Matrix Trust Co. is facing a class-action lawsuit over 12b-1 fees and float and non-float interest from 401(k) plans, which the firm allegedly failed to report to clients. Minnesota-based MBA Engineering brought the case July 21 against the Denver, Colo.-based Broadridge affiliate, seeking class certification for as many as 60,000 Matrix clients. MBA alleges that Matrix,
the plan custodian, ran afoul of the Employee Retirement Income Security Act by not disclosing the fate of 12b-1
charged by many mutual funds and potential income from float and non-float plan assets. At least 100 Matrix retirement plan sponsor clients have not received the fee disclosures required by the Department of Labor, known as 408(b)(2) notices, the plaintiffs wrote. “Plaintiffs were falsely told by third parties that 90% of the 12b-1 fees defendants would receive would be paid to the plaintiffs. However, records now show that did not happen,” the complaint read. “Accordingly, defendants have, without disclosure, either kept the 12b-1 fees entirely or paid portions of them to parties in interest. Discovery will reveal what defendants did with the 12b-1 fees, but either case constitutes a prohibited transaction.”
The plaintiffs are represented by McCathern Law Firm.
A spokesperson for Matrix said in a statement that the company will defend itself against the claims and expects to prevail in court. “Matrix Trust and its affiliates have provided technology-based solutions to the bank trust and retirement industry with the highest integrity for over 20 years. Matrix vehemently rejects these baseless and unsubstantiated allegations made by MBA Engineering,” the company wrote in an email statement. “We have always acted in a manner consistent with our contractual obligations and in full compliance with the law.” Whether the plaintiffs receive class certification is crucial to the case. The MBA Engineering 401(k) plan, for example, is small, with only 34 active accounts as of the end of 2019, according to a filing with the DOL. The company also has a cash-balance plan. The lawsuit was filed in U.S. District Court in the Northern District of Texas, Dallas Division. The case was filed in that state, rather than Minnesota or Colorado, where the plaintiff and defendant are based, as “ERISA allows for broad nationwide service of process on defendants in any district where they reside or may be found,” the complaint read. [More: Why 401(k) fees are a mystery]
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