Texas-based engineering firm Fluor Corp. is among the latest to be sued over its 401(k) plan, having been hit on Monday with a lawsuit in federal court.
The suit brought against Fluor, similar to numerous other class-action cases, points to allegedly excessive record-keeping fees and poor performance of the plan’s main investment option, a custom target-date series.
The plan, which represented about $3.45 billion among more than 15,000 participants as of the end of 2020, “has suffered millions of dollars in losses resulting from defendants’ fiduciary breaches and remains vulnerable to continuing harm,” the complaint read.
Between 2015 and 2020, the plan’s average annual per-participant record-keeping fee was $96, charged via revenue sharing from the investment options, the plaintiffs stated. That was several times higher than rates within comparably sized plans, which were as low as $23, according to the complaint.
The plan’s custom target-date series, which is managed by BlackRock, is designed to mirror the firm’s LifePath Index Funds. But the custom series lagged other leading target-date suites between the beginning of 2018 and mid-2020, ranking last or near last on three- and five-year returns compared with products from American Funds, Fidelity, State Street, T. Rowe Price and TIAA, according to the complaint.
The case was brought by law firms Miller Shah and Fee Smith Sharp & Vitullo.
Fluor Corp. by policy does not comment on active litigation, a company spokesperson said in an email.
Dish Network was also recently targeted in a class-action lawsuit brought by Miller Shah and Capozzi Adler. The complaint filed last Thursday in U.S. District Court in Colorado is very similar to the one filed against Fluor Corp., raising claims around record-keeping fees and the performance and cost of investment options.
The plan, which represented $841 million among nearly 19,000 workers as of 2020, had annual record-keeping fees per participant averaging $49 between 2016 and 2020, according to the complaint. Similarly sized plans had record-keeping fees of as low as $23, the law firms stated.
They also allege that the target-date series used within the plan, Fidelity’s Freedom line, has high investment management fees and excessive investment risk, as it invests in actively managed underlying mutual funds.
The series has been used within the plan since at least 2009, but the class period proposed by the plaintiffs begins in 2015. At that time, the Freedom series lagged peer target-date suites from several competitors, the complaint stated.
Rather than selecting and retaining that line of products, the plan fiduciaries should could have opted for Fidelity’s Freedom Index series, which had fees of 8 basis points, compared with fees ranging from 42 bps to 65 bps within the active line, according to the suit.
“Defendants’ decision to add the active suite over another prudent TDF suite, and their failure to replace the active suite at any point during the class period, constitutes a glaring breach of their fiduciary duties,” the law firms wrote in the complaint.
Dish Network did not immediately respond to a request for comment.
Just ahead of the Dish Network lawsuit, a nearly identical one was filed against Boston Children’s Hospital over its tax-deferred annuity plan.
Like the other case, the suit filed Jan. 18 against Boston Children’s was brought by law firms Miller Shah and Capozzi Adler, although another firm, Bailey & Glasser, is also representing the plaintiffs.
The lawsuit similarly alleges excessive record-keeping fees within the $1.1 billion plan, which on average charged participants $73 annually between 2016 and 2020. The case also points to fee arrangements as low as $23 in other plans.
Further, the proposed class-action case against Children’s centers on the plan’s use of Fidelity’s active Freedom target-date series, rather than the lower-cost index version.
“Considering just the gap in expense ratios from the plan’s investment in the active suite to the institutional premium share class of the index suite, in 2020 alone, the plan could have saved approximately $3.15 million in costs,” according to the complaint.
The hospital does not comment on active litigation, a spokesperson said in an email.
The same law firms — Miller Shah and Capozzi Adler — recently scored a settlement of nearly $1.9 million in a 2020 case that centered on a plan’s use of Fidelity’s Freedom target-date suite.
Last Friday the firms, along with The Law Office of Dan E. Martens, filed an unopposed motion for settlement in federal court in Texas with defendant Zachry Holdings, a construction company.
The lawsuit raised claims over the plan’s investment options, including allegations that the plan fiduciaries should have used lower-cost share classes, a lower-cost index-based fund or collective investment trusts. That complaint also pointed to higher-than-necessary record-keeping fees and cited other investments beyond the target-date series.
As much as a third of the total settlement, or $625,000, will go toward attorneys’ fees, according to the settlement memo.
Separately, Miller Shah, Capozzi Adler and Whitfield Bryson recently reached a settlement in a 2020 lawsuit filed against Coca-Cola Consolidated. Much like the other cases, the one against the Coca-Cola bottler focused on its plan's use of the active Fidelity Freedom target-date series, as well as allegedly high costs for record keeping. Terms of the agreement were not yet filed with the court.
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