Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 1 of 36 PageID: 1
`
`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF NEW JERSEY
`
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`)
`
`
`
`
`
`
`
`
`
`v.
`
`Plaintiffs,
`
`MARK MILANO, ROBERT CAMERON,
`RODNEY HERGENRADER, KATHERINE
`H. JONCAS and CHARLES VAN
`HOOSER, individually and on behalf of all
`others similarly situated,
`
`
`
`
`
`COGNIZANT TECHNOLOGY
`SOLUTIONS U.S. CORPORATION, THE
`BOARD OF DIRECTORS OF
`COGNIZANT TECHNOLOGY
`SOLUTIONS U.S. CORPORATION, THE
`401(K) INVESTMENT COMMITTEE OF
`COGNIZANT TECHNOLOGY
`SOLUTIONS U.S. CORPORATION and
`JOHN DOES 1-30.
`
`
`
`
`
`
`
`
` CIVIL ACTION NO.:
`
`
`
` CLASS ACTION COMPLAINT
`
`
`
`
`
`
`
`) ) ) ) ) ) ) )
`
`
`
`
`
`
`
`
`
`Defendants.
`
`
`
`
`
`COMPLAINT
`
`Plaintiffs, Mark Milano, Robert Cameron, Rodney Hergenrader, Katherine H. Joncas and
`
`Charles Van Hooser (“Plaintiffs”), by and through their attorneys, on behalf of the Cognizant
`
`Technology Solutions 401(k) Savings Plan (the “Plan”),1 themselves and all others similarly
`
`situated, state and allege as follows:
`
`I.
`
`INTRODUCTION
`
`1.
`
`This is a class action brought pursuant to §§ 409 and 502 of the Employee
`
`Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1109 and 1132, against the
`
`
`1 The Plan is a legal entity that can sue and be sued. ERISA § 502(d)(1), 29 U.S.C. § 1132(d)(1).
`However, in a breach of fiduciary duty action such as this, the Plan is not a party. Rather, pursuant
`to ERISA § 409, and the law interpreting it, the relief requested in this action is for the benefit of
`the Plan and its participants.
`
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 2 of 36 PageID: 2
`
`Plan’s fiduciaries, which include Cognizant Technology Solutions U.S. Corporation. (“Cognizant”
`
`or “Company”) and the Board of Directors of Cognizant Technology Solutions U.S. Corporation
`
`and its members during the Class Period2 (“Board”) and the 401(k) Investment Committee of
`
`Cognizant Technology Solutions U.S. Corporation and its members during the Class Period
`
`(“Committee”) for breaches of their fiduciary duties.
`
`2.
`
`To safeguard Plan participants and beneficiaries, ERISA imposes strict fiduciary
`
`duties of loyalty and prudence upon employers and other plan fiduciaries. Fiduciaries must act
`
`“solely in the interest of the participants and beneficiaries,” 29 U.S.C. § 1104(a)(1)(A), with the
`
`“care, skill, prudence, and diligence” that would be expected in managing a plan of similar scope.
`
`29 U.S.C. § 1104(a)(1)(B). These twin fiduciary duties are “the highest known to the law.” Sweda
`
`v. Univ. of Pennsylvania, 923 F.3d 320, 333 (3d Cir. 2019).
`
`3.
`
`The Department of Labor has explicitly stated that employers are held to a “high
`
`standard of care and diligence” and must, among other duties, both “establish a prudent process
`
`for selecting investment options and service providers” and “monitor investment options and
`
`service providers once selected to see that they continue to be appropriate choices.” See, “A Look
`
`at 401(k) Plan Fees,” supra, at n.3; see also Tibble v. Edison Int’l, 135 S. Ct. 1823, 1823 (2015)
`
`(Tibble I) (reaffirming the ongoing fiduciary duty to monitor a plan’s investment options).
`
`4.
`
`Under 29 U.S.C. § 1104(a)(1), a plan fiduciary must give substantial consideration
`
`to the cost of investment options. “Wasting beneficiaries’ money is imprudent. In devising and
`
`implementing strategies for the investment and management of trust assets, trustees are obligated
`
`to minimize costs.” Uniform Prudent Investor Act (the “UPIA”), § 7.
