RR Donnelley and Cognizant Technology Solutions were sued over their 401(k) plans this week, the latest targets in a recent chain of copycat lawsuits with no end in sight.
Law firm Walcheske & Luzi filed the complaint against RR Donnelly Thursday in U.S. District Court in the Northern District of Illinois. That case alleges that the communications and printing company breached its fiduciary duty under the Employee Retirement Income Security Act by allowing the $1.2 billion plan to pay unreasonably high administrative and managed-account fees. The defendant also allegedly did not disclose all fees to participants, according to the complaint. The proposed class would apply to an estimated 25,000 participants who were in the plan as far as six years back.
The plan has paid for record-keeping and administrative costs through revenue-sharing fees baked into mutual funds on the menu, with average per-participant fees for those services totaling about $79 between 2014 and 2019, according to the complaint. Participants in several comparably sized plans pay fees of less than $40 per year, the plaintiffs wrote.
RR Donnelley declined to comment on the lawsuit.
Law firm Capozzi Adler, which has filed dozens of very similar cases this year against plan sponsors, alleged in a complaint filed Wednesday that Cognizant Technology Solutions breached its fiduciary duties of loyalty and prudence and failed to monitor fiduciaries. The case is in U.S. District Court in New Jersey.
The law firm claims that $1.6 billion plan included higher-than-necessary investment management costs, as the plan sponsor allegedly failed to consider an identical but unbranded alternative for several MassMutual funds that used subadvisers. The technology company also failed to consider collective investment trust options for the American Century target-date series, which have a similar design but come with fees one-third the size of the mutual fund version on the plan menu, the law firm alleges. The complaint also claims that Cognizant should have considered cheaper alternatives to other funds, and that the plan’s record-keeping fees were excessive.
The proposed class would include about 40,000 participants. Cognizant did not respond to a request for comment.
A WIN FOR ONE DEFENDANT
Trader Joe’s this week successfully fended off a legal attack from Capozzi Adler, winning a motion to dismiss in federal court on Monday.
The case had allegations similar to those in others brought by the law firm — that the plan did not include the lowest-cost investment options and that it had high record-keeping costs relative to peers.
The dismissal represents the second lawsuit Trader Joe’s has won over its 401(k) plan. The company was sued by different law firms a year ago, with that case being dismissed in April.
In the more recent case, the judge noted that the plaintiffs failed to offer any facts showing that the plan’s record-keeping costs were unreasonable. Further, allegations about the improper use of investor share classes for mutual funds within the plan, rather than institutional ones, fell flat. The plaintiffs didn’t show that the more expensive share classes did not carry benefits that were not available in less costly ones, the judge noted.
The case also did not provide a compelling argument that having a competitive bidding process would have benefitted the plan, the Nov. 30 order read.
The dismissal does not give the plaintiffs the chance to further amend their complaint.
“Despite having been granted leave to amend once and following dismissal of a substantially similar case, plaintiffs added only conclusory allegations that are insufficient to state a claim for breach of the fiduciary duty,” the order stated. “In addition, plaintiffs do not ask for leave to amend, and make no showing that they can allege additional facts … granting plaintiffs leave to amend would be futile.”
As our second lead editor, Cindy Hamilton covers health, fitness and other wellness topics. She is also instrumental in making sure the content on the site is clear and accurate for our readers. Cindy received a BA and an MA from NYU.