Voya Escapes Lawsuit Over 401(k) Robo-Adviser Fees

A 401(k) investor who accused Voya Financial Inc. and its subsidiaries of overcharging for investment advice from robo-adviser Financial Engines Advisors LLC won’t get another chance to make her case.

A federal judge on March 13 denied the investor’s request to amend her complaint, effectively ending the proposed class action. The judge reiterated her prior conclusion that the investor couldn’t use the Employee Retirement Income Security Act to challenge these fees, because the defendants weren’t acting as ERISA fiduciaries when negotiating fees with Financial Engines.

Any fiduciary breach claim challenging the investment fees should be brought against the sponsor of the investor’s 401(k) plan, Nestle USA Inc., the judge said. That’s because Nestle “retained ultimate authority to accept or reject the proposed terms,” the judge said.

This ruling by Judge Lorna G. Schofield of the U.S. District Court for the Southern District of New York follows the logic of recent appellate court decisions declining to impose fiduciary status on 401(k) service providers, including American United, John Hancock, Principal, and, most recently, Transamerica.

In the past few years, several lawsuits have challenged arrangements between 401(k) providers and Financial Engines, an online financial advisory firm also known as a “robo-adviser.” Voya, Fidelity, Xerox, and Aon Hewitt are accused of collecting fees from 401(k) investors in exchange for services that are actually performed by Financial Engines. The case against Fidelity was dismissed in 2017 for many of the same reasons Schofield cited in the Voya case.

Berger & Montague PC and Schneider Wallace Cottrell Brayton Konecky LLP represented the investor. Carlton Fields Jorden Burt PA represented the Voya defendants.

The case is Patrico v. Voya Fin., Inc., 2018 BL 85185, S.D.N.Y., No. 1:16-cv-07070-LGS, order denying leave to amend 3/13/18.