Taylor Corporation Failed to Prudently Manage Employee Retirement Plan, Class Action Alleges

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A proposed class action claims Taylor Corporation and its board of directors and fiduciary investment committee have failed to prudently manage the company’s employee retirement plan.

According to the 46-page case, the defendants have breached their fiduciary duties to 401(k) participants and beneficiaries by allowing the plan to be charged excessive recordkeeping fees and failing to replace high-cost, low-performing investment options with less expensive, better performing ones. 

Per the suit, Taylor Corporation, a privately owned printing company with “more than 80 subsidiaries,” and its co-defendants have run afoul of the Employee Retirement Income Security Act (ERISA) and caused plan participants and their beneficiaries to lose millions in retirement savings.

“As a direct and proximate result of the breaches of fiduciary duties alleged herein, the Plan suffered millions of dollars of losses due to excessive costs and lower net investment returns,” the complaint alleges. “Had the Prudence Defendants complied with their fiduciary obligations, the Plan would not have suffered these losses, and the Plan’s participants would have had more money available to them for their retirement.”

The lawsuit explains that Taylor Corporation’s 401(k) and profit sharing plan, with more than $877 million in assets and 12,157 participants with account balances as of December 2020, is considered a large defined-contribution plan with “substantial bargaining power.” Per the suit, the plan’s size should have allowed the defendants to negotiate low-cost administrative and recordkeeping expenses.

The case alleges, however, that the Taylor Corporation plan’s recordkeeping fees were “clearly unreasonable” when compared with those of plans of a similar size. Although the plan could have negotiated fees as low as $20 to $35 per participant, the lawsuit attests, plan participants paid an average of $83.37 in recordkeeping fees during the relevant timeframe.

Another indication that the defendants “employed a flawed fiduciary process,” according to the suit, is their apparent failure to prudently select and monitor the plan’s investment options. Per the lawsuit, lower cost versions of the “exact same investment options” available through the Taylor Corporation retirement plan were available at all relevant times. The case claims plan participants could have gained substantial savings had the defendants, for example, switched from the mutual fund versions of the T. Rowe Price Target Date funds to the collective investment trust versions of those investment options.

Moreover, the lawsuit alleges the defendants failed to choose the least expensive share classes for which the plan qualified even though the only difference between share classes is cost. Per the suit, less expensive share classes existed for at least 23 funds in the plan’s suite of investment options.

“There is no good-faith explanation for selecting and retaining a high-cost share class when a lower-cost share class is available for the exact same investment,” the complaint contends. “The Plan did not receive any additional services or benefits based on its selection of more expensive share classes; the only consequence was higher costs for Plan participants.”

The case further claims that the defendants failed to prudently monitor the cost and performance of the plan’s investment options. Had the defendants engaged in a prudent process to monitor plan funds and expenses, the lawsuit argues, they would have removed the Victory Integrity Small Cap Value Fund Class, which the case says has a high expense ratio and “consistently underperformed” its benchmark index and lower-cost funds in the same category.

The lawsuit looks to represent all participants in or beneficiaries of the Taylor Corporation retirement plan at any time between February 14, 2016 through the date of judgment in this matter.

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