The lawsuit was filed by Franklin Templeton employees, who allege the defendants chose expensive, poor-performing proprietary funds for the plan in place of better, lower-cost alternatives.
The lawsuit, entitled Cryer v. Franklin Resources, Inc. et al, also asserts a breach due to excessive fees for administrative services and using a money market fund in place of a stable value fund.
“Despite the many investment options available in the market, the Plan has invested hundreds of millions of dollars in mutual funds managed by Franklin Templeton and its subsidiaries. These investment options were chosen because they were managed by, paid fees to, and generated profits for Franklin Templeton and its subsidiaries,” the complaint states.
Plaintiffs assert that all 40 mutual funds in the $1.2 billion Franklin Templeton 401(k) Retirement Plan are managed by Franklin Templeton and its subsidiaries. While the proprietary funds generated millions of dollars in fees for Franklin Templeton, the plan lost $64 million since 2010 when compared with “prudent alternatives such as comparable Vanguard Funds” due to unreasonable fees “significantly higher than the median.”
Further allegations state that fiduciaries allowed an excessive total plan cost, inclusive of administration and investment management expenses, and that selecting a money market fund over a stable value fund, both being capital-preservation investment options, caused the plan to lose more than $9 million over the six-year period since 2010, due to low investment returns.
Plaintiffs are represented by attorneys with Izard Kindall & Raabe LLP, Bailey & Glasser LLP, and Creitz & Serebin LLP.