A former employee of a Waters Corp. subsidiary has sued the parent company and 401(k) plan fiduciaries alleging ERISA violations in the company’s defined contribution plan.
The plaintiff alleged that plan executives overpaid for recordkeeping, retained poor-performing investments and failed to monitor fiduciaries responsible for the investments.
“As a result of defendants’ actions, participants invested in subpar investment vehicles and paid additional unnecessary operating expenses and fees with no value to the participants and resulting in a loss of compounded returns,” said the July 7 complaint in the case of Daggett vs. Waters Corp. et al.
“The plan has the tremendous bargaining power to demand low-cost administrative and well-performing, low-cost investment funds,” said the lawsuit, which is seeking class-action status.
“Defendants, however, did not regularly monitor Fidelity to ensure that Fidelity remained the prudent and objectively reasonable choices to provide total (record-keeping) services, nor did it effectively monitor the underperforming active suite of the Fidelity Freedom Fund,” the lawsuit said. Fidelity Investments, the record keeper, isn’t a defendant. The lawsuit said plan executives should have replaced the actively managed Fidelity Freedom Fund target-date series due to alleged poor results.
“Nothing exists in any plan documents provided to plan participants to suggest that there is anything exceptional, unusual, or customized” about the services provided by Fidelity, the lawsuit said.
Contending that record-keeping services are a commodity, “recordkeepers primarily differentiate themselves based on price, and will aggressively bid to offer the best price in an effort to win the business,” the lawsuit said.
As for the target-date series, the plaintiff argued that “had defendants been acting prudently, defendants would have selected a target-date fund suite with better performance than those funds actually selected by defendants from 2010-2022.” The target-date series was replaced last year, the lawsuit said.
Defendants failed to make “an objectively reasonable investigation process when selecting, retaining, and failing to remove these target-date investments,” the lawsuit said.
A company representative did not respond to a request for comment.
The Waters Employee Investment Plan, Milford, Mass., had assets of $1.22 billion as of Dec. 31, 2021, according to the latest Form 5500.
