Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
July 1 — A new ERISA class action accuses Fujitsu Technology & Business of America Inc. of breaching its fiduciary duties by designing and administering one of the most expensive large 401(k) plans in the country ( Johnson v. Fujitsu Technology & Business of Am., Inc , N.D. Cal., No. 5:16-cv-03698, complaint filed 6/30/16 ).
Fujitsu's failure to monitor the plan administrative fees resulted in millions of dollars charged to participants, according to the complaint, filed June 30 in the U.S. District Court for the Northern District of California. The proposed class also alleges that the plan fiduciaries imprudently designed and implemented the plan's target-date funds feature in violation of the Employee Retirement Income Security Act.
Nichols Kaster PLLP filed the complaint on behalf of eight plan participants. The law firm has recently filed similar complaints against M&T Bank Corp., American Airlines, Inc., and Deutsche Bank Americas Holding Corp.
As of 2014, the Fujitsu plan had approximately $1.3 billion in assets and 9,891 participants, and it had incurred at least $7 million per year in excess fees when compared with the average for plans of similar size, the complaint says.
The Fujitsu plan is described in the complaint as “the most expensive plan” in America during 2013 and 2014 among plans with more than $1 billion in assets.
Fujitsu didn't immediately reply to Bloomberg BNA's request for comments.
The plan's high costs are allegedly attributable to Fujitsu's failure to use the least expensive available share class for many mutual funds within the plan, to monitor record-keeping and administrative fees, and to manage the plan's investments in a cost-conscious manner, the complaint says.
Had the plan limited its expenses to the average total cost of 0.28 percent for similarly sized plans, participants would have saved approximately $8.18 million in fees in 2014 alone, the complaint says.
In a not-often-seen allegation, the complaint says that the fiduciaries breached their duties by imprudently designing and implementing the plan's target-date funds. These are investment options in which the asset allocation is automatically adjusted to become more conservative as the selected target date approaches and participants get closer to retirement.
The complaint says that Fujitsu transferred the large majority of the plan's assets into a set of custom target-date funds designed by the investment adviser firm Shepherd Kaplan LLC. According to the complaint, the firm had no public track record of managing or designing target-date funds and used a “fundamentally flawed” asset allocation.
Three-quarters of the Fujitsu target-date funds underperformed compared with their benchmark indices, costing participants tens of millions of dollars, the complaint alleges.
The proposed class comprises between 9,800 and 14,000 participants, the complaint says.
To contact the reporter on this story: Carmen Castro-Pagan in Washington at email@example.com
To contact the editor responsible for this story: Jo-el J. Meyer at firstname.lastname@example.org
Text of the complaint is at http://www.bloomberglaw.com/public/document/Johnson_et_al_v_Fujitsu_Technology_and_Business_of_America_Inc_et.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)