A participant in a 401(k) plan offered by Milliman Inc., Seattle, has sued the company and plan fiduciaries alleging they violated ERISA by offering high-cost and poor-performing target-risk funds.
The complaint, filed Thursday in U.S. District Court in Seattle, said fiduciaries offered three target-date risk funds that had a meager track record. Milliman offered the target-risk funds from Unified Trust Co. in 2013 even though these investments were established in November 2012, said the complaint in Mattson vs. Milliman Inc. et al. By the end of 2013, the Milliman plan was the sole investor in two of these funds and represented 97% of the assets in the other fund, the complaint said. Unified Trust isn't a defendant in the lawsuit.
"With $1.7 billion in assets, the plan has tremendous leverage to demand and receive superior investment products and services," the complaint said.
"But the Milliman defendants did not use their leverage to identify and select prudent target risk options for plan participants," the complaint said. "Instead, the Milliman defendants opted for poorly performing options for which they serve as subadviser."
The plaintiff is seeking class-action status for the lawsuit, saying that participants who invested in any of the target-risk funds since Jan. 13, 2016, are affected.
"Over the last five-year period, the three Unified Funds have performed worse than 70% to 90% of funds within their recognized peer universe, according to Morningstar," the complaint said.
"Despite this abysmal record of significant underperformance year-after-year, and a marketplace teeming with hundreds of better performing investment options, the Milliman defendants did not remove any of the Unified Funds from the plan," the complaint said.
"The Milliman defendants' ongoing decision to take no action is both imprudent and injurious to the plan and its participants," the complaint said. "No prudent investor would have sat idly by in the face of such underperformance."
A Milliman spokesman, Jeremy Engdahl-Johnson, wrote in an email that the company doesn't comment on ongoing litigation.