Plaintiffs in a class action lawsuit filed April 15 allege that Pharmaceutical Product Development mismanaged its 401(k) plan, opting for costlier investment options and administrative fees than necessary.
The case, filed in U.S. District Court in the Eastern District of North Carolina, is the latest example of ERISA litigation proceeding, even as courthouses are closed and much of the country is essentially locked down. The defendant, Pharmaceutical Product Development, is a global contract research firm that provides services to pharmaceutical companies, biotech firms, medical-device makers and others.
The plaintiffs, who are participants in the roughly $700 million plan, are seeking class certification for all people who were invested in the plan between April 15, 2014 and the date of judgment in the case. Participants in the plan invested in mutual funds with higher expenses than those of comparable products, and the pharmaceutical company allegedly did not consider lower-cost options, in violation of the Employee Retirement Income Security Act, according to the lawsuit. The plan also had higher-than-average record keeping costs for similarly sized 401(k)s, according to the lawsuit.
“As a large plan, the plan had substantial bargaining power regarding the fees and expenses that were charged against participants’ investments,” the complaint stated. “Defendants, however, did not try to reduce the plan’s expenses or exercise appropriate judgment to scrutinize each investment option that was offered in the plan to ensure it was prudent.”
Investments within the plan were as much as 127% more expensive than the median of those in the same category, according to the complaint. About 60% of the investment options were “much more expensive than comparable funds found in similarly sized plans.”
The plan also did not include the lowest-cost share classes of the mutual funds on its menu, which meant that participants were paying 13 to 22 basis points more than they could have, the lawsuit stated. Participants also could have benefited from having lower-cost investment products on the menu, such as collective investment trusts or separate accounts, the plaintiffs wrote.
The lawsuit claims the company breached its fiduciary duties of loyalty and prudence, as well as, failed to monitor plan fiduciaries.
The plaintiffs are seeking restoration of alleged losses to the plan, disgorgement of profits, actual damages, lawyers’ fees and other potential awards.
Pharmaceutical Product Development did not immediately respond to a request for comment.
The plaintiffs are represented by law firms Matheson & Associates and Capozzi Adler.
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