Law firm Capozzi Adler struck again this week with yet another lawsuit over allegedly excessive 401(k) fees, this time against multi-level marketing company Amway’s parent entity.
The law firm has brought dozens of class-action lawsuits against 401(k) plan sponsors this year, far surpassing the volume of cases filed by other plaintiffs’ firms.
In the complaint filed Nov. 9 in U.S. District Court in the Western District of Michigan, Capozzi Adler wrote on behalf of several plaintiffs that Amway’s parent firm, Alticor, breached its fiduciary duties of loyalty and prudence and allegedly failed to monitor other fiduciaries overseeing the plan.
Participants in the nearly $1.4 billion retirement plan have overpaid for administrative and investment expenses for years, to the tune of millions of dollars, the law firm alleges in the complaint.
There were about 5,400 participants in the retirement plan at the end of 2019, according to data from the Department of Labor. Amway allows its full-time employees to participate in the plan, rather than its network of more than 1 million “independent business owners” who distribute its lines of health and home products. The company provides matching contributions to participants with a five-year vesting schedule, according to the complaint.
Participants in the plan have paid for administrative services such as record keeping through revenue-sharing fees baked into fees charged by the mutual funds on its investment menu, according to the complaint.
Between 2014 and 2018, annual record-keeping fees varied between about $200 and $335 per participant, while a more suitable fee for a large retirement plan could have been about $35 per participant, according to the lawsuit.
Investment management fees were also as much as several times the median for their categories, according to data from the Investment Company Institute cited in the complaint. Some of the mutual funds have also had poor performance records, with net returns trailing peer group averages for years, the law firm wrote.
To keep costs lower, the plan sponsor should have considered lower-fee alternatives to the mutual funds on the plan menu, including passively managed funds and collective investment trusts, according to the complaint. One fund on the plan menu was also available in a considerably lower-cost share class, the law firm stated.
The law firm is seeking compensation for the proposed class for the alleged losses resulting from breaches of fiduciary duty as well as damages, lawyers’ fees and other potential compensation.
"Amway has always been fair, generous and competitive in its delivery of retirement benefits," the company said in an email. "We stand by the management of the Retirement Savings Plan we offer, and we will vigorously defend against these baseless accusations."
On its site, Amway points out in answers to frequently asked questions that it is the world’s largest direct-selling company and refutes claims of being a cult, a scam and a pyramid scheme.
“The White House has extremely strict ethical guidelines with respect to issues like this,” said Press Secretary Karoline Leavitt.
Just how much does it cost for a financial advice exec to stay out of prison?
The advisor both prices FSK's private loans and gets paid on those prices, the suit claims
The proposal would end decades of paper-first delivery rules, but keeps a paper opt-out and draws early praise from fund and annuity industry groups.
The Trump accounts are “generationally changing” and bring financial literacy to youth, said IRS chief Frank Bisignano.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
