Plaintiffs in this case claim that the plan trustees breached their fiduciary duties under ERISA by failing to “remedy their predecessor’s breaches” or in some cases, waiting too long to offer lower cost versions of T. Rowe Price retail share class funds to 401(k) plan participants. T. Rowe Price and other defendants argue that the plan document required the plan’s trustees to select an investment menu comprised of only T. Rowe Price funds. Although the judge noted that ERISA permits financial services companies to offer employees their proprietary funds within their 401(k) plans, it doesn’t not provide a “blanket” defense. Plaintiffs’ specific examples relating to their claims of expensive share classes, underperforming funds, and seeding, were found to be plausible and accepted at this stage of the proceedings. Allegations were also found to be sufficient to raise a “plausible inference” that trustees breached duties of loyalty and prudence in their selection and monitoring of investments for the Plan. This includes not only the trustees, but the investment advisers to the Trustees and T. Rowe Price, the Management Committee, and individual named members, as well as the Management Compensation Committee and individual members, as co-fiduciaries.
The claim of failing to remedy predecessor breaches was likewise allowed at this stage. If a fiduciary is aware of a breach committed by a predecessor fiduciary, but fails to act to remedy, then that failure would constitute a separate fiduciary breach. Claims of failure to monitor fiduciaries and prohibited transactions were allowed to proceed at this stage of the process.
www.planadviser.com; August 24, 2018.