A Federated Hermes 401(k) plan participant has sued the company and its fiduciaries saying the plan's offering of only proprietary investments violated ERISA.
The plan's lineup placed the interests of the company above those of participants, according to Koroly vs. Federated Hermes Inc. et al., which is seeking class-action status.
Defendants have a "fiduciary obligation to procure a diversified slate of suitable investment options at reasonably competitive rates and defray administrative expenses associated with administering the plan," said the complaint filed Wednesday in U.S. District Court in Pittsburgh.
Because Federated "is itself a retirement investment manager that sells mutual funds and other proprietary investment products in its ordinary course of business, it is reasonable to infer that defendants are in an even better negotiating position than other similarly situated fiduciaries in terms of their expertise and knowledge of the market for retirement plan services," the complaint said.
"Since at least August 28, 2017, and through to the present day however, defendants have continuously failed to do so," the lawsuit said. "Defendants have opted for a questionable lineup of underperforming and overpriced (Federated Hermes) proprietary funds as the only investment offerings" during this period.
Only a self-directed brokerage window provided non-proprietary investment options, the lawsuit said.
A representative from Federated Hermes did not respond to a request for comment.
Federated Hermes Inc. Employees Profit Sharing/401(k) Plan, Pittsburgh, had $660 million in assets as of Dec. 31, 2021, according to the latest Form 5500.