A participant in a 401(k) plan run by Paychex Inc. sued the company and plan fiduciaries for violations of ERISA in managing the investment lineup, according to a lawsuit.
The participant, a former employee, complained that fiduciaries should have chosen an index-based target-date fund series instead of an actively managed one because the former was cheaper and less risky. Both series are offered by Fidelity Investments, which isn't a defendant.
The plan fiduciaries "failed to compare the active and index suites and consider the respective merits and features," said the complaint filed Tuesday in U.S. District Court in Rochester, N.Y.
The actively managed target-date series is "dramatically more expensive than the index suite, and riskier in both its underlying holdings and its asset allocation strategy," said the complaint in McIntire vs. Paychex Inc. et al., which seeks class-action status.
The lawsuit also criticized plan managers for holding three other non-Fidelity funds, accusing them of breaches of fiduciary due to the funds' poor performances.
The lawsuit said the plan's record-keeping costs were "excessive," and that the fiduciaries failed to conduct "any examination, comparison or benchmarking" to determine if a better choice was available.
A Paychex representative did not respond to a request for comment.
The Paychex Inc. 401(k) Incentive Retirement Plan, Rochester, N.Y., had assets of $1.12 billion as of Dec. 31, 2018, according to the latest Form 5500.