A group of former Molina employees is suing the Long Beach, Calif.-based managed care company over alleged violations of the Employee Retirement Income Security Act.
The complaint, filed March 18, stems from Molina's 2016 replacement of Vanguard Target Retirement target date funds (TDF) with flexPATH Index TDF. The decision to add flexPATH resulted in 45 percent of the plan's total assets being transferred to the flexPATH Index TDF during 2016. That amount increased to 57 percent by Dec. 31, 2019.
The proposed class action suit alleges that when Molina switched to flexPATH, its TDF had never been used in an existing 401(k) plan. FlexPATH had launched the TDF only a few months prior, in January 2016.
"A prudent and loyal fiduciary would not have recommended or selected the flexPATH Index target date funds without a five-year performance history to assess the investment manager’s ability to provide superior long-term investment returns relative to prudent alternatives available to the plan," plaintiffs said in the lawsuit.
The suit alleges that Molina did not prudently monitor the performance of the flexPATH Index TDF after it was included in the plan. It underperformed compared with established TDFs.
The plaintiffs also alleged that by providing plan participants the more expensive share class of plan investment options, Molina caused participants to lose more than $1 million of their retirement savings.
Molina eventually replaced the flexPATH TDF with the Fidelity Freedom Index TDF in late 2020, according to the lawsuit.
The lawsuit was filed in the U.S. District Court for the Central District of California. Plaintiffs seek to have Molina held personally liable to make good all the losses to the plan resulting from each breach of fiduciary duty and restore the plan to the position it would have occupied if not for the alleged breaches.
A Molina spokesperson did not immediately respond to a request for comment from Becker's.