SeaWorld this week was sued by several participants in its $310 million 401(k) plan, allegedly for letting fees for investments and service providers run out of control.
Part of the case involves adviser compensation.
In the proposed class-action suit filed Monday in U.S. District Court for the Southern District of California, the law firms representing the plaintiffs leveled three claims against the theme park and entertainment company. Those are related to the fees paid to mutual fund providers, the plan’s record keeper and service providers including LPL Financial and Alliant Retirement.
The plaintiffs are seeking a very specific amount, “in excess of $53,523,698.53 in funds owed back to the plan on behalf of employees, participants [and] beneficiaries,” according to the complaint.
Much of the lawsuit, like other excessive-fee cases filed in recent years, is dedicated to 12b-1 fees and other expenses that are unrelated to investment management. Such fees are often baked into share classes other than institutional varieties and can be used to compensate record keepers, though they can also be rebated back to the plan.
As of 2019, 26 of the 29 investment options on the SeaWorld plan menu were available in lower-cost share classes, and some underperformed their benchmarks, according to the complaint. Participants in the plan overpaid for services, both through direct and indirect fees, the plaintiffs stated.
They take aim at fees paid to the record keeper, which was MassMutual until the end of 2019, when Prudential was hired as a replacement. The suit also points to indirect compensation paid to the shareholder service provider, which was LPL until 2014, after which Alliant Retirement was the designated financial adviser, according to the complaint. None of those firms is named as a defendant in the case, although they are all parties of interest.
Some of the mutual funds on the plan menu had selling arrangements with LPL, and the defendants allegedly “acted to incorporate these investments into the plan to the detriment of participants/beneficiaries and benefit of LPL.”
“The total amount of excess mutual fund expenses paid by plan participants over the past six years, which correspondingly reduced the return on the plan participants’ investments, resulted in millions of dollars of damages to participants,” the complaint read. “Defendants paid MassMutual, LPL and Alliant unreasonable fees, failed to monitor [service providers] and failed to make requests for proposals from other[s].”
SeaWorld did not immediately respond to a request for comment.
Plaintiffs in the lawsuit are represented by law firms Christina Humphrey Law and P.C. Tower Legal Group.
Being an only in the financial industry has been challenging
For reprint and licensing requests for this article, click here