Participants in a Cigna Corp. 401(k) plan have reached a preliminary agreement with the company and several other defendants to settle a class-action suit in which the participants had alleged a breach of fiduciary duties in the management of the plan.
The settlement must be approved by a U.S. District Court judge in Urbana, Ill. It calls for independent monitoring of — and several changes in — the Cigna plan, according to a settlement document filed with the federal court. The agreement also calls for a $35 million payment, including unspecified attorneys' fees, by the defendants, including Cigna and a unit of Prudential Financial Inc.
The settlement provides “a very attractive” 401(k) plan for employees, Jerome Schlichter, attorney for the plaintiffs said in an interview. Mr. Schlichter is managing partner for Schlichter, Bogard & Denton, St. Louis.
Mr. Schlichter said one “significant” part of the agreement is that the Cigna plan will hire an independent monitor to review plan management and some investments.
According to the settlement document, the monitor will review decisions regarding possible changes in a stable value fund, the issuance of an RFP for a record keeper and a list of the plan's investment options.
The defendants also agreed to hire a separate independent consultant to advise the plan on making changes in the stable value fund and on considering an RFP for stable-value managers, the settlement document said. Except for Cigna stock, the document said the 401(k) plan “will not offer any investment options advised by Cigna or a Cigna subsidiary in the plan.”
A Cigna attorney, Azeez Hayne, a Philadelphia-based partner for Morgan Lewis & Bockius, declined to comment on the settlement.
“Defendants deny liability to plaintiffs, deny all allegations of wrongdoing made in connection with the lawsuit, and deny that the class representatives, settlement class or plan suffered any losses,” according to the settlement document.
The defendants also “contend that they acted prudently at all times and in all respects with regard to the plan, that they complied with their duty of loyalty to the plan, and that they did not engage in self-dealing or transactions prohibited under ERISA,” the document said.
The original lawsuit was filed in February 2007, alleging plan fiduciaries had paid excessive fees, “caused the plan to engage in prohibited transactions” and received “improper benefits” from Cigna selling its retirement business to Prudential, according to the settlement document.
The agreement was reached June 17 and was announced June 21.
The settlement covers participants in the Cigna plan between April 1, 1999 and May 31, 2013.
