A second participant in the JPMorgan Chase 401(k) Savings Plan has sued plan executives and corporate executives of J.P. Morgan Chase & Co. alleging that the plan favored parent-company investments over less-expensive investment options and violated their fiduciary duties under the Employee Retirement Income Security Act.
“Rather than engage in systematic, arm's length review of available plan investment options, J.P. Morgan sought out investment options that allowed its affiliates and business partners to reap outsized fees,” said the lawsuit filed by Ferdinand Orellana, a plan participant.
“We are reviewing the complaint,” Jennifer Lavoie, a J.P. Morgan spokeswoman, wrote in an email Monday. “We disagree with the fundamental allegations in the complaint and believe the case is without merit.”
The lawsuit alleged that half of the 401(k) plan's investment options were affiliated with J.P. Morgan and another 20% were BlackRock Inc. options. BlackRock is not a defendant.
The lawsuit, Orellana et al. vs. J.P. Morgan Chase et al., was filed March 2 in federal District Court in New York. It seeks class-action status.
The complaint accused 401(k) plan executives of failing to take advantage of the 401(k) plan's size to negotiate lower fees. “Defendants structured several proprietary funds managed by a J.P. Morgan affiliate, J.P. Morgan Investment Management Inc., as more expensive mutual funds and placed them as investment options in the plan,” the lawsuit said.
The plan had $21.2 billion in assets as of Dec. 31, 2015, according to the latest Form 5500 filing with the Department of Labor.
Plan executives also were accused of giving “preferential treatment” to BlackRock, “a longtime business partner,” by selecting “excessively expensive” BlackRock funds, the lawsuit said.
These allegations are similar to a complaint filed in late January in District Court in New York by Terre Beach, a plan participant, in the case, Beach vs. J.P. Morgan Chase Bank et al.
