Plaintiffs Say 401(k) Plan Omitted Target-Date Funds Among Problems

The target of a new Employee Retirement Income Security Act is a plan sponsor with more than 20,000 participants that ‘periodically’ reviewed the plan’s investment options to ensure they were suitable, according to a complaint.



Plaintiffs in a lawsuit seeking class action certification have claimed the plan sponsor breached fiduciary duties to 401(k) plan participants.

Former employees have filed a lawsuit seeking class action certification against TTEC Services Corporation, the employee benefits committee and named 401(k) plan fiduciaries under the Employee Retirement Income Security Act.

The plaintiffs’ claim that defendants “flagrantly” breached fiduciary duties owed to the plan and plan participants by mismanaging the plan’s recordkeeping fees and investment options, “causing millions of dollars in damages to plan participants,” the complaint states.

Plaintiffs allege that defendants failed to prudently monitor, regularly benchmark and prudently negotiate the plan’s recordkeeping fees, among other claims.

It is alleged by plaintiffs that the plan allowed a service provider, T. Rowe Price—since 2019 the plan recordkeeper—to include and retain proprietary investments in the investment menu that “historically and subsequently underperformed the replaced funds and/or were more expensive investments; failed to prudently consider alternatives to mutual funds in the plan, despite the alternatives’ lower fees; [and] admitted to have only ‘periodically’ reviewed the plan’s investment options to ensure they were suitable for plan participants—in dereliction of their duty to continually monitor each investment offering—causing plan participants to incur excessive investment fees,” according to the complaint.

In addition, the plaintiffs claim in the complaint that the TTEC 401(k) plan was administered during the class period—August 25, 2016, to the present—without “crucial” protocol, namely, an investment policy statement, and did not include target-date funds in the plan’s investment menu until “late” 2019, when five Vanguard options were added.   

“Plaintiffs, accordingly, assert claims against defendants for breach of the fiduciary duties of prudence (Count One) and failure to monitor (Count Two),” the complaint states.

According to the court filing, plan assets totaled approximately $200 million as of January 1, 2020, and the average number of plan participants between 2016 and 2021 was approximately 26,000. Prior to T. Rowe Price, Merrill Lynch was the plan’s recordkeeper from 2012 through 2019, according to the court filing. 

“The recordkeeping fees defendants allowed Merrill Lynch to charge to plan participants were higher than comparably-sized defined contribution plans during the class period, showing the defendants failed to prudently monitor and benchmark these fees, causing the plan to overpay millions of dollars for recordkeeping services,” the complaint states. “Before 2016, a prudent fiduciary of a plan with a similar number of participants could have negotiated comparable recordkeeping services of similar or superior quality for $30 to $35 per participant, or lower.”

The complaint notes “that a [subsequent] recordkeeper, T. Rowe Price, was willing to charge lower recordkeeping fees in 2020 for comparable services demonstrates the plan fiduciaries caused the plan to overpay for recordkeeping fees. And … when changing recordkeepers from Merrill Lynch to T. Rowe Price, defendants failed to prudently negotiate the recordkeeping fees, causing the plan to continue to pay above market-rate for these services.”

A TTEC company webpage identifies global hubs across locations, in six continents, 85+ global locations and employing 60,000 workers. TTEC describes itself as a global customer technology and services company, “focused on the design, implementation, and delivery of customer service platforms in various industries,” according to the complaint.

A request for comment to TTEC on the lawsuit was not returned.

The case is plaintiffs Elijah Carimbocas, Linda Dlhopolsky, and Morgan Grant (“Plaintiffs”), by and through their attorneys, on behalf of the TTEC 401(k) Profit Sharing Plan (f/k/a TeleTech 401(k) Profit Sharing Plan) (the “Plan”), V. TTEC Services Corporation, TTEC Services Corporation Employee Benefits Committee, Edward Baldwin, K. Todd Baxter, Paul Miller, Regina Paolillo, Emily Pastorius, John And Jane Does 1-20, Defendants. It is Case 1:22-cv-02188-STV and before the United States District Court for the District of Colorado.