Posted August 24th, 2016.
A new lawsuit has been filed against Morgan Stanley (NYSE:MS) that accuses the company of mismanaging its 401(k) retirement savings plan. The plaintiff, who participated in the company’s retirement plan, says that the fees were too expensive. It was also said that the in-house investment funds were performing poorly. The fund fees charged to employees was higher than what the company charges to outside investors.
The plan was made with “poor to mediocre” performers, which included many of the company’s own funds that were charging less from outside clients. Many of these funds were “abysmal performers”, the complaint read. According to the ERISA or The Employee Retirement Income Security Act of 1974, employers have to make sure that the retirement funds are run in the best interests of employees.
The plaintiff further stated that Morgan Stanley was treating their $8 billion 401(k) plan to promote their own mutual fund business. They were trying to maximize profits at the expense of the company’s employees.
The lawsuit was filed in a U.S. District Court in New York last Friday. It claims that about 60,000 participants of Morgan Stanley have suffered “hundreds of millions of dollars” in losses because of this. Damages worth $150 million have been claimed from the employer. When asked, Morgan Stanley declined to comment on this lawsuit. The company has more than 60,000 employees in 1300 offices worldwide.
While filing the suit, employment law firm Sanford Heisler LLP said that millions of workers in the US depend on 401(k) plans for retirement, so the lawsuit goes way beyond Morgan Stanley, the complaint read. Just three days back, Sanford had filed a lawsuit against the retirement plans of Columbia University.
The Morgan Stanley (NYSE:MS) stock went down sharply from $30.69 to reach $30.50 with this news and closed at $30.44. But it recovered on Tuesday to reach a high of $30.88. The market closed on Tuesday with Morgan Stanley trading at $30.72, up 0.12 or 0.39 percent.
The lawsuit filed on Friday is the latest among many complaints about poor investment choices and high fees. Only last month, there was a similar suit against the 401(k) plan of Franklin Templeton. And earlier this month, complaints were also filed against Yale University and the Massachusetts Institute of Technology of New York.
Similar complaints have also been filed against the Neuberger Berman Group LLC, New York Life Insurance Co., Deutsche Bank, American Century Services LLC, and others.