401K Lawsuits Brought Against Franklin Templeton and Neuberger Berman

Two more 401(K) lawsuits alleging self-dealing have been brought against asset management firms. In Cryer V. Franklin Resources, Inc. et al, the employees of Franklin Resources Inc. are suing their employer. Franklin Resources (BEN) operates under the name Franklin Templeton Investments.

According to the plaintiffs, the asset management firm engaged in self-dealing in its 401(k) plan. They believe that individuals overseeing the retirement plan were in breach of duty under ERISA when they chose costly, proprietary funds that performed poorly instead of selecting less expensive funds that performed better. The plaintiffs are also accusing their employer of charging excessive fees for administrative services.

In the lawsuit, they noted that the 401K had invested in hundreds of millions of dollars in mutual funds that Franklin Templeton and its subsidiaries managed even though there were many other choices available. These entities manage all of the mutual funds in the Franklin Templeton 401(K) retirement plan. The plaintiffs said that Franklin Templeton chose these funds so that it could receive fees and make money.

The proprietary funds made Franklin Templeton millions of dollars in fees. However, since 2010 the plan has lost $64M.

The plaintiffs said that they paid about $15M more than necessary for a 401(k) plan that cost more than $1B. They believe that the choice of a money market fund instead of a stable value fund has caused the retirement plan to lose over $9M since 2010.

In Bekker v. Neuberger Berman Group LLC et al, plan participants are suing the investment manger, accusing the firm of offering a proprietary fund that performed poorly and was costly in order to make a profit. They claim that this cost the plan over $130M in six years. Meantime, Neuberger made tens of millions dollars by keeping the Value Equity Fund in the plan.

The fund is one of eight investment choices under the 401(k) plan that Neuberger manages. In total there are 29 investment choices. The plaintiffs are claiming a fiduciary breach under ERISA.

Meantime, other firms have been subject to similar 401(k) lawsuits, including New York Life Insurance Co., American Century Investments, Putman Investments, Allianz Asset Management, Fidelity Investments, Ameriprise Financial (AMP), Transamerica Corp., and Massachusetts Mutual Life Insurance Co. The latter four have settled the 401k lawsuits against them.

Asset management firms are not the only ones that have been sued over their management of retirement plans. Complaints were recently brought against a number of U.S. universities, including Yale University, the Massachusetts Institute of Technology, New York University, Johns Hopkins University, Vanderbilt University, and Duke University over allegations that they charged excessive plan fees, causing employees to overpay by millions of dollars in retirement money. The Yale, NYU, Duke, UPenn, Vanderbilt, and John Hopkins plans are 403(b) plans, which are for non-profit employers, public educational institutions, and church organizations. Plaintiffs claim that fiduciaries chose costly funds instead of less expensive options in other share classes.

If you are high net worth individual investor or a retail investor and you believe your losses are a result of securities fraud, contact The SSEK Partners Group today.

Franklin Templeton sued by employees for self-dealing in 401(k) plan, InvestmentNews, August 1, 2016

Neuberger Berman Latest Financial Firm to Be Hit With 401(k) Suit, The Wall Street Journal, August 5, 2016

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