AllianceBernstein 401(k) lawsuit booted
AllianceBernstein this week defeated a lawsuit over the use of its own products in the company’s $1.3 billion 401(k), and the result has lessons for other plan sponsors.
On Monday, the US District Court for the Southern District of New York dismissed the plaintiffs’ claims without prejudice, meaning that they can file an amended complaint to address the legal shortcomings within 30 days.
The lawsuit, which was filed in 2022, failed to show that the asset manager could have breached its duties of prudence and loyalty, and it did not successfully allege any prohibited transactions, the court stated.
“This case is one of the many that have been filed – 40-plus cases – that were for self-dealing against investment managers,” Bonnie Treichel, chief solutions officer at Endeavor Retirement, said in an email. “It is counterintuitive because as an investor/consumer you want to know that investment managers are ‘eating their own cooking,’ but these cases argued that the investment management firm has engaged in self-dealing with its 401(k) plan by including their own investments in the plan that underperform and cost too much.”
The plaintiffs alleged that AllianceBernstein acted in its own interest by including in-house investment products in the plan, such as the Lifetime Income Strategy, which was the default option. However, the company successfully argued that it didn’t enrich itself from those products, as it waived the investment management fees for its own plan participants. And while the plaintiffs contended that the firm nonetheless benefitted from having the plan’s assets in its own products, those investments accounted for only about 0.2 percent of AllianceBernstein’s total assets under management – a detail that the
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