Share Class Choices Challenged in New 401(k) Lawsuit

The Vail Corporation has been sued for allegedly excessive fees in the Vail Resorts 401(k) Retirement Plan.

According to the complaint, for at least 18 of the 27 mutual fund share classes available within the plan, the same issuer offered a different share class from that selected by the plan that charged lower fees, and consistently achieved higher returns. The plaintiff says the plan “inexplicably failed to select these lower fee-charging and better-return producing share classes.”

The lawsuit says that at the end of 2018, the plan had 8,276 participants with account balances and $309,822,304 in assets. “At all relevant times, the Vail plan’s fees were excessive when compared with other comparable 401(k) plans offered by other sponsors that had similar numbers of plan participants, and similar amounts of money under management. The excessive fees led to lower net returns than participants in comparable 401(k) plans enjoyed,” the complaint states.

Specifically, the plaintiff or her lawyers used a commercially available program the lawsuit says is commonly used by financial advisers and plan fiduciaries to analyze plans’ performance, comparative costs and other key indicators. The analysis allegedly shows that the administrative fees charged to Vail plan participants are greater than more than 90% of its comparator fees when fees are calculated as cost per participant, or as a percent of total assets. “In 2017, the plan’s expenses amounted to .73% of assets under management, or $314 per participant. The plan’s expenses are nearly double those of the mean among 19 comparator plans with 5-10,000 participants of $179 per participant and .2% of assets under management. Similarly, among a per group of 21 plans with an asset range between $250 million and $500 million, the mean expenses were .43% of assets under management, which again compared unfavorably with the plan’s fees representing .73% of assets,” the lawsuit says.

The complaint also includes a table of the investment options the plan fiduciaries chose and available alternatives they either did not consider or did not choose. The plaintiff says the table provides examples of how Vail breached its fiduciary duties. For example, the data regarding fees and performance taken from Morningstar.com as of December 23, show the T. Rowe Price Retirement 2005 fund used by the plan charged 53 basis points (bps), while the I share class of the same fund charged 41 bps.

“Plaintiff had no knowledge of defendant’s process for selecting investments and monitoring them to ensure they remained prudent. Plaintiff also had no knowledge of how the fees charged to and paid by Vail plan participants compared to any other funds. Nor did plaintiff know about the availability of lower-cost and better-performing (and other essentially identical) investment options that Vail did not offer because Vail provided no comparative information to allow plaintiff to evaluate and compare Vail’s investment options,” the complaint notes.

It alleges Vail caused plan participants to lose millions of dollars of their retirement savings through unreasonable fees and poorly performing investments.