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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.
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Text of the complaint is at http://www.bloomberglaw.com/public/document/Johnson_et_al_v_Fujitsu_Technology_and_Business_of_America_Inc_et.
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