The Capital Group Companies, the sponsor of American Funds, has been hit with a class-action lawsuit over its use of in-house funds in its employee retirement plans.
The case, Patterson v. Capital Grp. Cos., was filed in a federal court in California, where the firm is based.
According to the court filing, the plaintiffs brought the case under the violations of "fiduciary duties and prohibited transaction provisions" related to the Employee Retirement Income Security Act of 1974 (or ERISA).
"The complaint is without merit," the Capital Group said in a statement.
In the 2011-2016 period, the plaintiffs claim, between 95% to 98% of options for employees have been funds that with companies affiliated with the Capital Group, namely American Funds.
Funds investing in "unduly expensive Capital Group-affiliated options," they add, totaled $1.6 billion to $3 billion over this six-year timeframe for the employees.
These investment options were not adequality monitored for "both reasonable costs and performance levels through and impartial or product process," according to the plaintiffs.
These violations, they add, "resulted in plan participants and beneficiaries paying excessive and prohibited fees that substantially diminished their retirement savings, and resulted in windfall profits for the Capital Group and its subsidiaries."
American Funds Disagrees
