401K Record Keeper is sued Over Financial Engine’s Alleged Pay-to-Play Scam

Xerox HR Solutions is now the defendant in an alleged pay-to-play scam involving Financial Engines, Inc., which offers investment advice services through subsidiary Financial Engines Advisors. According to the proposed class action securities case, the “conspiracy” involving the two companies compelled participants of Ford Motor Co.’s retirement plans to pay unreasonable and excessive fees. The plaintiffs are three participants in the Ford plan. The 401K-related lawsuit is Chendes et al v. Xerox HR Solutions.

According to the complaint, Xerox allegedly was paid a “kickback” by Financial Engines in exchange for including the investment adviser/managed-account provider on its record-keeping platform. The plaintiffs believe that this deal between the two companies “wrongfully” inflated the price that Financial Engines charged for its professional investment advice services. They noted that even without the excessive fees, Xerox was already getting paid a record-keeping fee.

Plaintiffs said that of the $5.8M that participants paid Xerox HR for Financial Engines Services in 2015, 31% of that—$1.8M—was paid to Xerox. The plaintiffs are alleging that similar payments also occurred in 2012. They contend that the fees in question were not for any “substantial services” that either company provided to plan participants.

Xerox HR is not the only company that has been accused of seeking to profit unnecessarily when partnered with Financial Engines. A few months ago, Voya Financial was accused of self-dealing in a 401(K) case brought by a participant in the Nestle 401(K) Savings Plan. Voya served as record-keeper subcontracted to Financial Engines, which provided investment advice to plan participants. Meantime, Voya allegedly collected excessive fees.

In May, in a 401(K) lawsuit brought against Fidelity Investments, the plaintiffs accused the record-keeper of involvement in a pay-to-play scam with Financial Engines Advisors. The latter provided robo-level advice services to participants in the Delta Family-Care Savings Plan that allowed Fidelity to receive a kickback for including Financial Engines on its platform. The complaint also accused Fidelity of bringing more costly funds into its 401K plan.

The SSEK Partners Group is a securities fraud law firm.


Financial Engines and Xerox Questioned in ERISA Suit, Plan Adviser, November 11, 2016

Another 401(K) Record Keeper Sued Over ‘Pay to Play’ Scheme with Financial Engines, November 11, 2016

Chendes et al v. Xerox HR Solutions (PDF)