Cook Group, the Bloomington-based maker of medical devices, is being sued by a participant of its 401(k) retirement plan, who claims the plan charged unreasonably high fees, cutting the value of the retirement benefits.
Drew Mateya filed suit Monday in U.S. District Court in Indianapolis, seeking class action status on behalf of more than 12,000 participants in the company’s 401(k) plan.
Named as defendants were Cook Group, Cook Group Profit Sharing Plan, and the Cook Group Profit Sharing Plan Advisory Committee.
Cook officials told IBJ it disagreed with the allegations and planned to fight the suit. “We take our fiduciary responsibilities very seriously and we will defend this lawsuit vigorously,” the company said.
The complaint is latest in a wave of lawsuits against companies across the U.S. alleging unreasonably high fees due to corporate imprudence or negligence. In the past two years ago, more than 170 such lawsuits have been filed, many of them seeking class-action status.
Under 401(k) plans, employees make contributions directly from their paychecks, which may be matched by their employers. The plans are set up and administered by employers. Over the past few decades, 401(k) plans have largely taken the place of traditional pension plans, or defined benefit plans, that provide fixed, monthly lifetime retirement benefits.
“Over time, even seemingly small differences in fees and performance can result in vast differences in the amount of savings available at retirement,” the lawsuit against Cook said.
According to the 56-page complaint, Cook breached its duty to plan participants by paying “objectively unreasonable fees” for recordkeeping and administration to an outside firm, Fidelity Investments, and failing to review the plans’ portfolio to ensure the cost of funds were in line with similar funds.
As of Dec. 31, 2021, Fidelity received $46 a year per plan participant for record-keeping fees. That “far exceeded” reasonable fees that were obtainable in the market, the plan said, and led to lower net returns for participants.
Record-keepers are outside financial firms that track the balances of individual accounts, provide regular account statements, and offer other information to participants.
The complaint said that Cook selected and maintained high-priced share classes of mutual funds, instead of materially identical, lower-cost share classes of those same mutual funds that were readily available to the plan.
It added that Cook failed to adequately investigate and offer non-mutual fund alternatives, such as collective trusts and separately managed accounts.
The complaint added that each mutual fund in the plan charged fees far in excess of rates that Cook could have obtained by using such alternatives.
The complaint accuses Cook of breach of duty of loyalty and prudence, and failing to adequately monitor fees under federal 401(k) rules.
The plaintiff is represented by attorneys at Pavlack Law LLC and Wagner Reese LLP, both of Indianapolis. Cook Group has 60 days to file a response.