Empower Sued Over ‘Deceptive’ Sales Practices, High Fees

Three participants in separate defined contribution plans filed a complaint in U.S. District Court for the District of New Jersey accusing Empower Advisory Group LLC and its affiliates of orchestrating a scheme to mislead retirement plan participants into transferring their savings into high-fee investment products.

The participants include Shakira Williams-Linzey, a participant in the ERISA-governed Central Jersey Family Health Consortium 403(b) Pension Plan; Jennifer Patton, a participant in the Heliogen Inc. 401(k) Plan; and Kathleen McFarland, a Global Medical Response, Inc. 401(k) Plan participant.

Their complaint alleges that Empower and its related companies—Empower Retirement LLC, Empower Financial Services Inc. and Empower Annuity Insurance Co. of America—violated fiduciary duties under the Employee Retirement Income Security Act and engaged in prohibited transactions.

According to the filing, Empower leveraged its role as recordkeeper for employer-sponsored retirement plans to harvest confidential participant data and then target individuals, particularly those nearing retirement or with large balances, for sales pitches. The plaintiffs allege sales representatives falsely portrayed Empower’s “managed account” program—also marketed as “Empower Premier IRA” and “My Total Retirement”—as the only recommended investment option.

The complaint claims investors were not told about the multiple layers of fees associated with these accounts. In addition to standard investment expenses, participants were allegedly charged an “investment advisory fee” of up to 0.55% of assets, along with additional fund fees often paid to Empower affiliates. Combined, these charges could reach 1.35% of account balances, according to the complaint.

The plaintiffs further allege that Empower misrepresented its services as offering personalized, objective financial advice. In reality, the managed account program consisted of seven preset asset allocations, heavily invested in Empower-affiliated funds. Sales representatives were allegedly incentivized by bonuses and commissions tied to convincing participants to enroll, despite claims they were salaried and unbiased.

By steering participants into these products, the plaintiffs argue, Empower enriched itself and its affiliates while saddling investors with excessive costs and underperforming investments. The plaintiffs seek recovery of losses, disgorgement of what they describe as ill-gotten profits, and other equitable relief under ERISA.

Empower is the second-largest retirement plan recordkeeper in the U.S., administering more than $1.4 trillion in assets for approximately 17.4 million participants, according to the complaint. 

Though complaints are often filed against plan sponsors, this is the latest complaint targeting plan providers. In 2021, TIAA-CREF paid $97 million, including a $9 million civil fine, to settle charges from federal regulators and the New York attorney general stemming from similar allegations of misleading rollover recommendations, a case cited in the complaint against Empower. 

The plaintiffs are represented by Schlichter Bogard LLC, a firm known for its litigation on behalf of retirement plan participants.

An Empower spokesperson said: “As a matter of policy, we will not comment in detail on pending litigation; however, we will say Empower believes this suit and the claims it makes are without merit and will defend the matter vigorously. The law firms that filed this lawsuit are plaintiffs’ firms that regularly file lawsuits against retirement services providers. In Empower’s view, this case is another unfortunate example of an ERISA lawsuit driven by lawyers with questionable intentions.”

As of 2023, the Central Jersey Family Health Consortium 403(b) Pension Plan had more than $9 million in assets with 162 participants, according to its most recent Form 5500; the Heliogen, Inc. 401(k) Plan also had slightly more than $9 million in assets with 244 plan participants; and the Global Medical Response, Inc. 401(k) Plan had more than $1.5 billion in assets with 41,677 plan participants.