Reliance Trust Reaches Deal on 401(k) Excessive Fee, Self-Dealing Suit

A settlement agreement has been reached in a lawsuit alleging that Reliance Trust Co., Insperity, Insperity Holdings and Insperity Retirement Services breached their fiduciary duties and committed prohibited transactions under the Employee Retirement Income Security Act (ERISA) relating to the management, operation and administration of the Insperity 401(k) plan.

The lawsuit was filed in 2015 by participants in the plan, which Insperity, a professional employer organization (PEO), offers to employees of small and medium-sized businesses. Insperity retained Reliance Trust as discretionary trustee to hold, manage and control the assets of the plan and to be responsible for selecting, retaining and monitoring investment options available to participants.

The plaintiffs argued in their complaint that the defendants selected untested proprietary funds as investment options for the plan and retained those funds despite their poor performance, which benefited defendants at the expense of participants. The plaintiffs also claimed that defendants breached their fiduciary duties by selecting Insperity Retirement Services, a subsidiary of Insperity, as the plan’s recordkeeper, paying it excessive administrative expenses, and failing to monitor and control the amount of those administrative expenses. In addition, the plaintiffs claimed the defendants breached their fiduciary duties by providing as a plan investment an imprudent money market fund and later providing an imprudent proprietary stable value fund.

In March 2017, U.S. District Judge Mark H. Cohen of the U.S. District Court for the Northern District of Georgia granted in part and denied in part motions to dismiss the lawsuit. Insperity and Insperity Retirement Services were dismissed from the lawsuit in 2019.

“Insperity is pleased that this matter was resolved favorably, pending court approval, with a full release of claims against them and without any monetary contribution from the company or changes to the 401(k) plan. We vigorously defended this case and believe the release of all claims against our client with no financial consequences for them reflects the merits of Insperity’s defense,” says Emily S. Costin, partner with Alston and Bird and counsel to the Insperity defendants.

According to the settlement agreement, Reliance Trust will pay $39.8 million to settle the case.

“Reliance Trust admits no wrongdoing or liability with respect to any of the allegations or claims in this action and maintains that the plan was managed, operated and administered during its tenure as the plan’s discretionary trustee in full compliance with ERISA and applicable regulations,” the agreement states.

The agreement is subject to court approval.