A participant in the Cornerstone Pediatric Profit Sharing Plan has filed suit against Voya Financial and its subsidiary Voya Retirement Insurance and Annuity Company for violating the Employee Retirement Income Security Act (ERISA) by the way it charged fees.
According to the complaint, the participant is bringing the lawsuit on behalf of the Cornerstone plan and all other similarly situated plans seeking the return of undisclosed and unreasonable asset-based fees charged by Voya for recordkeeping and administrative services.
In a statement, Voya Financial said, “Voya denies the plaintiff’s claims and we plan to vigorously defend this matter.”
The complaint cites a survey by NEPC, a firm that advises on health care institutions’ defined contribution (DC) plan assets, which found the median recordkeeping cost of 113 plans was $64 per participant. It alleges that as a result of Voya’s asset-based fees, in 2014 the plan paid $30,790 for recordkeeping services for 21 participants, translating to $1,466 per participant, and in 2015, the plan paid $34,568 for 19 participants, translating to $1,819 per participant. “VOYA’s fees are 36 times more than the reasonable amount of compensation that should have been charged to the Cornerstone Plan,” the complaint says.
The lawsuit alleges that Voya charged the Cornerstone plan “an unreasonable asset-based fee of between 0.67% and 1.86% of the net assets invested in the various mutual funds offered as investment options.” It goes on to say Voya concealed the true amount of its fees in disclosures to participants by adding its asset-based fees to the operating costs of the mutual funds.
The plaintiff extrapolates this to the $175,780,000 in retirement plan assets Voya had under management as of the end of June this year, and says based on the fees charged to the Cornerstone plan, Voya potentially earns more than $1 billion a year “in excessive compensation at the expense of the individual plans and their participants.”
The complaint also states that Cornerstone plan fiduciaries engaged in a prohibited transaction by entering into the Voya contract. However, it does not name any person or committee of the plan as defendants.