MGM Resorts, Duke Energy face 401(k) lawsuits

Duke Energy and MGM Resorts are among the latest to be sued over their 401(k) plans, in a year that has so far been a bonanza for retirement plan litigation.

Plaintiffs in each of the class-action cases claim the plan sponsors let the 401(k)s carry excessive fees.

The Charlette, N.C.-based energy company was sued Sept. 23 in U.S. District Court in the Western District of North Carolina Charlotte Division. The firm’s $8.6 billion 401(k) was among the biggest in the country, though participants paid nearly double the going rates for record keeping and other administrative services, according to the complaint. Those fees ranged from $58 per year to $67 per year between 2014 and 2018, during which time comparably sized plans were able to negotiate rates of $20 to $30 per participants, the lawsuit stated.

The plan has retained the same record keeper, Fidelity Investments, for at least a decade, according to the complaint. That firm is not named as a defendant in the case.

“This gives rise to an inference that defendants failed to monitor recordkeeping compensation during that period, and failed to solicit competitive bids from other recordkeepers that would have resulted either in retention of a new recordkeeper or a significant reduction in the rates paid to its existing recordkeeper,” the complaint read.

The plan also included a managed-accounts option provided by Financial Engines since at least 2010, which the plaintiffs said that, at 50 basis points, was significantly higher than other available services. Participants paid that fee regardless of their account size, while some managed-accounts providers use tiered pricing models, the plaintiff noted.

“As a consequence of the foregoing breaches of the duty to monitor, the plan suffered millions of dollars of losses due to excessive fees,” the complaint read.

Financial Engines was not named as a defendant in the case.

“Duke Energy’s retirement savings plan has been carefully designed and administered as a retirement savings tool for the company’s 29,000 employees,” the company said in an email statement. “Duke Energy and its fiduciaries take seriously their responsibilities under the federal Employee Retirement Income Security Act of 1974, and work diligently to fully discharge their duties under the law. The company will vigorously defend against this lawsuit.”

Law firms Tharrington Smith, Nichols Kaster and the Levin Law Firm represent the plaintiff and proposed class.


Several named plaintiffs filed their Sept. 23 in U.S. District Court in Nevada, alleging that sponsors to the $1.6 billion plan breached their fiduciary duty by opting for high-cost mutual funds for the plan menu. Many of the funds on the menu had investment fees that were roughly twice the size of the median for comparably sized 401(k)s, according to comparisons of 2016 data from the Investment Company Institute cited in the complaint.

Additionally, the funds in the plan were not necessarily the lowest-cost share classes available, the plaintiffs stated. The complaint also cites an alleged failure to consider lower-cost actively managed funds or passive funds as a breach of fiduciary duty.

Record-keeping costs were also much higher than average, at about $70 for each of the 31,000 participants in 2018, compared with comparable industry rates of $35, according to the complaint. Some of the plan’s administrative expenses were paid through revenue sharing charged by the investment options, and some of those fees were partially rebated to participants, the complaint stated. The record keeper, Prudential, was not named as a defendant.

MGM Resorts declined to comment on the litigation.

The law firm that brought the complaint, Capozzi Adler, has filed dozens of 401(k) excessive-fee cases this year.

The post MGM Resorts, Duke Energy face 401(k) lawsuits appeared first on InvestmentNews.

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