`
`
`2 The Class Period, as will be discussed in more detail below, is defined as December 2, 2014
`through the date of judgment.
`
`
`2
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 3 of 36 PageID: 3
`
`5.
`
`“The Restatement … instructs that ‘cost-conscious management is fundamental to
`
`prudence in the investment function,’ and should be applied ‘not only in making investments but
`
`also in monitoring and reviewing investments.’” Tibble v. Edison Int’l, 843 F.3d 1187, 1197-98
`
`(9th Cir. 2016) (en banc) (quoting Restatement (Third) of Trusts, § 90, cmt. b) (“Tibble II”).3
`
`6.
`
`Additional fees of only 0.18% or 0.4% can have a large effect on a participant’s
`
`investment results over time because “[b]eneficiaries subject to higher fees … lose not only money
`
`spent on higher fees, but also lost investment opportunity; that is, the money that the portion of
`
`their investment spent on unnecessary fees would have earned over time.” Tibble II, 843 F.3d at
`
`1198 (“It is beyond dispute that the higher the fees charged to a beneficiary, the more the
`
`beneficiary’s investment shrinks.”).
`
`7.
`
` Most participants in 401(k) plans expect that their 401(k) accounts will be their
`
`principal source of income after retirement. Although at all times 401(k) accounts are fully funded,
`
`that does not prevent plan participants from losing money on poor investment choices by plan
`
`sponsors and fiduciaries, whether due to poor performance, high fees or both.
`
`8.
`
`Prudent and impartial plan sponsors thus should be monitoring both the
`
`performance and cost of the investments selected for their 401(k) plans, as well as investigating
`
`alternatives in the marketplace to ensure that well-performing, low cost investment options are
`
`being made available to plan participants.
`
`9.
`
`At all times during the Class Period (December 2, 2014 through the date of
`
`judgment) the Plan had at least 410 million dollars in assets under management. At the end of
`
`
`3 See also U.S. Dep’t of Labor, A Look at 401(k) Plan Fees, (Aug. 2013), at 2, available at
`https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-
`center/publications/a-look-at-401k-plan-fees.pdf (last visited February 21, 2020) (“You should be
`aware that your employer also has a specific obligation to consider the fees and expenses paid by
`your plan.”).
`
`3
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 4 of 36 PageID: 4
`
`2017 and 2018, the Plan had over 1 billion dollars and 1.1 billion dollars, respectively, in assets
`
`under management that were/are entrusted to the care of the Plan’s fiduciaries.
`
`10.
`
`The Plan’s assets under management qualifies it as a large plan in the defined
`
`contribution plan marketplace, and among the largest plans in the United States. As a large plan,
`
`the Plan had substantial bargaining power regarding the fees and expenses that were charged
`
`against participants’ investments. Defendants, however, did not try to reduce the Plan’s expenses
`
`or exercise appropriate judgment to scrutinize each investment option that was offered in the Plan
`
`to ensure it was prudent.
`
`11.
`
`Plaintiffs allege that during the putative Class Period Defendants, as “fiduciaries”
`
`of the Plan, as that term is defined under ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), breached
`
`the duties they owed to the Plan, to Plaintiffs, and to the other participants of the Plan by, inter
`
`alia, (1) failing to objectively and adequately review the Plan’s investment portfolio with due care
`
`to ensure that each investment option was prudent, in terms of cost; and (2) maintaining certain
`
`funds in the Plan despite the availability of identical or similar investment options with lower costs
`
`and/or better performance histories; and (3) failing to control the Plan’s recordkeeping costs.
`
`12.
`
` Defendants’ mismanagement of the Plan, to the detriment of participants and
`
`beneficiaries, constitutes a breach of the fiduciary duties of prudence and loyalty, in violation of
`
`29 U.S.C. § 1104. Their actions were contrary to actions of a reasonable fiduciary and cost the
`
`Plan and its participants millions of dollars.
