CenturyLink Inc., Monroe, La., is the target of a fiduciary lawsuit by 401(k) plan participants alleging the company violated its fiduciary duty in the management of the active domestic large-cap equity fund offered in the plan.
The lawsuit, filed Nov. 30 in U.S. District Court in Colorado Springs, Colo., alleged the company violated its fiduciary duty under the Employee Retirement Income Security Act of 1974 by hiring six separate underlying money managers — five active managers and one passive manager — to manage portions of the active fund, resulting in the fund's underperformance.
According to the filing, "odds of the five active managers outperforming the market in aggregate was highly remote due to the efficiency of the large cap domestic equity market and the difficulty of even one manager outperforming for more than a year" and that "the five active managers would inevitably take competing positions and cancel out each other's strategy."
According to the filing, the active managers as of March 2017 were Fiduciary Management Associates (which managed 30% of the 401(k) plan's assets), Ivy Investment Management (26%), Cornerstone Investment Partners (17%), T. Rowe Price Group (15%), and Systematic Financial Management (7%). State Street Global Advisors managed the rest of the assets passively.
As of Dec. 31, 2016, the CenturyLink Dollars & Sense 401(k) Plan had $3.7 billion in assets, according to the company's most recent Form 5500 filing. The filing does not disclose the asset size of the large-cap fund.
Mark Molzen, CenturyLink spokesman, said in an email that the company does not comment on pending litigation. Franklin D. Azar of Franklin D. Azar & Associates, attorney for Bonnie Birse, who filed the suit as class representative, was not immediately available to provide comment.