A federal court judge in Detroit has rejected a request by Magna International of America Inc., Troy, Mich., to dismiss a lawsuit filed by former 401(k) plan participants who accused the company and plan fiduciaries of violating their ERISA duties.
The plaintiffs alleged that the defendants failed to reduce expenses and failed to properly assess each investment option "to ensure it was prudent," according to their April 2020 complaint. They also said the fiduciaries should have selected lower-cost shares of mutual funds in the plan lineup.
In her March 31 opinion rejecting the petition for dismissal, U.S. District Court Judge Nancy G. Edmunds wrote that the plaintiffs had "sufficiently stated a claim" for each of their arguments against the defendants.
"The court finds that plaintiffs' complaint sufficiently states a claim for breach of fiduciary duty," she wrote in regard to allegations of excessive record-keeping fees. "Dismissal would be inappropriate at this stage of litigation."
As for criticism about choosing investment options, "plaintiffs' allegations here, coupled with suggested comparisons, permit the court to infer imprudence by the fiduciaries," she wrote.
Magna International of America Inc. is a subsidiary of Canada's Magna International Inc. The Magna Group of Companies Retirement Savings Plans, Aurora, Ontario, has assets of $2 billion for the year ended Dec. 31, 2019, according to the latest Form 5500.