ManTech ERISA Challenge Shows Cases Moving Down Market

The plan in question has about $800 million in assets, meaning it is quite a bit smaller than many other employers that have faced fiduciary breach lawsuits.

Plaintiffs have filed a new class action Employee Retirement Income Security Act (ERISA) complaint against the ManTech International Corp., alleging a number of fiduciary breaches in the operation of the firm’s defined contribution (DC) retirement plan.

The plaintiffs allege that during the putative class period—defined as May 15, 2014, through the date of judgment—the fiduciary defendants “failed to objectively and adequately review the plan’s investment portfolio with due care to ensure that each investment option was prudent, in terms of cost.” The challenge also suggests the company has maintained certain funds in the plan despite the availability of identical or similar investment options with lower costs and/or better performance histories. 

“To make matters worse, defendants failed to utilize the lowest cost share class for many of the mutual funds within the plan, and failed to consider collective trusts, commingled accounts or separate accounts as alternatives to the mutual funds in the plan, despite their lower fees,” the complaint continues. “Defendants’ mismanagement of the plan, to the detriment of participants and beneficiaries, constitutes a breach of the fiduciary duties of prudence and loyalty, in violation of 29 U.S.C. Section 1104. Their actions were contrary to actions of a reasonable fiduciary and cost the plan and its participants millions of dollars.”

The new complaint, filed in the United States District Court for the Eastern District of Virginia’s Richmond Division, very closely resembles others that have been filed by the Capozzi Adler P.C. law firm. Like the previous suits, this one names as defendants, in addition to the ManTech company, its board of directors, the retirement plan committee and several dozen individual “John Doe” defendants.

According to the plaintiffs, the ManTech defendants have retained several actively managed funds as plan investment options despite the fact that these funds “charged grossly excessive fees compared with comparable or superior alternatives,” and despite ample evidence available to a reasonable fiduciary that these funds had become imprudent because of their high costs. 

“During the class period, the plan lost millions of dollars in offering investment options that had similar or identical characteristics to other lower-priced investment options,” the complaint states. “The funds in the plan have stayed relatively unchanged since 2014. Taking 2018 as an example year, a signification portion of funds in the plan, almost half, were much more expensive than comparable funds found in similarly sized plans (plans having between $500 million and $1 billion in assets). The expense ratios for funds in the plan in some cases were up to 129% above (in the case of the Oakmark Equity and Income Investor) the median expense ratios in the same category.”

Another argument elucidated in the complaint is that “it is not prudent to select higher cost versions of the same fund even if a fiduciary believes fees charged to plan participants by the retail class investment were the same as the fees charged by the institutional class investment, net of the revenue sharing paid by the funds to defray the plan’s recordkeeping costs.”

“Fiduciaries should not choose otherwise imprudent investments specifically to take advantage of revenue sharing,” the complaint states. “This basic tenet of good fiduciary practice resonates loudly in this case, especially where the recordkeeping and administrative costs were unreasonably high as discussed. A fiduciary’s task is to negotiate and/or obtain reasonable fees for investment options and recordkeeping/administration fees independent of each other if necessary.”

ManTech has not yet responded to a request for comment. The full text of the complaint is here.