Former Molina Healthcare employees sue NFP Retirement alleging ERISA violations

Former employees of Molina Healthcare Inc. sued NFP Retirement Inc., in its role as an investment adviser to a Molina 401(k) plan, alleging ERISA violations.

"As a plan fiduciary, NFP was obligated to act for the exclusive benefit of plan participants and beneficiaries and to ensure that plan expenses are reasonable and plan investments are prudent," said the May 16 complaint filed in a U.S. District Court in Los Angeles.

"Instead of acting in the exclusive best interest of participants, NFP caused the plan to invest in flexPATH's untested target date funds, which replaced established and well-performing target date funds used by participants to meet their retirement needs," the complaint said. "NFP also caused the plan to pay unreasonable investment management fees."

The flexPATH index target-date funds are collective investment trusts maintained by Wilmington Trust, a bank that serves as the trustee for the funds, said the complaint in Mills et al. vs. NFP Retirement Inc. (NFP Retirement does business as 401k Advisors Inc.)

"We believe this case is without merit and will vigorously defend ourselves against the plaintiffs' allegations," said Joshua Wozman, an NFP spokesman, in an email.

Neither flexPATH, Wilmington Trust nor Molina is a defendant.

However, Molina and its retirement plan fiduciaries are defendants in a March 2022 lawsuit filed by the same plaintiffs, same law firm (Schlichter Bogard & Denton LLP), in the same federal court and with similar allegations about the flexPATH funds. In that lawsuit, neither flexPATH, Wilmington Trust nor NFP was cited as defendants.

"FlexPATH had limited experience managing assets when the flexPATH Index target date funds were first added to the plan in May 2016," said the lawsuit against NFP.

"FlexPATH was not registered as an investment adviser with the SEC until February 2015 and did not begin managing assets until June 2015," the lawsuit said. "The full suite of the flexPATH Index target date funds did not exist until January 2016."

The plaintiffs also accused NFP and flexPATH of having a "conflicted relationship."

The flexPATH target-date funds "are proprietary investment products of NFP and flexPATH" because "NFP specifically markets and promotes the use of the flexPATH funds," the lawsuit said. The owner of NFP, National Financial Partners Corp., is the joint owner of flexPATH with NFP CEO Vincent Giovinazzo and NFP President Nicholas Della Vedova, the complaint said.

"The CEO, President, Chief Operations Officer, and Chief Compliance Officer for NFP also hold those positions for flexPATH," the lawsuit said. "As reported on the companies' Forms ADV filed with the SEC, these individuals are control persons with authority to direct the management of each company."

The Molina Salary Savings Plan, Long Beach, Calif., had $741 million in assets as of Dec. 31, 2020, according to its latest Form 5500 filing.