`
`13.
`
`Based on this conduct, Plaintiffs assert claims against Defendants for breach of the
`
`fiduciary duties of loyalty and prudence (Count One) and failure to monitor fiduciaries (Count
`
`Two).
`
`
`
`
`
`4
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 5 of 36 PageID: 5
`
`II.
`
`JURISDICTION AND VENUE
`
`14.
`
`This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C.
`
`§ 1331 because it is a civil action arising under the laws of the United States, and pursuant to 29
`
`U.S.C. § 1332(e)(1), which provides for federal jurisdiction of actions brought under Title I of
`
`ERISA, 29 U.S.C. § 1001, et seq.
`
`15.
`
`This Court has personal jurisdiction over Defendants because they transact business
`
`in this District, reside in this District, and/or have significant contacts with this District, and
`
`because ERISA provides for nationwide service of process.
`
`16.
`
`Venue is proper in this District pursuant to ERISA § 502(e)(2), 29 U.S.C.
`
`§ 1132(e)(2), because some or all of the violations of ERISA occurred in this District and
`
`Defendants reside and may be found in this District. Venue is also proper in this District pursuant
`
`to 28 U.S.C. § 1391 because Defendants do business in this District and a substantial part of the
`
`events or omissions giving rise to the claims asserted herein occurred within this District.
`
`III.
`
`PARTIES
`
`Plaintiffs
`
`17.
`
`Plaintiff, Mark Milano (“Milano”), resides in Brick, New Jersey. During his
`
`employment, Plaintiff Milano participated in the Plan investing in the options offered by the Plan
`
`and which are the subject of this lawsuit.
`
`18.
`
`Plaintiff, Robert Cameron (“Cameron”), resides in El Dorado Hills, California.
`
`During his employment, Plaintiff Cameron participated in the Plan investing in the options offered
`
`by the Plan and which are the subject of this lawsuit.
`
`19.
`
`Plaintiff, Rodney Hergenrader (“Hergenrader”), resides in Denver, Colorado.
`
`During his employment, Plaintiff Hergenrader participated in the Plan investing in the options
`
`offered by the Plan and which are the subject of this lawsuit.
`
`5
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 6 of 36 PageID: 6
`
`20.
`
` Plaintiff, Katherine H. Joncas (“Joncas”), resides in Grafton, Massachusetts.
`
`During her employment, Plaintiff Joncas participated in the Plan investing in the options offered
`
`by the Plan and which are the subject of this lawsuit.
`
`21.
`
`Plaintiff, Charles Van Hooser (“Hooser”), resides in Jacksonville, Florida. During
`
`his employment, Plaintiff Hooser participated in the Plan investing in the options offered by the
`
`Plan and which are the subject of this lawsuit.
`
`22.
`
`Each Plaintiff has standing to bring this action on behalf of the Plan because each
`
`of them participated in the Plan and were injured by Defendants’ unlawful conduct. Plaintiffs are
`
`entitled to receive benefits in the amount of the difference between the value of their accounts
`
`currently, or as of the time their accounts were distributed, and what their accounts are or would
`
`have been worth, but for Defendants’ breaches of fiduciary duty as described herein.
`
`23.
`
`Plaintiffs did not have knowledge of all material facts (including, among other
`
`things, the investment alternatives that are comparable to the investments offered within the Plan,
`
`comparisons of the costs and investment performance of Plan investments versus available
`
`alternatives within similarly-sized plans, total cost comparisons to similarly-sized plans,
`
`information regarding other available identical funds, and information regarding the availability
`
`and pricing of collective trusts) necessary to understand that Defendants breached their fiduciary
`
`duties and engaged in other unlawful conduct in violation of ERISA until shortly before this suit
`
`was filed.
`
`Defendants
`
`Company Defendant
`
`24.
`
`Cognizant is the Plan sponsor and a named fiduciary with a principal place of
`
`business being 500 Frank W. Burr Boulevard, Teaneck, New Jersey 07666. The December 31,
`
`6
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 7 of 36 PageID: 7
`
`2018 Form 5500 of the Cognizant Technology Solutions 401(k) Savings Plan filed with the United
`
`States Department of Labor (“2018 Form 5500”) at 1.
