Voya sued by participant in $2.8 million plan for excessive 401(k) fees

The plaintiff claims Voya potentially earns more than $1 billion per year in "excessive compensation" from its nearly 50,000 record-keeping clients

Sep 12, 2017 @ 1:34 pm

By Greg Iacurci

Voya Financial has been sued by a participant in a roughly $3 million 401(k) plan for charging allegedly excessive fees for record keeping and administration services, adding to an emerging trend of retirement-plan-fee lawsuits materializing among small plans.

Plaintiff Sharon Goetz is seeking the "return of undisclosed excessive and unreasonable asset-based fees" for its services to the $2.8 million Cornerstone Pediatric Profit Sharing Plan, and "to prevent Voya from charging those excessive fees in the future," according to a lawsuit filed Sept. 8 in Delaware district court.

Ms. Goetz is seeking class-action status, to represent other defined contribution plans that contract with Voya and its wholly owned subsidiary, Voya Retirement Insurance and Annuity Co., for record-keeping services.

Voya is one of the largest record keepers of DC plans. It provides services to around 47,000 DC plans, with 4.6 million participants and more than $300 billion in assets, according to data from InvestmentNews' sister publication Pensions & Investments.

The plaintiff claims Voya potentially earned more than $1 billion per year in "excessive compensation" on fees the company charged its DC plans.

"Voya denies the plaintiff's claims and we plan to vigorously defend this matter," spokesman Joseph Loparco said. "Other than that, we do not discuss pending litigation."

Lawsuits alleging excessive 401(k) fees for investment-management and record-keeping services aren't new — their prevalence has increased steadily over the past decade. However, those focused on small retirement plans — the market the majority of 401(k) advisers operate in — are fairly new, and some anticipate this as a growing trend.

A participant in a $1.1 million 401(k) plan filed a lawsuit in June against Nationwide for allegedly excessive record-keeping and administration fees.

LaMettry's Collision Inc., an employer sponsoring a $9 million 401(k) was sued in May 2016 for breaching its fiduciary duties, as were fiduciaries of a $25 million plan in July last year.

The Voya lawsuit — Goetz v. Voya Financial, Inc. et al — alleges the Cornerstone plan paid roughly $30,790 for record-keeping services in 2014, amounting to $1,466 per participant; fees increased to $34,568 in 2015, or $1,819 per participant, according to the suit.

Comparing those fees to a survey conducted by consulting firm NEPC, which found median record-keeping fees to be $64 per plan participant in 2015, the lawsuit claims Voya's fees were 36 times more than what would be considered reasonable.

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