Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...
By Jacklyn Wille
Jan. 15 — Great-West Life & Annuity Insurance Co. is the latest retirement plan service provider to be hit with a class action complaint alleging it charges and collects excessive 401(k) fees.
According to the complaint, filed Jan. 14 in the U.S. District Court for the District of Colorado, Great-West's retirement plan business—branded Empower Retirement—receives kickbacks from the mutual funds it offers to 401(k) plans as part of an impermissible “pay-to-play scheme” that drains money from plan participants' retirement savings.
Great-West also “deceptively characterized” these kickbacks as service fees and reimbursements, even though they bore “absolutely no relationship to the cost or value of any such services,” the complaint alleged.
The complaint, filed by a participant in the TPS Parking Management LLC 401(k) Plan, seeks to represent a class of “thousands” of 401(k) investors. According to the complaint, Great-West services more than 32,000 retirement plans covering more than 7 million participants, and it administers more than $416 billion in assets.
A spokesman for Great-West told Bloomberg BNA that the company believes the suit is without merit and will defend itself vigorously, but declined to comment further.
If recent appellate court decisions are any indication, the participants bringing this suit may face an uphill battle in their quest to treat Great-West as a fiduciary under the Employee Retirement Income Security Act. Earlier this month, the U.S. Court of Appeals for the Eighth Circuit became the third federal appellate court to reject efforts to impose fiduciary liability on 401(k) service providers such as Principal Life Insurance Co., American United Life Insurance Co. and John Hancock Life Insurance Co (06 PBD, 1/11/16).
These defendant-friendly rulings have come over the strong objections of the Department of Labor, which filed amicus briefs urging each court to treat the service providers as ERISA fiduciaries. However, the department is currently in the process of finalizing a regulation that is expected to expand the definition of an ERISA fiduciary in a way that could encompass 401(k) service providers in certain circumstances.
The past two months have seen an uptick in 401(k) fee litigation, with class actions filed against Deutsche Bank Americas Holding Corp., Fidelity Management Trust Co., New York Life Insurance Co., Insperity Inc. and Anthem Inc. Prudential Retirement Insurance & Annuity Co. was suedtwice, once by law firm Shepherd Finkelman Miller & Shah LLP, which filed the instant suit against Great-West.
To contact the reporter on this story: Jacklyn Wille in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
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 firstname.lastname@example.org.
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 email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)