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Proprietary Funds File Another 401(k) Excess Fee Lawsuit

The new lawsuit argues that the decision to keep own funds in a 401(k) was “tainted with self-interest” caused by “blind preference” and that “defendants’ favoritism resulted in excessive investment management fees.” It has led to the payment of

The plaintiff in this case is current participant Sandy Schissler.[i] Bring lawsuits against Janus 401(k) and employee stock plan trustees (and those who appointed them). The lawsuit asserts that “at the expense of the plan and its participants and beneficiaries, the defendants violated ERISA and breached their fiduciary duty with respect to the plan. applied a dishonest and imprudent priority to Janus Henderson’s own funds.”

A lawsuit filed in the United States District Court for the District of Colorado (Schissler v. Janus Henderson US (Holdings) Inc.D. Colo., No. 1:22-cv-02326, 9/9/22) states that “Given the excessive fees charged by the Janus Henderson Funds and the availability of comparable or superior funds at significantly lower costs, the fees paid to Janus Henderson and its affiliates are It was unreasonably expensive,” he claims.[ii]

“Guess” motion?

the suit itself[iii] Although relatively short (only 31 pages), the allegations are generally comparable to those made in excessive fee lawsuits, particularly those involving proprietary funds. Also, the Janus Henderson Fund charged higher fees compared to the non-proprietary alternatives chosen by similarly sized plans. It is reasonable to assume that we were unable to investigate

Leaving aside the notion of validity of that reasoning for a moment, the lawsuit argues that “throughout the estimated class period, the annual investment fees paid by plan participants were at least 0.45% to 0.50% of total plan assets and consistently It was higher than average,” claims 401. (k) Plans of similar size. It further argues that “excluding the plan’s non-proprietary options (all passively managed investments), the annual investment fee would be at least 0.64% to 0.68% of total plan assets.” In contrast, in an average 401(k) plan where he had assets between $250 million and $500 million, his total plan cost was 0.44% in 2016, down to 0.42% in 2018. Decreased.

The complaint further states that in 2018, “the most recent year for which average fee data is available, the Janus Henderson Fund’s fees were within the same asset class category among plans ranging from $250 million to $500 million. of funds exceeded the average expense ratio.” “If you just look at the leading actively managed funds invested in a similar style to the Janus Henderson Fund, the excess fees are about 25%, which is 131% higher than the average.”[iv]

Menu “Driven”

The plan itself is not particularly large, and from 2016 to the end of 2021 (the last year for which data are publicly The lawsuit said it had assets of $512 million. That said, as of the end of 2016, the plan’s investment menu included 53 investments, including 44 of its own Janus Henderson funds, according to the lawsuit.

Here, the plaintiffs deny any specific knowledge of the process the planning commission went through, but the lawsuit alleges that from 2016 to 2021, “a liquidation or merger could result in certain Janus Henderson funds being placed on the planning menu.” Defendants, however, did not choose to exclude any of Janus Henderson’s proprietary investments from the Plan’s menu during that time. We often added Janus Henderson funds.” So by the end of 2021, the plan menu consisted of 50 investments, including 40 of our own Janus Henderson funds.

“To infer that Defendants’ process for selecting and monitoring the Janus Henderson Fund was dishonest and careless, based on Defendants holding proprietary funds over cheaper and superior non-proprietary funds. is reasonable.”

“Blind Preferences”

Plaintiff alleges that Janus Henderson Trustee Defendant “constructed and maintained the plan’s investment menu unlike other plans of similar size. As of 2021, “all mutual funds offered by Janus Henderson were included in the plan. The managed investment is the Janus Henderson Fund, and “no other similarly sized defined contribution plan has entrusted substantially all of its actively managed investments to Janus Henderson.”

The lawsuit alleges that “when certain Janus Henderson funds fell off the plan menu, it was solely due to a liquidation or merger of the funds and was not the result of a diligent or prudent review process,” and that “a presumed class of During the period, Defendants added eight additional Janus Henderson Funds to their menu of plans, but to date have not added a single non-proprietary, actively managed fund, and many of these Janus Henderson Funds. was added to the plan upon its inception.” Further, the lawsuit “harmed the participants of the plan by the defendant’s reckless use of the plan’s assets to seed new own funds.” claims.

Ultimately, the lawsuit argues that “defendant’s favoritism was attributed to participants’ excessive investment management fee payments to Janus Henderson, failure to carefully monitor and remove underperforming Janus Henderson funds, and It has led to a failure to engage in wise and loyal investments.” The process in choosing a new planned investment. ”

The lawsuit concluded that “defendant’s dishonesty and indiscretion cost plan participants millions of dollars over the estimated duration of the class,” and concluded that “plaintiffs are expected to redress this misconduct and cause loss to the plan.” and to obtain other appropriate relief provided by Erisa.”

Will the court be persuaded? stay tuned.

[i] The lawsuit, which has been a participant since 2012, claims that at least the Janus Henderson Contrarian Fund, the Janus Henderson Emerging Markets Fund, the Janus Henderson European Focus Fund, the Janus Henderson Flexible Bond Fund, Janus Henderson Forty Fund, Janus Henderson Global Equity Income Fund, Janus Henderson Global Real Estate Fund, Janus Henderson Global Select Fund, Janus Henderson Global Technology Fund, Janus Henderson Growth and Income Fund, Janus Henderson High Yield Fund, Janus Henderson International Opportunities Fund, Janus Henderson Overseas Fund, Janus Henderson Enterprise Fund, Janus Henderson Multisector Income Fund, Janus Henderson Mid Cap Value Fund, Janus Henderson Research Fund, Janus Henderson Small Mid Cap Value Fund, Janus Henderson Small Cap Value Fund, Janus Henderson Venture Fund.

[ii] This is clearly derived from the total planned cost as determined by the BrightScope/ICI Defined Contribution Pension Annual Profile, which includes “asset-based investment management fees from forms, asset-based management and advice fees, and other 5500 and ERISA Covered DC Plan Audited Financial Statements.

[iv] Note here that comparisons with common “averages” as a benchmark have drawbacks.