Jackson National Sued Over In-House Funds in 401(k)

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

A Jackson National Life Insurance Co. employee filed a lawsuit claiming the in-house investment funds in the company’s retirement plan carried high fees that benefited the company at workers’ expense ( Pease v. Jackson Nat’l Life Ins. Co. , W.D. Mich., No. 1:17-cv-00284, complaint filed 3/29/17 ).

The proposed class action claims that Jackson’s retirement plan invested 89 percent of its assets—about $542 million—in investment funds that earned high fees for the company and its affiliates. Eighteen of the plan’s 21 investment options were affiliated with Jackson, the lawsuit claims, and most of those options were “virtually identical” to funds that other institutions offered at “a fraction of the cost.”

At least 20 financial companies, including Morgan Stanley, Wells Fargo and Charles Schwab Corp., have been sued in the past three years over the in-house investment products in their 401(k) plans. So far, judges have sided with the investors by refusing to dismiss cases against BB&T Corp., Allianz, Deutsche Bank and others.

The lawsuit against Jackson National—filed March 29 in the U.S. District Court for the Western District of Michigan—claims that the company’s proprietary funds lagged behind their benchmarks largely as a result of the high fees they carried. The lawsuit specifically challenges the plan’s default investment option, a Jackson National-branded growth fund that allegedly charged 108 basis points while underperforming its benchmark by nearly 5 percent.

The lawsuit seeks to represent a proposed class of more than 5,000 current and former participants in Jackson National’s plan. It was filed by Schneider Wallace Cottrell Konecky Wotkyns LLP, Viviano Pagano & Howlett PLLC, Kehoe Law Firm and Carlson Lynch Sweet Kilpela Carpenter.

A spokeswoman for Jackson National declined to comment on the allegations, citing a policy against discussing ongoing litigation. She told Bloomberg BNA that the company “is proud to provide competitive benefits to associates, including generous profit-sharing contributions and workshops to help associates maximize the benefits provided by Jackson’s 401(k) plan.”

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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