A participant in the Caesars Holdings 401(k) plan on Wednesday sued the company and Russell Investments, alleging that a change in the fund menu cost the plan $100 million in lower returns.
The class-action suit, filed in U.S. District Court in the District of Nevada, was brought by law firms Nichols Kaster and Paul Padda Law.
“Russell obtained control of the plan’s investment menu in 2017 and promptly filled the plan with its own poorly performing proprietary funds,” the complaint read. “Russell’s gambit was a life preserver for its struggling funds and brought $1.4 billion in new investment at a critical time when other plan sponsors were leaving Russell’s funds.”
Most of the assets in the $1.4 billion plan went into Russell target-date funds, according to the complaint.
“The plan’s menu did not need an overhaul,” the complaint stated. “[It] offered leading, low-cost investment funds, including age-based balanced options managed by State Street with long track records of success.”
In a statement, Russell Investments disputed the claims that it veered from its fiduciary duty by moving the plan’s assets to its own investment products.
“We believe this suit is without merit and we intend to vigorously defend the firm against these allegations,” the company said.
The lawsuit alleges Caesars Holdings, which owns numerous casinos and entertainment businesses, breached its fiduciary duty under the Employee Retirement Income Security Act by hiring Russell and failing to monitor it. The company stated in an email that it does not comment on litigation.
Health insurance provider Humana is facing a lawsuit over allegedly excessive fees for two mutual funds and the record-keeping service in its $5.3 billion 401(k) plan.
Law firms Capozzi Adler and Kirk Law brought the class action case April 13 against the Louisville, Kentucky-based company. The suit is filed in U.S. District Court for the Western District of Kentucky.
The lawsuit takes aim at the investment-management fees in the Delaware Small Cap Value and Pimco Total Return funds. Class I shares of the Delaware fund carried expenses of 90 basis points, although the R6 share class not used by the plan has fees of 72 bps, according to the complaint. Even then, the Investment Company Institute category median is 35 bps, the plaintiffs stated. The plan also used A shares of Pimco’s Total Return, which had net fees of 105 bps, compared with 30 bps for the ICI category average and 80 bps for I shares of the same fund, according to the complaint.
Additionally, participants paid about $60 per person for record keeping for each year between 2015 and 2019, while a more reasonable rate might have been about $40, the plaintiffs stated in the lawsuit.
Humana did not respond to a request for comment.
The plaintiff’s claims include breach of the fiduciary duty of prudence and failure to monitor fiduciaries.
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