Current and former participants in a 401(k) plan run by BBVA Compass Bancshares have filed suit, claiming breaches of fiduciary duty by plan managers who failed to provide low-cost investment options while favoring similar higher-cost ones.
The two plaintiffs also argued that plan managers should have chosen a different capital preservation vehicle because the only choice, a money market fund, provided insufficient returns in a low-interest rate environment.
"BBVA could have chosen safe investments such as low-fee index funds or even low-fee index funds with high-fee actively managed alternatives," the complaint said. Instead, plaintiffs argued, the BBVA plan's menu contained only high-fee actively managed investments "for most asset classes of investments," said the complaint, filed July 18 in the case of Ferguson and McClinton vs. BBVA Compass Bancshares Inc. et al.
"Had BBVA monitored the plan with any care or diligence BBVA would have realized that the returns of the money market fund during the class period were woefully inadequate for long-term retirement investments," The lawsuit, which seeks class action status, was filed in a U.S. District Court in Birmingham, Ala. The class period was defined as starting July 18, 2013 until the date when a judgment is issued.
"The best way to control the costs of management expenses often is to maintain an investment menu of low-cost index funds," said the complaint, adding that plan managers compounded their offering of high-cost investment options by keeping alleged poor-performers.
BBVA spokeswoman Christina Anderson wrote in an email that the company doesn't comment on pending litigation.
BBVA Compass Bancshares is part of BBVA USA Bancshares Inc.
The Compass SmartInvestor 401(k) Plan had assets of $931.3 million, covering 3,145 participants, as of Dec. 31, 2017, the complaint said.
