A class action complaint has been
filed against Starwood Hotels & Resorts Worldwide, Inc. accusing it of
serially breaching its Employee Retirement Income Security Act (ERISA)
fiduciary duties in the management, operation and administration of its
employees’ 401(k) plan, the Starwood Hotels & Resorts Worldwide, Inc.
Savings & Retirement Plan.
The complaint notes that the
United States Supreme Court held in Tibble v. Edison International that plan
fiduciaries have an ongoing duty to monitor investments. Participants allege
that Starwood had the bargaining power to obtain and maintain low fees.
However, Starwood did not exercise this power for many years. At about the same
time as the Tibble decision, Starwood managed to cut the fees of its fund
offerings in half. Fees were reduced an average of 40 basis points (.40%). This
means that for the prior five years, an unnecessary $20 million in fees were
incurred by plan participants—40 basis points times $1 billion in assets equals
$4 million per year in excess fees or $20 million over a five-year period, the
The lawsuit also cites a survey
by NEPC, an independent investment consulting firm, which found that the median
recordkeeping costs of 113 plans was $64 per plan participant in 2015. The
Starwood Plan has consistently averaged recordkeeping and administrative fees
that are close to $100, more than 50% higher than the median cost of $64. As a
Plan with assets well over $1 billion, Starwood could have negotiated
substantially lower recordkeeping and administrative fees, the participants
The complaint also states that
Starwood engaged in the practice of revenue-sharing with the investment funds
it offered plan participants. This means that funds paid Starwood monies for
their inclusion in the investment menu. However, Starwood does not disclose the
amount of revenue sharing it received.
here for the original article from planadvisor.com.