A proposed class action claims Juniper Networks, Inc. and its board of directors and investment committee have breached their fiduciary duties to employee 401(k) participants by allowing the plan to incur excessive fees and failing to select the most prudent investment options.
The lawsuit alleges that had the defendants acted in the best interests of plan participants, they would have negotiated lower fees for retirement plan services, managed account services and investment management, and selected less expensive share classes of the mutual funds in the plan. Moreover, the defendants’ alleged failure to disclose both certain amounts charged or credited to plan investments and their accurate performance histories deprived investors of information they needed to make informed decisions about the management of their retirement accounts, the suit contends.
According to the case, the defendants’ conduct caused plan participants to suffer “unreasonable and unnecessary losses” exceeding $22 million over the past six years.
The lawsuit states that Juniper Networks, a networking products provider, and its board of directors and investment committee are fiduciaries of the company’s employee 401(k) plan and thus required under the Employee Retirement Income Security Act (ERISA) to manage the plan “with the care, skill, prudence, and diligence” of a prudent person acting in the best interests of plan participants.
The suit alleges, however, that the parties instead allowed the plan to be charged unreasonably excessive fees for retirement plan services (RPS), managed account services and investment management. Had Juniper and the plan’s other fiduciaries engaged in a prudent process and regularly solicited bids from the providers of plan services, participants would have paid much lower fees, the lawsuit argues, claiming plan participants paid approximately twice as much for RPS fees than those in comparable employee retirement plans over the past six years.
“Defendants did not engage in a prudent decision-making process, as there is no other explanation for why the Plan paid these objectively unreasonable fees for RPS, managed accounts, and investment management,” the complaint scathes.
The lawsuit stresses that the failure of fiduciaries to properly monitor fees and costs can have “stark financial consequences” for plan participants given the extra expenses compound over time and reduce the value of their retirement accounts.
The case goes on to allege that the Juniper has failed to prudently monitor the plan’s investment options for the lowest cost and best performing funds. The Juniper retirement plan, as one of the largest defined contribution plans in the U.S., should qualify for the lowest cost share classes among those offered for an identical investment option, the suit relays. Nevertheless, the defendants have many times failed to select the share classes that provide the greatest benefit to plan participants, according to the complaint. The lawsuit argues that Juniper and the plan’s other fiduciaries must not have engaged in an objectively reasonable search for the share classes that would provide the lowest fees.
“During the entirety of the Class Period and because Defendants selected a share class that resulted in higher fees when a share class that resulted in lower fees was available to the Plan for the identical investment option, the Plaintiff and the Plan Participants did not receive any additional services or benefits other than a higher cost for Plaintiff and the Plan Participants,” the complaint says.
Based on available information on alternative share classes that were available during the class period—August 11, 2015 through the date of judgment in the case—the investment options selected for the plan were “599.61% more expensive than prudent alternatives and less expensive options covering the same asset category,” the case alleges.
According to the suit, the defendants’ failure to act in the best interests of plan participants when selecting investment options has caused the individuals “unreasonable and unnecessary losses” in excess of $21 million through 2019.
The lawsuit looks to represent all participants and beneficiaries of the Juniper Networks 401(k) plan beginning August 11, 2015 and through the date of judgment in the case.
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