While performance-based lawsuits are suddenly garnering attention, alleging that companies are now sacrificing returns in an effort to find the lowest-cost investment options, litigation over high-priced ERISA violations hasn’t gone away.
“The monetary figure might not stretch far, as the deal could cover the plan’s 33,761 participants.”
L Brands Inc., the parent company of notable names Victoria’s Secret and Bath & Body Works, has agreed to a $2.75 million settlement of a proposed class action lawsuit that alleged pricey fees and investment options in its $1.6 billion 401k plan.
“The deal, announced Thursday in the US District Court for the Southern District of Ohio, resolves allegations that L Brands violated the Employee Retirement Income Security Act by offering expensive investment funds and failing to rein in administrative fees in its employees’ 401(k) plan,” Bloomberg Law said, referencing the Ohio federal court filing.
The monetary figure might not stretch far, however, especially after attorneys’ fees, as the deal could cover the plan’s 33,761 participants.
The 401(k) Averages Book, referenced in the suit, shows the average cost for recordkeeping and administration in 2017 for plans that were much smaller than L Brands’ plan was $35 per participant, yet participants in the L Brands plan were paying $56 per participant.
“The lawsuit also alleges that from 2014 through 2019, the plan paid out investment management fees of 0.38% to 0.46% of its total assets, higher than the average of 0.28% for plans with more than $1 billion in assets,” ERISA attorney Ary Rosenbaum noted. “The lawsuit also accuses plan fiduciaries of failing to use the least expensive share classes for mutual funds on the 401k plan’s investment menu.”
Calling the case, and many like them, “fill in the blank” type of case, he said they merely “allege that the plan costs are higher, but they still have to prove that paying higher fees was an actual breach of fiduciary duty.”
Editor’s Note: L Brands split itself into two independent companies, Victoria’s Secret and Bath & Body Works, in 2021.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
