Waddell & Reed Must Face Lawsuit Over In-House Funds in 401(k)

Waddell & Reed Financial Inc. and its executives must defend a lawsuit accusing them of selecting affiliated mutual funds with excessive fees and underperforming returns for the employees’ 401(k) plan.

The plan participant’s claims of fiduciary breach and prohibited transactions aren’t barred by the Employee Retirement Income Security Act’s limitations periods and sufficiently state a claim under the federal statute, Judge Julie A. Robinson of the U.S. District Court for the District of Kansas held Feb. 22.

Robinson’s ruling is the latest setback for financial companies that have been sued under federal benefits law for selecting and retaining affiliated funds ...