Woman sues CenturyLink over 401(k) results

DENVER — A Denver woman has sued Louisiana-based CenturyLink over what she says is “a serious design flaw” in one of the funds in its 401(k) plan.

BusinessDen reported that Bonnie Birse alleges in the lawsuit, filed last week in federal district court in Denver, that CenturyLink breached its fiduciary responsibility in the design and management of the Active Large Cap U.S. Stock Fund in its Dollars & Sense 401(k) Plan.

The lawsuit requests class action certification. CenturyLink has not filed a response, and a spokesman declined to comment.

According to the lawsuit, Denver-based subsidiary CenturyLink Investment Management hired six investment firms to manage the Large Cap Fund with the goal of exceeding the return of the Russell 1000, a market index of the largest 1,000 companies. The suit claims that underperformance was “virtually guaranteed” by the structure of the plan.

Since launching in 2012, the fund has underperformed the Russell 1000 by 2 percent or more each year, according to the suit.

“This design flaw was built in by CIM by using six different fund managers with the same mandate (five active and one passive),” the lawsuit reads. “The odds of the five active managers outperforming the market in aggregate was highly remote due to the efficiency of the large cap domestic market and the difficulty of even one manager outperforming for more than a year.”

Birse says in the suit that the active managers “would inevitably take competing positions and cancel out the other’s strategy,” resulting in managers effectively “trading stock among themselves.”