`
`25.
`
`Cognizant describes itself as one “of the world’s leading professional services
`
`companies, transforming clients’ business, operating and technology models for the digital era.”
`
`The December 31, 2019 10-k filed with the United States Securities and Exchange Commission
`
`(“10-k”) at 1. Cognizant reports that it had “approximately 292,500 employees at the end of 2019
`
`… .” 10-k at 5. At the end of 2019, Cognizant reported over 16 billion dollars in revenue. 10-k at
`
`17.
`
`26.
`
`The Company, acting through its Board of Directors, appointed the Committee
`
`which is responsible “for the investment of Plan assets … in any prudent investment consistent
`
`with the funding policy of the Plan and the requirements of ERISA.” The Massachusetts Mutual
`
`Life Insurance Company Volume Submitter Profit Sharing/401(k) Plan as amended and restated
`
`effective May 1, 2020 (“Plan Doc.”) at 110.
`
`27.
`
`Accordingly, the Company had a concomitant fiduciary duty to monitor and
`
`supervise those appointees.
`
`28.
`
`Cognizant also made discretionary decisions to make profit sharing and employer
`
`matching contributions to the Plan each year. As detailed in the 2018 Auditor Report: “Under the
`
`terms of the plan agreement, contributions to the Plan by the Company are on a discretionary
`
`basis.” The December 31, 2018 Report of the Independent Auditor of the Cognizant Technology
`
`Solutions 401(k) Savings Plan (“2018 Auditor Report”) at 6.
`
`29.
`
`Accordingly, Cognizant during the putative Class Period is/was a fiduciary of the
`
`Plan, within the meaning of ERISA Section 3(21)(A), 29 U.S.C. § 1002(21)(A) because it
`
`exercised discretionary authority over management or disposition of Plan assets and because it
`
`7
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 8 of 36 PageID: 8
`
`exercised discretionary authority to appoint and/or monitor the other fiduciaries, which had control
`
`over Plan management and/or authority or control over management or disposition of Plan assets.
`
`30.
`
`For the foregoing reasons, the Company is a fiduciary of the Plan, within the
`
`meaning of ERISA Section 3(21)(A), 29 U.S.C. § 1002(21)(A).
`
`Board Defendants
`
`31.
`
`As detailed above, the Company, acting through its Board of Directors, appointed
`
`the Committee which is purportedly responsible “for the investment of Plan assets … in any
`
`prudent investment consistent with the funding policy of the Plan and the requirements of ERISA.”
`
`Plan Doc at 110. Under ERISA, fiduciaries with the power to appoint have the concomitant
`
`fiduciary duty to monitor and supervise their appointees. As will be discussed below, the
`
`Committee failed to carry out its fiduciary duties prudently.
`
`32.
`
`Accordingly, each member of the Board during the putative Class Period (referred
`
`to herein as John Does 1-10) is/was a fiduciary of the Plan, within the meaning of ERISA Section
`
`3(21)(A), 29 U.S.C. § 1002(21)(A) because each exercised discretionary authority over
`
`management or disposition of Plan assets and because each exercised discretionary authority to
`
`appoint and/or monitor the other fiduciaries, which had control over Plan management and/or
`
`authority or control over management or disposition of Plan assets.
`
`33.
`
`The Board and the unnamed members of the Board during the Class Period
`
`(referred to herein as John Does 1-10), are collectively referred to herein as the “Board
`
`Defendants.”
`
`Committee Defendants
`
`34.
`
` As discussed above, the Committee is responsible “for the investment of Plan
`
`assets … in any prudent investment consistent with the funding policy of the Plan and the
`
`requirements of ERISA.” Plan Doc. at 110. The Committee must “act for the exclusive benefit of
`
`8
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 9 of 36 PageID: 9
`
`the Plan Participants and Beneficiaries.” Plan Doc. at 117. The Committee must also “establish a
`
`funding policy and method for the Plan for purposes of ensuring the Plan is satisfying its financial
`
`objectives.” The Committee is also responsible for selecting and monitoring the investments in the
`
`Plan. Plan Doc. at 112. As will be discussed in more detail below, the Committee fell well short
`
`of these fiduciary goals.
