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 29 — Franklin Resources Inc. employees have sued the company for including in-house mutual funds in their 401(k) plan when better-performing and lower-cost funds allegedly were available ( Cryer v. Franklin Resources, Inc., N.D. Cal., No. 3:16-cv-04265-EDL, complaint filed 7/28/16 ).
This lawsuit is the latest in a flurry of recent class action challenges to financial services companies that include in-house mutual funds in their 401(k) plans. Just last week, employees brought similar claims against New York Life Insurance Co.
Other recently filed lawsuits are pending against:
In April, a federal judge issued a short order declining to dismiss the claims against BB&T Corp. A similar order was entered in the case against Putnam. Neither order included a detailed explanation of the judge's reasoning.
According to the newest class action complaint, Franklin Resources—which does business as Franklin Templeton Investments—invested hundreds of millions of its workers' retirement dollars in funds managed by the company and its subsidiaries, even though these funds carried fees between 57 and 1,100 percent higher than those of comparable funds offered by Vanguard. This decision caused them to lose more than $64 million in retirement savings, the workers allege.
The workers also challenge the company's decision to include a money market fund in the 401(k) plan instead of a stable value fund that would have provided “inflation-beating returns.” This decision cost the workers more than $9 million in retirement savings, they allege.
Finally, the workers challenged the total administrative costs borne by plan participants, which they alleged to be more than $48 per participant, per year. According to the workers, this was “nearly double” the costs of comparable plans.
The workers who filed suit seek to represent a proposed class of more than 1,000 participants in the Franklin Templeton 401(k) plan.
The lawsuit was filed July 28 in the U.S. District Court for the Northern District of California by Bailey & Glasser LLP, Izard Kindall & Raabe LLP and Creitz & Serebin LLP.
A spokeswoman for Franklin Resources declined Bloomberg BNA's request for comment on the lawsuit.
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Text of the complaint is at http://www.bloomberglaw.com/public/document/Cryer_v_Franklin_Resources_Inc_et_al_Docket_No_316cv04265_ND_Cal_.
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