Compliance

Insperity Fails to Get Excessive Fee Suit Dismissed

By Rebecca Moore editors@strategic-i.com | March 13, 2017
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The plaintiffs claimed the defendants breached their fiduciary duties by providing as a plan investment an imprudent money market fund that was not in the sole interest of participants and did not provide meaningful retirement benefits without considering a stable value fund option, and then providing an imprudent proprietary stable value fund.

According to the court opinion, plaintiffs allege that stable value funds are unique investments available only to retirement plans, especially large plans, which provide safety of principal and liquidity but far higher returns than money market mutual funds, which are used by retail investors with shorter investment horizons and more rapid trading activity. Cohen found their allegations in the compliant fail to state a claim upon which relief can be granted. “Plaintiffs challenge the mere selection of one fund over another, with no allegations (other than hindsight financial comparison) of why the selection was improper,” he wrote. Therefore, he granted the Insperity defendants' and Reliance's motions to dismiss Count IV of the complaint.

Plaintiffs alleged that defendants' selection of funds with excessive management fees resulted in greater income for defendants and that Reliance Trust and Insperity entities engaged in blatant self-dealing when offering higher-cost investments to plan participants. In order to drive revenue to Reliance Trust, Reliance Trust selected these investments, and Insperity entities allowed Reliance Trust proprietary investments to be offered as plan investment options. In return. Reliance Trust selected higher-cost share classes of the plan's funds, which paid a larger amount of asset-based revenue sharing to Insperity entities than the available lower-cost share classes would have paid. Cohen found plaintiffs have stated a claim.

Finally, Cohen found plaintiffs have included sufficient specific allegations of deficient monitoring on behalf of Holdings to state a claim for relief.