`
`35.
`
`The Committee and each of its members were fiduciaries of the Plan during the
`
`Class Period, within the meaning of ERISA Section 3(21)(A), 29 U.S.C. § 1002(21)(A) because
`
`each exercised discretionary authority over management or disposition of Plan assets.
`
`36.
`
`The Committee and unnamed members of the Committee during the Class Period
`
`(referred to herein as John Does 11-20), are collectively referred to herein as the “Committee
`
`Defendants.”
`
`Additional John Doe Defendants
`
`37.
`
`To the extent that there are additional officers, employees and/are contractors of
`
`Cognizant who are/were fiduciaries of the Plan during the Class Period, or were hired as an
`
`investment manager for the Plan during the Class Period, the identities of whom are currently
`
`unknown to Plaintiffs, Plaintiffs reserve the right, once their identities are ascertained, to seek
`
`leave to join them to the instant action. Thus, without limitation, unknown “John Doe” Defendants
`
`21-30 include, but are not limited to, Cognizant officers, employees and/or contractors who
`
`are/were fiduciaries of the Plan within the meaning of ERISA Section 3(21)(A), 29 U.S.C. §
`
`1002(21)(A) during the Class Period.
`
`
`
`
`
`
`
`
`
`9
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 10 of 36 PageID: 10
`
`IV. CLASS ACTION ALLEGATIONS
`
`38.
`
`Plaintiffs bring this action as a class action pursuant to Rule 23 of the Federal Rules
`
`of Civil Procedure on behalf of themselves and the following proposed class (“Class”):4
`
`All persons, except Defendants and their immediate family
`members, who were participants in or beneficiaries of the
`Plan, at any time between December 2, 2014 through the
`date of judgment (the “Class Period”).
`
`The members of the Class are so numerous that joinder of all members is
`
`39.
`
`impractical. The 2018 Form 5500 lists 39,958 Plan “participants with account balances as of the
`
`end of the plan year.” 2018 Form 5500 at 2.
`
`40.
`
`Plaintiffs’ claims are typical of the claims of the members of the Class. Like other
`
`Class members, Plaintiffs participated in the Plan and have suffered injuries as a result of
`
`Defendants’ mismanagement of the Plan. Defendants treated Plaintiffs consistently with other
`
`Class members and managed the Plan as a single entity. Plaintiffs’ claims and the claims of all
`
`Class members arise out of the same conduct, policies, and practices of Defendants as alleged
`
`herein, and all members of the Class have been similarly affected by Defendants’ wrongful
`
`conduct.
`
`41.
`
`There are questions of law and fact common to the Class, and these questions
`
`predominate over questions affecting only individual Class members. Common legal and factual
`
`questions include, but are not limited to:
`
`A. Whether Defendants are/were fiduciaries of the Plan;
`
`B. Whether Defendants breached their fiduciary duties of loyalty and
`
`prudence by engaging in the conduct described herein;
`
`
`4 Plaintiffs reserve the right to propose other or additional classes or subclasses in their motion for
`class certification or subsequent pleadings in this action.
`
`10
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 11 of 36 PageID: 11
`
`C. Whether
`
`the Defendants responsible for appointing other
`
`fiduciaries failed to adequately monitor their appointees to ensure
`
`the Plan was being managed in compliance with ERISA;
`
`The proper form of equitable and injunctive relief; and
`
`The proper measure of monetary relief.
`
`D.
`
`E.
`
`42.
`
`Plaintiffs will fairly and adequately represent the Class and have retained counsel
`
`experienced and competent in the prosecution of ERISA class action litigation. Plaintiffs have no
`
`interests antagonistic to those of other members of the Class. Plaintiffs are committed to the
`
`vigorous prosecution of this action and anticipate no difficulty in the management of this litigation
`
`as a class action.
