Three former participants in DENSO International America's 401(k) plan filed a class-action federal lawsuit against the firm, claiming the global auto-parts manufacturer's plan charged excessive record-keeping fees and offered expensive investment options.
The lawsuit, filed in U.S. District Court in Detroit on Monday, names the company as well as its board of directors and national retirement committee as defendants. Two of the plaintiffs are former DENSO employees; one still works there.
The plaintiffs alleged that the defendants breached their fiduciary duty by requiring the plan to pay excessive record-keeping fees and failing to remove Empower Retirement as the plan's record keeper. They also claimed the defendants offered an underperforming stable value fund and needlessly expensive investment options in the form of high-cost share classes.
"These objectively unreasonable record-keeping and investment fees, as well as the underperforming stable value fund, cannot be contextually justified and do not fall within the range of reasonable judgments a fiduciary may make based on her experience and experience," the plaintiffs claimed in the lawsuit.
The plaintiffs also alleged the defendants failed to leverage the plan's size to negotiate better fees, saying their breaches of fiduciary duty caused them "millions of dollars of harm in the form of lower retirement account balances."
The plaintiffs were particularly critical of the company's decision to move the plan's stable value fund to Denso Stable Value Fund, which is managed by Empower, from the MassMutual SAGIC II Fund. Denso Stable Value's performance consistently trailed the Morningstar stable value index and was more expensive than the average stable value fund on the index, the plaintiffs claimed.
The plaintiffs allege the Denso Stable Value Fund consistently charged plan participants on average 93 basis points more than the average stable value fund on the Morningstar index, resulting in a loss of more than $3.2 million of plan participants' retirement savings.
"No prudent reason existed for defendants to move from the MassMutual SAGIC II fund to the Denso Stable Value Fund, and defendants did so to benefit ... Empower and provide it with additional revenue streams," the plaintiffs charge in the lawsuit.
DENSO did not immediately return an email seeking comment.
In addition to an order compelling the defendants to make good on all losses to the plan resulting from their alleged breaches of fiduciary duty, the plaintiffs are looking to require the company to disgorge all profits received from the plan.
As of Dec. 31, 2020, the DENSO Retirement Savings Plan. Southfield, Mich., had $1.77 billion in assets, according to the company's most recent Form 5500 filing.
