A new lawsuit against a jumbo defined contribution plan takesaim at the relationship The Vanguard Group, Inc. had asrecordkeeper and trustee of participant assets, and the allegedlyhigh fees participants paid to invest in proprietaryVanguard funds.

Fiduciaries to the 401(k) plan sponsored by health care giant Anthem—which heldabout $5.1 billion in assets and served more than 59,000participants at the end of 2014—selected high-cost share classes ofVanguard mutual funds when lower cost share classes of identicalfunds were available to the plan, allege a proposed class of Anthemparticipants.

Participants lost $18 million in retirement savings betweenDecember 29, 2009 and July 22, 2013 due to unnecessarily high fees,according to the claim.

As recently as the end of 2014, Vanguard funds dominated theplan’s investment menu. Anthem offered its workers 11 Vanguardmutual funds and Vanguard’s series of collective trust target datefunds.

Two other non-Vanguard funds were offered, as well as an Anthemstock fund.

Each fund in the lineup charged fees “far in excess” of whatAnthem could have obtained, given the size of the plan, accordingto the complaint, which was filed in U.S. District Court for theSouthern District of Indiana. Anthem is headquartered inIndianapolis.

“Jumbo retirement plans, such as the (Anthem) Plan, have muchmore bargaining power to negotiate low fees for investmentmanagement services than even large plans,” write attorneys for theplaintiffs, who are being represented by St. Louis-based Schlichter, Bogard andDenton.

While the Vanguard funds offered had low expense ratios, the plaintiffs areclaiming there were better options available.

For instance, up until July 22, 2013, the plan offered theVanguard Total Bond Market Index Fund, costing participants 20basis points. That intermediate-term bond fund is available toretail investors with a minimum of $3,000 investment, according toVanguard’s website.

The institutional class share of the same fund is available for5 basis points, but requires a minimum investment of $100 million,Vanguard’s website says. The complaint shows that participants hadmore than $422 million invested in a Vanguard intermediate bondfund at the end of 2014.

The Vanguard Extended Market Index Fund, an aggressivelystructured domestic stock fund, was offered for 24 basis points,while the institutional share class was available for 6 basispoints, so long as a minimum of $100 million in assets wereinvested.

In one case, the spread between the retail and institutionalexpense ratios was as little as 2 basis points.

In 2013, Anthem restructured its investment menu, switching ininstitutional shares of funds and moving Vanguard’s TDF series tocheaper collective trusts.

That action served to fuel the plaintiffs’ claim.

“The lower-cost share classes of the identical mutual funds wereavailable to the plan many years before Anthem restructured theinvestment lineup in 2013,” the claim says. Several were availableas early as the late 1990s.

The lineup’s two most expensive options—the Artisan Midcap ValueFund and the Touchstone Sands Capital Select Growth Fund—costparticipants 120 and 103 basis points, respectively, and each heldmore than $130 million in assets.

Those are not Vanguard funds, but the complaint says trusteescould have saved participants “millions” by using cheaper Vanguardoptions.

Anthem also failed to monitor the recordkeeping fees Vanguardcharged, according to the complaint.

Given the size of the plan, a reasonable per-participantrecordkeeping fee would have been $30 per participant, argue theplaintiffs.

But between hard-dollar fees and revenue sharing agreements, insome cases from its own funds, Vanguard was earning as much as $80to $94 per participant in recordkeeping fees until September 2013,when Anthem initiated a flat $42 recordkeeping fee.