`
`43.
`
`This action may be properly certified under Rule 23(b)(1). Class action status in
`
`this action is warranted under Rule 23(b)(1)(A) because prosecution of separate actions by the
`
`members of the Class would create a risk of establishing incompatible standards of conduct for
`
`Defendants. Class action status is also warranted under Rule 23(b)(1)(B) because prosecution of
`
`separate actions by the members of the Class would create a risk of adjudications with respect to
`
`individual members of the Class that, as a practical matter, would be dispositive of the interests of
`
`other members not parties to this action, or that would substantially impair or impede their ability
`
`to protect their interests.
`
`44.
`
`In the alternative, certification under Rule 23(b)(2) is warranted because the
`
`Defendants have acted or refused to act on grounds generally applicable to the Class, thereby
`
`making appropriate final injunctive, declaratory, or other appropriate equitable relief with respect
`
`to the Class as a whole.
`
`
`
`
`
`11
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 12 of 36 PageID: 12
`
`V.
`
`THE PLAN
`
`45.
`
`Cognizant “has adopted the Cognizant Technology Solutions 401(k) Savings Plan
`
`(the “Plan”) to help its employees save for retirement.” The Summary Plan Description of the
`
`Cognizant Technology Solutions 401(k) Savings Plan effective August 1, 2020 (“SPD”) at 1.
`
`46.
`
`The Plan is a “defined contribution” or “individual account” plan within the
`
`meaning of ERISA § 3(34), 29 U.S.C. § 1002(34), in that the Plan provides for individual accounts
`
`for each participant and for benefits based solely upon the amount contributed to those accounts,
`
`and any income, expense, gains and losses, and any forfeitures of accounts of the participants
`
`which may be allocated to such participant’s account. Plan Doc. at 109. Consequently, retirement
`
`benefits provided by the Plan are based solely on the amounts allocated to each individual’s
`
`account. Id.
`
`Eligibility
`
`47.
`
`In general, regular full-time employees are eligible to participate in the Plan. 2018
`
`Auditor Report at 6. The 2018 Auditor Report states: “[t]he Plan is a defined contribution plan
`
`covering substantially all employees of Cognizant Technology Solutions” Id.
`
`Contributions
`
`48.
`
`There are several types of contributions that can be added to a participant’s account,
`
`including: an employee salary deferral contribution, an employee Roth 401(k) contribution, an
`
`employee after-tax contribution, catch-up contributions for employees aged 50 and over, rollover
`
`contributions, discretionary profit sharing contributions and employer matching contributions
`
`based on employee pre-tax, Roth 401(k), and employee after-tax contributions. Id.
`
`49. With regard to employee contributions: participants may contribute between 1% to
`
`75% of pretax annual compensation, as defined in the Plan.” Id. As discussed above, Cognizant
`
`may decide to make matching contributions to the Plan in any given year. Id. As described in the
`
`12
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 13 of 36 PageID: 13
`
`2018 Auditor Report: “[f]or the year ended December 31, 2018, the Company matched 50%
`
`of employee contributions, up to 6% of eligible compensation deferred each pay period to the
`
`Plan..” Id.
`
`50.
`
`Like other companies that sponsor 401(k) plans for their employees, Cognizant
`
`enjoys both direct and indirect benefits by providing matching contributions to Plan participants.
`
`Employers are generally permitted to take tax deductions for their contributions to 401(k) plans at
`
`the time when the contributions are made. See generally, https:/www.irs.gov/retirement-
`
`plans/plan-sponsor/401k-plan-overview.
`
`51.
`
`Cognizant also benefits in other ways from the Plan’s matching program. It is well-
`
`known that “[o]ffering retirement plans can help in employers’ efforts to attract new employees
`
`and reduce
`
`turnover.” See, https://www.paychex.com/articles/employee-benefits/employer-
`
`matching-401k-benefits.
`
`52.
`
`Given the size of the Plan, Cognizant likely enjoyed a significant tax and cost
`
`savings from offering a match.
