A Florida optometry practice with a 401(k) plan with only $300,000 in assets is the latest plan to be sued for 401(k) mismanagement, with a newly filed lawsuit accusing the practice of over-investing in alleged \u201cpatent troll\u201d VirnetX.<\/p>\n
The proposed class action lawsuit alleges that the founder of Emerald Coast Eye Institute LLC, managed the company\u2019s 401(k) investments, despite having no background or qualifications in investment management. There clearly was no financial advisor on the plan.<\/p>\n
The founder, Dr. Samuel Poppell directed a significant portion of the plan\u2019s assets into the stock of VirnetX, a company that allegedly specialized in acquiring patents and attempting to bring litigation against violators of those patents.<\/p>\n
Supposedly the founder of the practice only learned of VirnetX through online message boards and blogs, not exactly the best place to get sound investment advice.<\/p>\n
The 401(k) plan had fewer than 30 participants during the past year and ended 2015 with just over $300,000 in assets.<\/p>\n
More than half of the Plan\u2019s assets were invested in VirnetX stock, with the remaining assets invested in cash equivalents. The complaint states that VirnetX\u2019s poor performance caused the plan to suffer actual losses of more than $600,000.<\/p>\n
Before you start jumping up and down about a micro 401(k) plan being sued, it should be noted that Plan participants weren\u2019t able to direct their own investments, so the founder of the practice dictated the investments as plan trustee. While this type of investment wouldn\u2019t happen with participant directed 401(k) plans, it does show the lack of fiduciary responsibility by a trustee investing most of the plan\u2019s assets in one stock.<\/p>\n
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