Voya Financial Inc. is accused in a new lawsuit of charging excessive record-keeping and administrative fees to a small 401(k) plan ( Goetz v. Voya Financial, Inc. , D. Del., No. 1:17-cv-01289-UNA, complaint filed 9/8/17 ).
Voya’s fees are 36 times more than the reasonable amount of compensation that the Cornerstone Pediatric profit sharing plan should have been charged, according to a lawsuit.
The plan has $2.8 million in assets and 19 participants, according to the lawsuit, filed Sept. 8 in the U.S. District Court for the District of Delaware.
Voya in 2014 received $30,790 for record-keeping services, amounting to $1,466 per participant, the lawsuit said.
The fees in 2015 increased to $34,568, which amounted to $1,819 per participant, the lawsuit alleged.
The median record-keeping cost of 113 plans for 2015 was $64 per plan participant, according to a survey by an independent investment consulting firm, the lawsuit said.
It was filed by a participant in the Cornerstone Pediatric’s plan on its behalf and as representative of other similarly situated plans for which Voya provides administrative services.
The participant seeks class treatment for 47,000 plans and 4.5 million individual investors. Based on certain fees charged to the plan, Voya “potentially earns over $1 billion in excessive compensation at the expense of the individual plans and their participants,” the lawsuit said.
The lawsuit comes three months after similar allegations of fiduciary breach under the Employee Retirement Income Security Act were raised against Nationwide Life Insurance Co. by a participant in another small 401(k) plan, which had $1.1 million in assets and more than 27 participants.
Such lawsuits seem to follow a similar legal strategy not to name the plan sponsor as defendant, and instead go against the larger companies that serve the plans.
Litigation involving excessive fees is usually filed over plans with thousands of participants and hundreds of millions of dollars in assets, sponsored by large companies like M&T Bank Corp., American Airlines, Inc., Intel Corp., Anthem Inc., Verizon Communications Inc., and Chevron Corp.
Last year, smaller companies including auto body repair provider LaMettry’s Collision Inc. and Checksmart Financial LLC were sued over excessive fees in their employees’ retirement plans, prompting some in the industry to question whether widespread litigation against plans of that size would ensue.
Voya denies the claims and it will vigorously defend this matter, a company spokeswomen told Bloomberg Sept. 11.
The proposed class is represented by Franklin D. Azar & Associates P.C., a personal injury law firm that specializes in motor vehicle accidents, defective products, and slip-and-fall accidents, according to its website.
This is at least the third time the Colorado-based law firm has filed an ERISA class action involving mismanagement of retirement savings.
Chimicles & Tikellis LLP and Sherman & Howard LLC also represent the participants.