`
`Vesting
`
`53.
`
`Participants are immediately vested in both their own contributions made to the
`
`Plan but also any contributions matched by the Cognizant. As described in the 2018 Auditor
`
`Report: “[p]articipants are vested immediately in their contributions as well as employer match
`
`contributions plus actual earnings thereon.” Id.
`
`The Plan’s Investments
`
`54.
`
`In theory, the Committee responsibilities include selection and monitoring of the
`
`funds available for investment in the Plan. Plan Doc. at 112. The Committee must carry out this
`
`fiduciary responsibility “for the exclusive benefit of the Plan Participants and Beneficiaries.” Plan
`
`Doc. at 117. But in practice, as alleged below, that is not what happened.
`
`13
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 14 of 36 PageID: 14
`
`55.
`
`Several funds were available to Plan participants for investment each year during
`
`the putative Class Period. Specifically, a participant may direct all contributions to selected
`
`investments as made available and determined by the Committee. Plan Doc. at 109.
`
`56.
`
`The Plan’s assets under management for all funds as of December 31, 2018 was
`
`$1,172,609,167. 2018 Auditor Report at 4.
`
`Payment of Plan Expenses
`
`57.
`
`During the Class Period, administrative expenses were paid for using Plan assets.
`
`As described in the Plan Document: “All reasonable expenses related to plan administration will
`
`be paid from Plan assets … .” Plan Doc. at 118.
`
`THE PLAN’S FEES DURING THE CLASS PERIOD WERE UNREASONABLE
`
`A.
`
`The Totality of Circumstances Demonstrate that the Plan Fiduciaries
`Failed to Administer the Plan in a Prudent Manner
`
`
`As described in the “Parties” section above, Defendants were fiduciaries of the
`
`58.
`
`VI.
`
`
`Plan.
`
`59.
`
`ERISA “imposes a ‘prudent person’ standard by which to measure fiduciaries’
`
`investment decisions and disposition of assets.” Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct.
`
`2459, 2467 (2014) (quotation omitted). In addition to a duty to select prudent investments, under
`
`ERISA a fiduciary “has a continuing duty to monitor [plan] investments and remove imprudent
`
`ones” that exists “separate and apart from the [fiduciary’s] duty to exercise prudence in selecting
`
`investments.” Tibble I, 135 S. Ct. at 1828.
`
`60.
`
`Plaintiffs did not have and do not have actual knowledge of the specifics of
`
`Defendants’ decision-making process with respect to the Plan, including Defendants’ processes
`
`(and execution of such) for selecting, monitoring, and removing Plan investments, because this
`
`information is solely within the possession of Defendants prior to discovery. See Braden v. Wal-
`
`mart Stores, Inc., 588 F.3d 585, 598 (8th Cir. 2009) (“If Plaintiffs cannot state a claim without
`
`14
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 15 of 36 PageID: 15
`
`pleading facts which tend systematically to be in the sole possession of defendants, the remedial
`
`scheme of [ERISA] will fail, and the crucial rights secured by ERISA will suffer.”)
`
`61.
`
`For purposes of this Complaint, Plaintiffs have drawn reasonable inferences
`
`regarding these processes based upon the numerous factors set forth below.
`
`62.
`
`Defendants’ breaches of their fiduciary duties, relating to their overall decision-
`
`making, resulted in inter alia, the selection (and maintenance) of several funds in the Plan
`
`throughout the Class Period, including those identified below, that wasted the assets of the Plan
`
`and the assets of participants because of unnecessary costs.
`
`(1)
`
`Four of the Plan’s Funds with Substantial Assets had Identical Lower Cost
`Alternatives
`
`
`63.
`
`Here, Defendants failed to timely consider available lower cost identical mutual
`
`funds to the funds offered by MassMutual. The alternative funds are identical in every respect
`
`except that they don’t bear the MassMutual name. MassMutual engages in a rebranding process
`
`whereby it contracts with providers of mutual funds to offer each provider’s funds but only as a
`
`MassMutual product.
`
`64.
