company Tuesday, charging that it used its 401(k)-retirement plan to boost profits rather than for the exclusive benefit of its employees.
First Union makes its employees invest their 401(k) money only in its own "mediocre" funds, according to a statement from Sprenger & Lang, the Washington law firm representing the workers.
The suit also claims that First Union charges its employees "excessive, and indeed often strictly prohibited and illegal" fees and expenses in the 401(k) program, the statement said.
Meanwhile, outside investors in First Union funds receive "waivers, discounts, offsets, rebates, and/or reductions" in these fees and expenses, the statement said.
First Union denied the charges. "First Union administers all of its plans for the benefit of its employees," a company statement said. "Our plan provides participants with a broad range of investment options, which are prudently and appropriately selected."
The plaintiffs are seeking class-action status and asking for $300 million in damages on behalf of 100,000 current and former First Union employees. The suit was filed in U.S. District Court in Richmond, Va.
Many financial companies force their employees to purchase the companies' own funds in 401(k) programs, said Eli Gottesdiener, a partner at Sprenger & Lang. He said his research so far shows First Union to be "the worst offender." -- Dan Weil