When most people think about ERISA lawsuits, the usual suspects are plan sponsors. They’re the fiduciaries who pick the investments, hire the service providers, and have the crosshairs on their backs when plaintiffs’ firms go looking for blood. But every once in a while, the tables turn, and it’s the providers themselves who end up in the defendant’s chair. That’s exactly what happened in New Jersey, where three participants in separate plans are accusing Empower Advisory Group LLC and its affiliates of orchestrating a scheme to mislead participants into rolling over into high-fee products.
The Complaint
The plaintiffs are from three very different plans:
· Shakira Williams-Linzey, from the Central Jersey Family Health Consortium 403(b).
· Jennifer Patton, from the Heliogen, Inc. 401(k).
· Kathleen McFarland, from the Global Medical Response, Inc. 401(k).
Together, they allege that Empower and its web of affiliates—Empower Retirement LLC, Empower Financial Services Inc., and Empower Annuity Insurance Co. of America—crossed the line from being neutral recordkeepers into being conflicted salespeople. The accusation? That Empower harvested confidential participant data and then used it to target those nearing retirement or with larger balances, steering them into what was portrayed as “the” recommended investment solution: managed accounts branded as Empower Premier IRA and My Total Retirement.
On paper, these programs promised personalized, objective advice. In reality, the lawsuit says, participants got little more than cookie-cutter asset allocations stuffed with Empower-affiliated funds, along with fee layers that could reach 1.35% of assets.
The Fee Angle
If you’ve been in this business long enough, you know where plaintiffs’ lawyers love to sink their teeth—fees. And the complaint here reads like a case study:
· Advisory fee: up to 0.55%.
· Fund expenses: often flowing back to Empower affiliates.
· All-in cost: as high as 1.35%.
Now, one and a third percent may not sound like highway robbery if you’re thinking in retail-brokerage terms, but in the retirement plan world, that’s going to catch a fiduciary litigator’s eye. When you add the allegations that sales reps were incentivized by bonuses and commissions—despite Empower’s public claims that they were “salaried and unbiased”—you start to see why plaintiffs’ counsel believes they have a live one.
A Familiar Pattern
If all this sounds familiar, it’s because we’ve seen this movie before. Back in 2021, TIAA-CREF shelled out $97 million to settle charges over misleading rollover practices. The allegations in that case? Very similar—sales reps pushing participants toward in-house managed products under the guise of objective advice. The law firm behind the Empower suit, Schlichter Bogard, is no stranger to these kinds of fights. When Schlichter shows up, you know it’s serious.
Empower’s Position
To no surprise, Empower says the claims are meritless, pointing out that plaintiffs’ firms like Schlichter regularly sue providers. That may be true, but it doesn’t mean every complaint is frivolous. Empower is the second-largest recordkeeper in the country, with over $1.4 trillion in assets and 17.4 million participants. When you operate at that scale, your compliance practices had better be bulletproof—because if they’re not, the ripple effects hit millions of savers.
What It Means for the Industry
This lawsuit is yet another reminder that plan providers aren’t immune from ERISA’s fiduciary standards. It’s not just sponsors who need to worry about their duty of loyalty and prudence. When providers leverage participant data to cross-sell, or when they blur the line between objective advice and product distribution, they’re painting a target on their backs.
In the end, the question is simple: were participants given truly independent advice, or were they funneled into high-fee, proprietary investments under the guise of objectivity? If it’s the latter, Empower could find itself in the same club as TIAA and others who paid dearly for similar allegations.
My Take
For years, I’ve said this business is about trust. Whether you’re a TPA, an advisor, or a recordkeeper, you don’t get to play both sides of the table. If you’re going to present yourself as a fiduciary, you can’t have your hand in the till through revenue-sharing, proprietary funds, or hidden fee layers. Eventually, someone will call you out on it.
The Empower case is a cautionary tale. Providers need to make a choice: are they in the business of delivering unbiased fiduciary guidance, or are they in the business of selling product? Because trying to do both under the same roof rarely ends well.