BlackRock Institutional Trust Co., a division of BlackRock Inc., New York, agreed to settle a long-running class-action lawsuit alleging violations of the Employee Retirement Income Security Act in the firm's employee 401(k) plan with a payout to participants of $9.7 million.
A Tuesday court filing in U.S. District Court in Oakland, Calif., said the money will pay eligible participants in the BlackRock Retirement Savings Plan "to settle the class-action claims against defendants concerning the use of BlackRock-managed funds as investment options in the plan."
On April 5, 2017, Charles Baird, a BlackRock employee, filed a complaint on behalf of himself and other participants in the 401(k) plan, alleging that BlackRock breached its fiduciary responsibility by engaging in "prohibited transactions relating to the management, operation and administration of the plan."
The complaint alleged that BlackRock "selected and retained high-cost and poor-performing investment options, with excessive layers of hidden fees that are not included in the fund expense ratios" in the 401(k) plan and noted that "almost all" of the investment options in the plan were BlackRock funds.
The lawsuit contended that investment of the 401(k) plan in BlackRock funds "is expressly prohibited by ERISA."
In the March 2021 settlement filing, BlackRock denied "all allegations of wrongdoing" and maintained that "the plan has been managed, operated, and administered at all relevant times in compliance with ERISA and applicable laws and regulations. This settlement agreement and the prior negotiations between the parties, shall in no event constitute, be construed as, or be deemed evidence of, an admission or concession of any wrongdoing, fault or liability of any kind by defendants."
Edward Sweeney, a BlackRock spokesman, did not respond to a request for comment about the settlement and for information about the size of BlackRock's 401(k) plan.
BlackRock managed $8.68 trillion as of Dec. 31.