Judge dismisses suit against Prudential, CapTrust in 401k fiduciary claim

Dive Brief:

  • A judge dismissed a lawsuit charging companies involved in a 401k plan with breaching their fiduciary duty, reports Employee Benefits News. The plaintiffs claimed that Prudential Retirement Insurance and Annuity Company, Prudential Bank & Trust, FSB, CapTrust Financial Advisors and Ferguson Enterprises Inc. also focused on offering high-priced mutual funds.   
  • Judge Victor Bolden of the U.S. District Court for the District of Connecticut ruled that Prudential was the plan provider rather than the fiduciary, and dismissed the case. He said fiduciary responsibility belonged to Ferguson Enterprises, plaintiff Richard Rosen’s employer, and CapTrust, which Ferguson hired as a plan adviser.
  • Rosen argued that most of the plan’s investment options were mutual funds and that most of those funds were higher priced “actively managed” investments. But the judge said the plan offered lower-priced options, such as a Vanguard index fund and stable value funds, which the plaintiffs could have chosen.

Dive Insight:

The plaintiffs in this case might not have understood the difference between “fiduciary” and “plan provider.” The new fiduciary rule may change the game somewhat in this regard, as it provides broader definitions of who could be considered a fiduciary. But in this case, the ruling would likely still be the same, as a plan advisor was specifically hired for this job.

In their argument, the plaintiffs seemed to imply that plan participants were being steered toward high-priced investment funds. “Actively managed” funds cost more than “passively managed” funds. But as the judge noted, the plan also offered lower-priced options that participants could have selected.

Employers must review all plans – whether retirement savings or healthcare – and make sure employees fully understand them.


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Filed Under: Comp & Benefits Legal
Top image credit: Flickr; Supermac1961