A U.S. District Court judge in Chicago dismissed an ERISA violations claim against CareerBuilder LLC and its fiduciaries by a former 401(k) plan participant who alleged the plan offered "excessively expensive" mutual funds and made participants pay excessive fees to the plan's record keeper and investment adviser.
"Defendants' failure to offer every index fund under the sun is not, in and of itself, imprudent, so long as the plan offers a mix of investments and there are no other indicia of a flawed process," wrote Judge Robert M. Dow Jr. in his July 1 opinion. "Here, the plan offers an acceptable mix of options."
Neither the record keeper, ADP, nor the investment adviser, Morgan Stanley, was named as a defendant in the case of Carl Martin vs. CareerBuilder LLC et al.
Although the plaintiff claimed fiduciaries violated the ERISA standard for prudent management, "these allegations suggest that defendants did have a prudent process, because they removed or modified a majority of the funds," Mr. Dow wrote. "Perhaps an imaginative reader could spin a speculative yarn as to defendants' imprudence, but that is not the standard" to prevent dismissal.
ERISA's guideline for prudence "is processed-based, not outcome-based," Mr. Dow added. "Thus, a plan's mere underperformance is not actionable so long as the fund administrators acted prudently."
However, the judge gave Mr. Martin until July 28 to file an amended complaint "consistent with this opinion."
CareerBuilder LLC 401(k) Plan, Chicago, had assets of $143 million as of Dec. 31, 2018, according to the latest Form 5500.