MGM Resorts International has been sued by participants of its 401(k) plan alleging breaches of Employee Retirement Income Security Act (ERISA) fiduciary duties by allowing excessive recordkeeping and investment fees.
The plaintiffs say the defendants breached their duties by, among other things, failing to review the plan’s investment portfolio to ensure investments were prudent in terms of cost and maintaining certain investment options in the plan when identical or similar investments with lower costs or better performance histories were available. The lawsuit challenges the use of some actively managed funds over passive funds, as well as the use of actively managed funds that cost more than other, similar actively managed funds.
The lawsuit also claims fiduciaries failed to use lower fee share classes for funds offered in the 401(k) plan. “There is no good-faith explanation for utilizing high-cost share classes when lower-cost share classes are available for the exact same investment,” the complaint states.
The plaintiffs contend that as a “jumbo” plan, the MGM Resorts plan fiduciaries should have been able to negotiate for lower costs for recordkeeping. Costs for recordkeeping per participant in the MGM plan ranged from $72.93 in 2014 to $69.60 in 2018. The lawsuit says, “Some authorities have recognized that reasonable rates for large plans typically average around $35 per participant.”
The complaint says the defendants failed to manage costs and ensure reasonable costs by not regularly issuing a request for proposals (RFP).
MGM Resorts International told PLANADVISER it does not have a comment about the lawsuit.