Class Action Claims Voya Financial Saddled Employee Retirement Plan with Poor Investment Options, High Fees

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A proposed class action claims Voya Financial and its affiliates have violated their fiduciary duties to employee retirement plan participants by failing to prudently manage the plan’s investment options and recordkeeping fees.

According to the sprawling 63-page case, Voya’s choice to maintain poorly performing investment options in the plan, which had over 11,400 participants and more than $2.2 billion in assets at the end of the 2020 plan year, indicates that the company failed to employ an impartial and prudent selection process and instead “enriched [itself] at the expense of [its] own employees.” Moreover, Voya’s choice to maintain in-house recordkeeping services instead of engaging in a bidding process to ensure that plan participants would pay the lowest recordkeeping fees was not in the individuals’ best interests, and instead financially benefited the defendants, the suit charges.

The lawsuit alleges the defendants, who include Voya Financial, Inc., a financial, retirement, investment and insurance company; Voya Services Company, the plan sponsor; Voya Retirement Insurance and Annuity Company, the plan recordkeeper; Voya Institutional Trust Company, the plan trustee; Voya Investment Trust Company, an investment advisor; Voya Investment Management Co. LLC, who manages one of the plan’s investment options; Voya Financial Plan Administrative Committee, the plan administrator; and Voya Financial Plan Investment Committee, who is tasked with managing the plan’s investments, have violated the federal Employee Retirement Income Security Act (ERISA).

The filing alleges the defendants ran afoul of their fiduciary duties to plan participants by selecting and repeatedly failing to remove certain investment funds managed by Voya Financial and its affiliates. Per the case, although the plan is one of the largest defined contribution plans in the U.S. and thus had “tremendous bargaining power” to obtain high-performing investment options at low cost, the defendants put their own interests above those of plan participants and instead invested in Voya’s proprietary funds, which the lawsuit says consistently under-performed compared to alternative investment options yet generated fees for the defendants.

Moreover, the lawsuit alleges Voya’s decision to maintain poorly performing funds, including a suite of target date funds managed by Voya, the Voya Stable Value Option, the Voya Small Cap Growth Trust Fund, the Voya Real Estate Fund, the Cohen and Steers Real Asset Multi-Strategy Collective Investment Trust, and the Brown Advisory Small-Cap Growth Equity Portfolio, indicates that the defendants’ decision-making process was “tainted” by their self-serving motive to generate revenue and profits from these funds despite the “detrimental impact” it would have on employees’ retirement savings. According to the suit, the defendants’ lack of a proper monitoring process, which would have taken into account the funds’ history of chronic underperformance, has caused plan participants to lose out on millions in retirement savings.

The lawsuit goes on to claim that the defendants’ alleged failure to maintain reasonable and prudent recordkeeping expenses was the result of “disloyal decision-making.” While it was the defendants’ fiduciary duty to scrutinize plan expenses and conduct a competitive bidding process to ensure plan participants pay reasonable fees for plan-related services, they instead chose to keep such services in-house at all times in order to drive revenue, the complaint charges. As a result, the recordkeeping fees paid by the plan were “unreasonable and imprudent” and not in participants’ best interests, the case alleges.

The lawsuit surmises that the plan’s recordkeeping costs were well above the $5 average for plans “a fraction of the size of the Plan” despite the fact that “jumbo” plans like the defendants’ have bargaining power significant enough to negotiate low fees.

The case looks to cover anyone who invested through the defendants’ employee retirement plan between December 14, 2015 to the present.

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