Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.
Compliance January 30, 2018
Mutual of Omaha Faces Self-Dealing Suit
The complaint calls out the use of United of Omaha-branded mutual funds and target-date funds, as well as a guaranteed fund managed by United of Omaha.
Reported by Rebecca Moore
A new Employee Retirement Income Security Act (ERISA) lawsuit has been filed against Mutual of Omaha and its 401(k) fiduciaries.
According to the complaint, the plan’s fiduciaries violated their fiduciary duties by selecting numerous investment options not to benefit the plan or its employees, but because they paid fees to Mutual of Omaha or its subsidiaries.
A request for comment from the firm has not yet been returned.
In particular, the suit says fiduciaries selected United of Omaha-branded investment funds when each of these Omaha-branded funds invested all of its assets in another publicly available investment fund managed by an unrelated third party—causing the plan to pay a fee to United of Omaha in addition to the fee charged by the underlying fund’s manager when the plan could simply have offered the underlying fund and avoided paying any additional fee to United of Omaha. In addition, it says for several of the non-United of Omaha funds offered in the plan, the fiduciaries added on a fee in addition to the fee charged by the fund.
The complaint alleges the plan’s fiduciaries included several United of Omaha-branded Mutual GlidePath target-date funds, which charged plan participants more than non-plan investors paid to invest in those funds. In addition, the fiduciaries constructed several asset-allocation funds (the “Mutual Directions” funds), which automatically allocated participants’ savings to other funds based on risk parameters identified by the participants. United of Omaha added additional fees to the Mutual Directions funds in addition to those charged by the underlying funds.
Finally, the lawsuit claims plan fiduciaries elected to include in the plan a capital preservation option called the Guaranteed Account, which was managed by United of Omaha, despite scores of other better capital preservation funds on the market simply because the Guaranteed Account paid significant fees to United of Omaha.
The plaintiff in the suit seeks damages and equitable relief on behalf of the plan.« Advisers Beware and Be Cautious When Talking Taxes in 2018