Insperity Inc. has been sued by participants in an Insperity 401(k) plan sold to small- and midsized employers that alleged the company and its subsidiaries charged “excessive” record-keeping fees and made other fiduciary breaches of ERISA. The complaint, filed Tuesday, also alleges that Reliance Trust Co., the discretionary trustee for the plan, breached its fiduciary duties by allegedly making “imprudent” investment decisions.
The lawsuit, Pledger et al. vs. Reliance Trust Co. et al., was filed in U.S. District Court in Atlanta. The suit seeks class-action status for more than 50,000 participants in the Insperity 401(k) Plan.
The suit cites only the $2.05 billion 401(k) plan sold to employers by Insperity, a company that provides outsourced human resources services. The 401(k) plan sponsor and fiduciary is an Insperity subsidiary called Insperity Holdings Inc.
The plaintiffs are four participants in this plan for Insperity clients, but the clients aren't identified in the complaint. The lawsuit does not affect Insperity's $208.6 million plan for its own employees, the Insperity Corporate 401(k) plan.
The participants claim one example of a fiduciary breach was Insperity's October 2003 decision to hire an Insperity subsidiary — Insperity Retirement Services — as record keeper for the 401(k) plan, “rather than obtaining bids,” according to the complaint by participants, whose lead counsel is Jerome Schlichter, the founding and managing partner of Schlichter, Bogard & Denton.
“The amount paid by plan participants for record-keeping services was, and is, excessive for the services provided,” the complaint said. “Defendants failed to rebate to plan participants excessive payments (through a revenue-sharing arrangement) that exceeded a reasonable flat per participant record-keeping fee.”
This effort, the complaint said, meant that the defendants acted in their own interests “at the expenses of the participants.”
The complaint cited Reliance Trust in its role as discretionary trustee for its responsibility “for selecting, retaining and monitoring of investment options.” Reliance Trust “selected and retained its own high-cost and poorly performing” investments that paid asset-based revenue sharing to the Insperity record-keeping subsidiary, the complaint said.
In an interview, Mr. Schlichter pointed out that Reliance Trust selected its own target-date fund series for the plan, two days after the series was made available to clients. The various alleged fiduciary breaches by Reliance Trust and Insperity caused participants to lose money from their retirement accounts, he said.
Representatives from Insperity and Reliance Trust could not be reached for comment.