A former participant in a Capital Group 401(k) plan sued the company and plan fiduciaries, alleging ERISA violations because the plan offered underperforming funds, failed to monitor the funds and failed to remove five proprietary funds from the investment lineup.
The proprietary investments are Capital Group's American Funds, which the plaintiff alleged suffered from "long-term underperformance" in a complaint filed Nov. 14 in a U.S. District Court in Los Angeles.
"Capital Group continued its devotion to its proprietary American Funds and the fee income they generated," said the complaint in Pover vs. The Capital Group Cos. Inc. et al.
"For reasons that defy any prudent explanation, Capital Group failed to replace any of the American Funds with any one of the many prudent alternatives," said the lawsuit, which provided examples of other funds to support its allegations of poor performance. The lawsuit also alleged that the American Funds frequently failed to meet their benchmark returns.
The plaintiff also accused the defendants of violating ERISA's duty of loyalty provision by "acting in their self-interest, rather than the best interests of the plan and its participants" by retaining the allegedly poor American Funds in the plan.
"An unconflicted fiduciary, in possession of the same investment performance information, would have removed the American Funds as investment options in the plan and replaced them with more prudent alternatives," the lawsuit said.
The lawsuit is seeking class-action status for any participant in the 401(k) plan from July 1, 2019, through the date of judgment.
A company representative declined to comment. No information was available on details of the plan.