A class action was filed on behalf of participants of the Costco 401(k) Retirement Plan against Costco Wholesale Corp. and other related parties for alleged mismanagement of the $15.5 billion defined contribution plan.
The complaint, filed Tuesday in U.S. District Court in Green Bay, Wis., alleges that, beginning June 23, 2014, the defendants violated their fiduciary duties by authorizing the plan to pay unreasonably high record-keeping fees, failing to ensure that each investment option within the plan was prudent, and maintaining certain funds in the plan despite the availability of identical or similar investment options with histories of lower costs and/or better performance.
The plaintiffs also accuse the sponsors of choosing more expensive actively managed funds instead of index funds that offered equal or better performance at lower costs. The suit also charges that plan participants were charged administration fees that were consistently greater than those of comparable 401(k) plans.
"These investment options and unreasonable fees cannot be justified. Defendants' failure to monitor and improve investment options confirms more than simply sloppy business practice," the suit said. "Defendants' failures breached the fiduciary duties they owed to plaintiff, plan participants and beneficiaries. Prudent fiduciaries of 401(k) plans continuously monitor administrative fees against applicable benchmarks and peer groups to identify unreasonable and unjustifiable fees."
Paul M. Secunda, a partner at the law firm Walcheske & Luzi LLC who's representing the plaintiffs, said in an emailed statement: "For far too long, some of the largest companies have turned a blind eye to excessive fees in 401(k) retirement plans. The technology exists for plan fiduciaries to provide their plan members the very best investments at the lowest costs, and yet, companies like Costco continue to fleece their employees' retirement savings with unreasonable record-keeping fees and unnecessary actively managed mutual funds."
Mr. Secunda added: "The hope is that this class-action lawsuit against Costco will start the process of forcing employers and their record keepers to monitor their 401(k) investment options in a way that is truly in the best interests of their employees. Only then will employees ... be able to retire with the adequate retirement income that they have rightfully earned."
Representatives from Costco could not be immediately reached for comment.