`
` MassMutual refers to their branded funds as separate investment accounts (“SIA”).
`
`A review of the Menu of Available Investment Options published by MassMutual in 2018 provides
`
`the following statement regarding SIAs offered by MassMutual: “MassMutual also maintains
`
`multiple SIAs or sub-accounts of SIAs that invest in the same share class of a mutual fund, but
`
`will have a different expense ratio and provide different levels of revenue sharing to MassMutual
`
`as a result of the application of different fee amounts at the SIA or sub-account level (referred to
`
`as a “wrap fee”).” Menu of Available Investment Options as of November 15, 2018 published by
`
`MassMutual (“SIA List”) at 1.
`
`
`
`
`
`15
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 16 of 36 PageID: 16
`
`65.
`
` The 2018 Auditor Report identifies the SIA which was in the Plan in 2018 by a
`
`SIA reference number. Matching the reference number from the 2018 5500 to the SIA list shows
`
`that the expense ratios found on the SIA list matches the expense ratios listed on the proposed class
`
`representatives account statements and fee disclosures. Therefore, it’s clear that mass mutual
`
`engages in nothing more than a rebranding process for mutual funds freely available on the market
`
`except they don’t bear the MassMutual name.
`
`66.
`
` In addition, the summary prospectuses for many of the unbranded versions of each
`
`MassMutual fund confirms that each of the five funds listed below engage in this rebranding
`
`process. Several of the prospectuses describe how MassMutual adds fees to each underlying
`
`investment with no added benefit as follows: “depending on the level of administrative service
`
`revenue (“ASR”) generated from the underlying investment and MassMutual’s target ASR for the
`
`plan, on a periodic basis MassMutual will make adjustments to the unitized plan fund’s expense
`
`to cause each united plan fund to produce ASR equal to the target ASR.”
`
`67.
`
`There is no difference between the underlying mutual fund and the rebranded Mass
`
`Mutual product. The funds hold identical investments, have the same managers, risk return profiles
`
`and investment strategy.5 Because the underlying funds are otherwise identical to the Mass Mutual
`
`version, but with lower fees, a prudent fiduciary would know immediately that a switch is
`
`necessary. Tibble, et al. v. Edison Int. et al., No. 07-5359, 2017 WL 3523737, at * 13 (C.D. Cal.
`
`Aug. 16, 2017).
`
`68.
`
`Generally, products rebranded by insurance companies such as Mass Mutual are
`
`targeted at smaller investors with less bargaining power, while the underlying investments which
`
`
`5 See the summary prospectus for each MassMutual fund as compared to the summary prospectus
`for the unbranded version of the same fund. Looking at the MassMutual Invesco Developing
`Markets, as an example, the investment manager for the fund is Justin M. Leverenz, CFA. The
`investment objective and strategy are identical. Thus the MM version of the fund is identical to
`the unbranded version except the MassMutual version is much more expensive.
`16
`
`

`

`Case 2:20-cv-17793 Document 1 Filed 12/02/20 Page 17 of 36 PageID: 17
`
`don’t bear the Mass Mutual name are targeted at institutional investors with more assets. While
`
`the underlying investments may have an investment minimum, qualifying for them usually
`
`requires only a minimum of a million dollars for individual funds. However, it is common
`
`knowledge that investment minimums are often waived for large plans like the Plan. Sweda v.
`
`Univ. of Pennsylvania, 923 F.3d 320, 329 (3d Cir. 2019) (citing Tibble II, 729 F.3d at 1137 n.24).
`
`69.
`
`During 2018, for example, there were five funds in the Plan which needlessly bore
`
`the Mass Mutual name at great expense and detriment to Plan participants. In 2018, these five
`
`funds harbored over 81million dollars which easily qualified the Plan to invest in identical products
`
`not rebranded by Mass Mutual. The following chart provides detail on these funds:
`
`Current Fund
`
`ER
`
`Identical Lower
`Cost Fund
`
`ER
`
`Excess
`Expense
`
`MM Total Return Bond
`
`0.51 %
`
`