DeMoulas Super Markets Inc., Tewksbury, Mass., agreed to pay $17.5 million to settle allegations of ERISA violations by former participants in the company's profit-sharing plan.
The terms of the preliminary settlement were contained in a document filed Nov. 20 in U.S. District Court in Boston and requires court approval.
The settlement also requires plan fiduciaries to limit to 10% the amount of plan assets held in cash or cash equivalents. Plan fiduciaries have agreed to modify the plan's investment policy statement to increase the annual return target by 100 basis points, the settlement document said. Details on the return target and cash holdings were not provided.
One former participant sued in July 2019, alleging that the plan's investment lineup, chosen by fiduciaries, prevented participants from making any choices. The lineup's allocation was 70% domestic fixed income and 30% equities, according to the plan's investment policy statement.
"It is not prudent or appropriate to force participants into 'low-yielding investments' without regard to their individual desires or needs," the original complaint stated.
The plan is financed only by company contributions; no participants' contributions were allowed.
The case was allowed to proceed to trial when U.S. District Court Judge Leo T. Sorokin rejected the company's April 2020 motion to dismiss the case. The complaint was amended to add two plaintiffs in September and this complaint, Toomey et al. vs. DeMoulas Super Markets Inc. et al., is the subject of the settlement. The parties reached a tentative agreement in October without initially disclosing terms.
The DeMoulas (Restated) Profit-Sharing Plan & Trust, Tewksbury, Mass., had assets of $860 million as of Dec. 31, 2019, according to the latest Form 5500.