Two new 401(k) lawsuits and one big settlement

A dentist’s group brought a 401(k) lawsuit against an AIG subsidiary, Variable Annuity Life Insurance Co., this month, alleging that the company violated ERISA by charging a 5% surrender fee to move assets away from the plan provider.

Early last year, California dental office D.L. Markham realized it would incur a surrender fee of more than $20,000 for changing plan providers, which the plaintiffs allege was a prohibited transaction and self-dealing under the Employee Retirement Income Security Act. The fee reflected assets moved to the plan provider within the previous 60 months, per the surrender charge policy, according to the complaint.

The plan sponsor was unaware of the charge until it made the decision to switch providers, the plaintiffs stated.

They filed the class-action suit on behalf of about 8,000 401(k) plans, representing nearly $4 billion in group annuity contracts, according to the complaint filed Jan. 4 in U.S. District Court for the Eastern District of California.

The plaintiffs are represented by law firm Baker Curtis & Schwartz. They are asking the court for disgorgement of fees and losses incurred by plans in the proposed class.

VALIC parent AIG declined to comment on the allegations.


Wisconsin-based Associated Banc-Corp was sued last Wednesday by two participants in its retirement plans who allege the plan sponsor breached its fiduciary duty by opting for its own products and services.

The 401(k) lawsuit, filed in U.S. District Court for the Eastern District of Wisconsin, seeks class certification for participants in the $690 million plan. The in-house collective investment trusts underperformed peers but benefitted the plan sponsor, the plaintiffs claim.

The plan also used a company subsidiary to provide record-keeping services, which allegedly charged participants three times as much as a prudently selected service would, according to the complaint.

“A prudent and loyal fiduciary would not have selected or retained Associated Bank’s unpopular and poorly performing funds, and would instead have selected superior alternatives covering the same asset classes that are widely used by similarly situated fiduciaries,” the complaint read.

A representative for the defendant said in an email that the firm is unable to comment on the case. The company’s Associated Bank brand has hundreds of branches located in Illinois, Minnesota and Wisconsin, according to the firm.

The complaint was brought by law firm Nichols Kaster, which has long been involved in 401(k) litigation.


Defendants in a long-running class-action lawsuit brought by participants in the DST 401(k) plan settled the case earlier this month for a whopping $79 million.

The total represents three separate agreements – a $27 million deal with DST Systems, which SS&C acquired in 2018, a $21.5 million settlement with Ruane Cunniff & Goldfarb, the investment firm that managed the assets in the 401(k) plan, and a $30.5 million deal with Robert Goldfarb.

The plaintiffs filed the case in 2017, alleging breaches of fiduciary duty for various reasons but chief among them was a loss in plan assets related to heavy investments in Valeant Pharmaceuticals, whose shares plunged in 2016 amid accusations of fraud. Like Ruane Cunniff & Goldfarb’s Sequoia Fund, the investment portfolio in the plan held as much as 50% Valeant, according to the complaint.

As of March 2016, the plan incurred had investment losses of more than $300 million tied to investments in Valeant stock, with those invested assets falling more than 75% from a 52-week high.

“The investment of such a significant portion of the [profit-sharing account’s] portfolio value in one security was highly imprudent and an abject breach of fiduciary duty,” the 2017 complaint read.

The DST case is separate from a 2016 lawsuit brought by a participant in the Disney Savings and Investment Plan against the Walt Disney Co. over similar losses. That case was dismissed with prejudice at the district court level in 2017, and the ruling was upheld by an appeals court in 2019. Another case centering on losses in the Sequoia Fund was brought by participants in the FMC Corp. retirement plan against the plan sponsor. That case was dismissed in 2018.

Plaintiffs in the recently settled case are represented by law firm Shepherd Finkelman Miller & Shah.

The post Two new 401(k) lawsuits and one big settlement appeared first on InvestmentNews.

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