A former participant in Allstate Corp.'s 401(k) plan sued the company and plan fiduciaries, alleging a series of ERISA violations, most notably the plan's retaining of a "poorly performing" target-date series.
The Allstate defendants "loaded the plan with a suite of poorly performing funds called the Northern Trust Focus Retirement Trusts," said the complaint filed Monday in U.S. District Court in Chicago.
"Allstate defendants kept these funds throughout the class period despite their continued underperformance," said the complaint, which seeks class-action status for any participant who invested in the target-date series from Jan. 4, 2015 through the date of judgment in the case.
Northern Trust Corp. and its subsidiary Northern Trust Investments Inc. aren't defendants.
"From the start, the Allstate defendants mishandled the process of picking the Northern Trust funds," said the complaint in the case of Mary Ellen Morgan vs. The Allstate Corp. et al.
"Despite a market teeming with better-performing alternatives, Allstate selected the Northern Trust funds in 2011," the complaint said. "At this time, the Northern Trust funds were in their nascent stage, with only a one-year investment track record, and a poor one at that."
The plaintiff said plan executives compounded their alleged error by offering the Northern Trust funds as the plan's qualified default investment alternative.
She also complained that the Northern Trust funds are managed by a subsidiary of the plan's trustee, Northern Trust Corp., thus giving Northern Trust "two separate streams of income from the plan," the lawsuit said.
The complaint is the second ERISA lawsuit filed against Allstate's and its fiduciaries' offering of the Northern Trust target-date funds. Katherine Cutrone, a former participant in the company 401(k), sued Oct. 30 in U.S. District Court in Chicago, alleging ERISA violations because plan executives kept the "poorly performing" target-date series.
The Allstate 401(k) Savings Plan had $5.9 billion in assets as of Dec. 31, 2019, according to the latest Form 5500.