Employees claim 401(k) mismanagement led to tens of millions in losses

(CN) — Global logistics and shipping company Pitney Bowes caught the ire of its employees Tuesday when they filed a class action over retirement losses stemming from poor investment decisions.

The employees say administrators of the investment plan clung to two T. Rowe Price funds that drastically underperformed over a period of more than five years, which led to catastrophic losses.

Administrators’ refusal to ditch the TRP Growth Stock Fund cost participants between $57 million and $152 million over the five years, while they sustained losses of between $7.9 million and $27 million over the same time period when the plan held on to the TRP Mid-Cap Growth Fund, according to the employees.

Based in Shelton, Connecticut, Pitney Bowes is best known for producing the world’s first commercially available postage meter, and currently has over 7,000 employees.

Anthony Guastella, one of those 7,000, filed suit Tuesday as the lead plaintiff in the class action.

Guastella and the other participants say the company and its 401(k) committee “fell well short” of the fiduciary duties imposed on them by the Employee Retirement Income Security Act, or ERISA, when they refused to look for alternatives to the T. Rowe Price funds.

“These funds have consistently proven themselves unable to beat their own chosen index benchmark … [and] glaringly underperformed their peers under nearly all modern portfolio theory investment metrics,” they say.

Pitney Bowes’ failure to weigh the extra costs associated with the actively managed, underperforming funds with less risky, passively managed investments violated basic investment principles, as well as their fiduciary duties, the employees claim.

Their complaint is rife with charts and graphs highlighting comparable investments that easily outperformed those from T. Rowe Price during the relevant period.

“Examining the information available to the plan fiduciaries in 2020, a plan fiduciary following the minimum standard of care for prudence, when evaluating whether to continue to retain the TRP Growth Stock Fund would have determined that its investment performance was inferior and its risk-adjusted performance was severely inferior under commonly accepted investment metrics,” the employees say.

The estimate of damages given in the lawsuit is derived from the T. Rowe Price funds’ struggling performance when compared with similar investment options, and quickly added up over the relevant five-year period.

“If defendants had complied with their fiduciary duties to monitor their investments, these unsuitable and underperforming investments would have been removed several years ago,” the employees say. “Defendants’ failure to conduct a reasonably prudent process to investigate and monitor investment options within the plan and remove these unsuitable and underperforming investments reduced plan participants’ retirement funds by tens of millions of dollars.”

A violation of ERISA’s duty of prudence and other fiduciary duties are listed as causes of action in the lawsuit.

The employees seek an order requiring plan administrators to “make good to the plan all losses” sustained as a result of their mismanagement.

The lawsuit was filed by attorney James Healy of the Hartford-based firm Cowdery, Murphy and Healy LLC.

Pitney Bowes did not immediately return a request for comment.

Follow @kkoeninger44