Two participants in a multiple-employer 401(k) have sued ADP Inc. and affiliates, accusing them of breaching their fiduciary duties under ERISA.
The complaint, filed May 7 in a U.S. District Court in. Newark, N.J., is similar to one filed May 4, in the same court, with one significant difference. This case, Berkelhammer and Ruiz vs. ADP Inc. et al., contains accusations by participants. The earlier lawsuit, McCaffree Financial Corp. vs. ADP Inc. et al., was filed by one of the sponsors of the multiple-employer plan for which ADP is a fiduciary. Among the defendants in both lawsuits is ADP TotalSource Retirement Savings Plan.
The latest lawsuit describes 12 alleged ERISA violations throughout the 152-page document. The employers of the two plaintiffs aren't identified in the lawsuit that seeks class-action status.
"Instead of using the plan's bargaining power to benefit participants and beneficiaries, defendants allowed unreasonable expenses to be charged to participants for administration of the plan and for managed account services, and retained poorly performing investments that similarly situated prudent fiduciaries would have removed from their plans," the complaint said.
"Defendants selected and retained imprudent higher-cost investment alternatives in the plan when lower-cost investment vehicles were available for the plan based on its bargaining power to obtain such vehicles," the complaint said. "Defendants also failed to ensure that the lowest-cost available share classes of the designated investment alternatives were included in the Plan, resulting in the Plan paying excessive investment management and other unnecessary fees."
The plaintiffs also accused the defendants of allowing the plan's service providers to use "participants' highly confidential data, including Social Security numbers, financial assets, investment choices, and years of investment history to aggressively market lucrative non-plan retail financial products and services."
Voya Financial is the plan's record keeper; Voya Retirement Advisors, a unit of Voya Financial, provides managed account services; and Edelman Financial Engines is the subadviser to the plan's managed accounts. None was cited as a defendant.
"It is not uncommon to see similar complaints filed following an initial claim," said Allyce Hackmann, an ADP spokeswoman, in an email. "TotalSource works diligently to fully and properly discharge all of its fiduciary and other duties. We are confident that the ADP TotalSource Retirement Savings Plan offers an excellent retirement savings vehicle for our TotalSource clients and their employees."
As of Dec. 31, 2018, the ADP TotalSource Retirement Savings Plan had $4.4 billion in assets, according to the company's most recent Form 5500 filing.
