciary willing to assume responsibility and the risk of liability with respect to the employer sponsored retirement plans for which it provides fiduciary service, American Trust has refused to take responsibly for its unauthorized distribution from Mr. Mandli’s Plan account by reimbursing the account for the amount of the unauthorized distribution,” the complaint read.

The unknown person requesting the distribution provided a phone number and email address that did not match those on Mandli’s account, according to the complaint. Nonetheless, American Trust sent distribution paperwork to the email address, and the fraudster completed it, signing with an electronic copy of the participant’s handwritten signature, according to the complaint. The funds were reportedly transferred to an apparently new checking account bearing Mandli’s name, the plaintiff stated.

American Trust did not respond to a request for comment about the allegations. The lawsuit was filed Jan. 12 in U.S. District Court for the Western District of Wisconsin.

American Trust has been the trustee to the plan since 2014, according to court records. The Wisconsin-based Mandli 401(k) plan represented about $3 million among 191 participants as of the end of 2019, DOL data show.

Mandli is suing American Trust for breach of fiduciary duty and equitable relief. Law firm DeWitt LLP represents the plaintiff.

[Podcast: Her Success Matters featuring Blue Zone Wealth Advisors CEO Judith Lu]

LONG-RUNNING 403(b) CASE ENDS IN $13 MILLION SETTLEMENT

The University of Pennsylvania has agreed to settle a 2016 lawsuit over allegedly excessive costs and underperforming investment options. The agreement, sent to court Jan. 14, includes a $13 million monetary settlement, up to a third of which, or $4.3 million, will go to attorneys’ fees.

The suit is one of many launched by law firm Schlichter Bogard & Denton several years ago against prominent colleges and universities. The plaintiffs claimed that the school failed plan participants by opting for multiple record-keeping services, such as a relationship with TIAA that included the CREF Stock Account as an investment option on the plan menu.

The settlement also includes several nonmonetary components. The university agreed to begin using just one record keeper for the 403(b) by spring, and it will have an updated investment menu with the lowest-cost share classes available. The school will also ensure that any excess revenue-sharing fees in mutual fund investments within the plan that are used to offset administrative costs will be reimbursed to plan participants. 

Go deeper on retirement at RPAConvergence.com.

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