John Hancock is settling a class-action lawsuit over its 401(k) plan for $14 million, according to court records filed Tuesday.
The company was sued last year by plaintiffs alleging the company engaged in self-dealing by putting its own products, including its target-date series, on the plan menu rather than lower-cost alternatives with better performance track records. The case also pointed to allegedly excessive administrative costs, taking aim at revenue sharing collected by mutual funds.
The lawsuit is one of many filed in recent years against financial services firms that use proprietary funds within their plans. There were more than 40 such cases brought against mutual fund providers and others as of 2018, according to a report from the Center for Retirement Research at Boston College.
Although firms can, and often do, include their own products within their 401(k) plans — even if they are not the cheapest or best-performing options available — they generally need to show that they used a prudent process in vetting the products.
John Hancock and the plaintiffs indicated in April that they had reached a settlement, although the terms of the agreement were not published until this week.
Law firms Block & Leviton and Nichols Kaster represent the plaintiffs. As much as a third of the settlement amount will go to attorneys’ fees, according to the settlement notice.
As part of the agreement, John Hancock will retain an independent third-party investment consultant for the plan for at least five years, develop an investment policy statement and use an independent consultant to help negotiate record-keeping costs.
Lowe’s Cos. has agreed to pay $12.5 million to settle a class-action lawsuit brought over the company’s 401(k) plan, court records filed last week show.
The case, which was brought in 2018, involved an allegedly inappropriate investment of $1 billion in the Hewitt Growth Fund, which saw poor performance relative to the eight funds on the plan menu it replaced. Aon Hewitt, which was also named as a defendant in the case, is not a party in the recent settlement.
As of 2019, the Lowe’s plan had $6.6 billion in assets among 272,000 participants, data from the Department of Labor show.
Lowe’s and the plaintiffs agreed in April to a settlement, although the details were not made public until last week’s court filing.
Law firms Tharrington Smith and Nichols Kaster represent the plaintiff and class. As much as one-third of the settlement amount will go toward attorneys’ fees, according to the agreement.
NORTHERN TRUST CASE RESURFACES
Northern Trust was hit this week with a new incarnation of a lawsuit that was voluntarily dismissed in March.
The case, brought by law firm Scott and Scott and several others, involves Northern Trust’s 401(k) plan and the inclusion of its in-house target-date series. That product line, Focus Target Retirement Trusts, has also been the center of other recent 401(k) lawsuits filed against Allstate and Takeda Pharmaceuticals. Northern Trust is not named as a party in those cases.
The recently filed complaint is similar to the one the plaintiffs voluntarily dismissed in March, although it lists new lead plaintiffs and an additional law firm representing them.
The complaint alleges that Northern Trust breached its fiduciary duty to participants by including the collective investment trust series in the plan since 2013, rather than products from third parties. The plaintiffs compare the performance of the in-house series to that of target-date products from Vanguard, T. Rowe Price and American Funds.
In an email statement, the company disputed the claims. “Northern Trust believes the Northern Focus Funds have been an appropriate vehicle for retirement savings, and plans to defend itself from the lawsuit’s claims,” according to the statement.
Northern Trust’s plan represents more than $2.5 billion, about $400 million of which is invested in its target-date series, according to the complaint.
The case is filed in U.S. District Court in the Northern District of Illinois Eastern Division.
On March 12, the same district court granted voluntary dismissal of the prior case. In that lawsuit, the plaintiffs had filed an amended complaint to which the defendant had not responded.
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