MSCS, Matrix Prohibited Transactions in Retirement Plans ERISA Class Action

This class action is about prohibited transactions involving mutual fund fees taken from two retirement plans, the MBA Engineering, Inc. Employees 401(k) Plan and the MBA Engineering, Inc. Cash Balance Plan. The complaint alleges that the fees removed from the plan total at least $40 million and possibly as much as $400 million and that these payments were not disclosed to the plan participants. The transactions in this case are prohibited under the Employee Retirement Income Security Act of 1974 (ERISA) and breached the defendants’ fiduciary duties, the complaint claims.

Named as defendants are three related companies, MSCS Financial Services Division of Broadridge Business Process Outsourcing, LLC (a fiduciary of the plans), Matrix Trust Company (also a fiduciary), and Matrix Settlement and Clearance Services, LLC. All three have the same parent company.

The mutual fund fees consisted of three categories of fees, the complaint claims: shareholder servicing fees, finders fees, and sub-administration fees, all of which were generated by investments in the plans. The complaint alleges, “Defendants worked together to collect the Mutual Fund Fees, retain a portion of them, and transfer more than 90% of them to third parties in interest, e.g., third[-]party administrators.”

The three companies are strictly liable for these transactions, the complaint claims, and cannot offer the defense that they disclosed the transactions, because they did not do this. The complaint alleges mutual fund fees were not mentioned as compensation in their agreements with the plans.

The complaint alleges that the defendants worked together to collect and transfer the mutual fund fees. Matrix Trust, the complaint says, had contracts “to provide custodial services for many forms of assets, including mutual funds which generated the Mutual Fund Fees.” Among the parties it contracted with was MSCS Financial, which the complaint claims collected the fees from the mutual funds. Finally, the complaint alleges Matrix Settlement “recorded and facilitated the flow of information between Matrix Trust and MSCS Financial.”

According to the complaint, the funds were collected into an account controlled by MSCS Financial, after which that company may have transferred more than ninety percent of them to another account controlled by Matrix Trust, which in turn may have transferred them to third parties in interest. Alternatively, the complaint suggests that MSCS Financial may have been the one to distribute them.

The complaint alleges, “Each of the Defendants, as closely[-]knot entities, benefitted from the illegal payments to parties in interest and compensation.” Also, it claims that the defendants “failed to disclose and actively concealed that Defendants retained and paid to parties in interest many millions of dollars in Mutual Fund Fees.”

The class for this action is all customers of Matrix’s Denver office which had assets in the custody of Matrix Trust that generated mutual fund fees at any time before the date notice is sent to class members.

Article Type: Lawsuit
Topic: Employment
Tags: ERISA, Employment Violations, Prohibited Transactions, Retirement Plans